Capital Reorganisation (4118J)

TIDMINVU

RNS Number : 4118J

Invu plc

30 June 2011

30 June 2010

Invu plc

Proposed Capital Restructuring

General Meeting

and

Annual General Meeting

Invu plc ("the Company") today announces that it has entered into conditional arrangements ("the Conversion and Subscription Agreement") in relation to a proposed capital restructuring plan (the "Proposed Capital Restructuring") intended to allow the Company to meet its obligations to creditors and to continue as a going concern, reducing current debt levels and maximising shareholder value as a whole.

The Company has also today announced separately its preliminary results for the year ended 31 January 2011. The full text of that announcement is available on the Company's website, http://www.invu.net/investor-relations.aspx.

The Proposed Capital Restructuring includes:

(a) the issue of 69,658,800 A Shares (described in more detail below) ("the Subscription") to Cynthia Goldman ("CPG"), Magpie Investments Limited ("Magpie") and Tyne & Wear Holdings Limited ("Tyne & Wear"), in each case at a price of GBP0.01 per share, in order to raise approximately GBP696,588 before expenses, in order to finance the payment of withholding taxes related to the Loan Facility Agreements as defined below in b), the Company's professional fees, costs and expenses in connection with the Proposed Capital Restructuring, the repayment of the Secured Loan Notes referred to in c) below, as well as for general working capital purposes;

(b) the conversion to A Shares at GBP0.01 per share of an aggregate sum (including interest) of GBP2,353,412 ("the Conversion") owed to Tyne & Wear, Magpie and CPG under the loan facility agreements entered into between: (i) the Company and Tyne & Wear; (ii) the Company and Magpie; and (iii) the Company and CPG, each dated 1 May 2010 ("the Loan Facility Agreements"); and

(c) the repayment of the GBP0.5 million of secured non-convertible loan notes issued in August 2009 to Puma VCT plc, Puma VCT II plc, Puma VCT III plc, Puma VCT IV plc and Puma VCT V plc ("Puma") and guaranteed by CPG in accordance with their terms, and the release of all related security, rights, obligations and commitments under those agreements.

It is the opinion of the directors of the Company, excluding Daniel Goldman, due to the nature of his family relationship to Cynthia Goldman and by virtue of his relationship as an adviser to Tyne & Wear and Magpie ("the Independent Directors"), that the proposed restructuring of the Company's share capital which will arise as a result of the Conversion and the Subscription, is in the Company's best interests. In order to implement the proposals a number of shareholder approvals will be required. These include:

(a) amending the Company's articles of association to set out the rights and restrictions attaching to the A Shares; and

(b) the approval of the allotment and issue of the 305,000,000 A Shares, pursuant to the Subscription and the Conversion, each at the nominal value of GBP0.01 per share and each on a non pre-emptive basis.

The A Shares will not be publicly traded and are not convertible. The A Shares will rank in priority to the issued ordinary shares of GBP0.01 each in the capital of the Company ("Ordinary Shares") with respect to any distribution of assets of the Company on a winding-up and will have no rights to attend or vote at general meetings of the holders of Ordinary Shares ("Shareholders") but will otherwise rank pari passu in all respects with the issued Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Company's share capital. The terms of the A Shares are set out in full below.

Background

During the financial year ending 31 January 2009, poor business performance coupled with adverse market conditions resulted in the Company and its subsidiaries incurring significant losses. By the end of that financial year, the Company was in need of additional finance which it decided to obtain by issuing additional shares for cash and agreeing new loan facilities. In May 2009, the Company negotiated a GBP500,000 funding facility with Tyne & Wear. In August 2009, the Company issued 50 million new Ordinary Shares raising GBP1 million (the "August 2009 Placing"). These new shares were purchased by certain pre-existing Shareholders and their affiliates. A further GBP1 million was raised simultaneously through the issuance of: (i) GBP500,000 in Convertible Loan Notes (described below); and (ii) GBP500,000 in Secured Loan Notes. Both sets of loan notes are unlisted and have no voting rights attached.

On 12 August 2009, the Company issued GBP500,000 in 7 per cent. convertible loan notes (the "Notes") due 12 August 2014. The Notes were issued at a principal amount of GBP1 each. Each Note may be converted into 40 Ordinary Shares (at a conversion price of 2.5 pence per Share). The conversion occurs on the fifth anniversary or earlier if a conversion notice is served (by the note holder) after the third anniversary.

The Shareholders as a whole were informed of the August 2009 Placing in a circular dated 23 July 2009. The circular provided details of the August 2009 Placing and the loan notes to be issued. Subsequent to the August 2009 Placing and later in 2009, additional debt funding of GBP500,000 was received from Tyne & Wear, consisting of GBP400,000 in October and GBP100,000 in November. A further GBP500,000 was received from Magpie in November 2009. These additional loans were needed to help fund the business at that time and were repaid in January 2010, being replaced with equivalent facilities from the same lenders totalling GBP2,059,562, which represented the previous facilities plus interest and an additional loan of GBP500,000 from Cynthia Goldman. These loans were settled on 1 May 2010 and replaced by further loans amounting to GBP2,113,521 pursuant to the Loan Facility Agreements which under the terms of the Conversion and Subscription Agreement become immediately due and payable either immediately prior to completion or, if the resolutions (the "Resolutions") to be proposed at the general meeting of the Company to be held on 29 July 2011 at 3.00 p.m. (the "General Meeting") are not passed, upon the date of the General Meeting. An additional GBP500,000 owed to Puma pursuant to the Secured Loan Notes is due on 30 September 2011, which under the terms of the Conversion and Subscription Agreement the Company has agreed to repay on its due date using funds raised from the Subscription. The aggregate sum outstanding on all these loans as at 30 June 2011 was GBP2,941,765 inclusive of interest and withholding taxes. Interest accrued from 30 June 2011 until repayment of the various loans will, in the case of the Secured Loan Notes, be repaid by the Company from its cash resources, and in the case of the other loans will be due for payment on 31 July 2013, such interest being an aggregate gross amount of GBP23,373 assuming that completion of the Conversion and Subscription takes place on 29 July 2011.

Shareholders should note that the Company has no means of repaying these debts when they fall due if the Proposed Capital Restructuring is not approved.

Revised financing strategy

The Company has been able to afford to finance its operations over the last two years by issuing debt, solely because of the exceptional terms upon which certain Shareholders have been willing to provide loans in order to assist the Company. Those Shareholders have now indicated that they are no longer prepared to provide debt financing to the Company but have agreed to capitalise the debt on the terms described below. The Independent Directors believe that it would not be in the Company's best interests to seek alternative sources of debt financing given the high level of borrowings that would be required, the terms currently available in the open market and the current financial performance of the Company. Instead, it is in the interests of both the Company and Shareholders to alleviate current debt levels by converting much of the outstanding debt into equity. The results of this will be that:

(a) the Company will be able to meet its repayment obligations in relation to the loans that remain after the Proposed Capital Restructuring and continue as a going concern;

(b) the Company will no longer be burdened by high levels of debt and will be less dependent on external borrowing;

(c) the injection of new equity will strengthen the Company's capital reserves; and

(d) as a result of the creation and issue of non voting, non convertible A Shares, the Proposed Capital Restructuring will not in any way adversely affect the voting rights of existing holders of Ordinary Shares, but will give the directors of the Company ("Directors") flexibility to seek further equity funding from the holders of the A Shares (the "A Shareholders") in the future, without the need for additional Shareholder approval or the need to make a pre-emptive offer to Shareholders, in the event that alternative sources of funding are unavailable (and assuming that the A Shareholders agree to the terms offered by the Directors).

The Proposed Capital Restructuring

The Company has entered into the Conversion and Subscription Agreement under the terms of which, subject to certain conditions, certain creditors of the Company have agreed:

(a) to convert to A Shares the aggregate sum of GBP2,353,412 owed by the Company under the Loan Facility Agreements (including interest) at a price of GBP0.01 per share. The consideration for the issue of these Conversion Shares will take the form of set-off against the Company's debt; and

(b) to subscribe for 69,658,800 A Shares at a price of GBP0.01 per share in cash.

In aggregate therefore the Company is proposing to issue 305,000,000 A Shares (134,331,060, 83,810,940 and 86,858,000 to Tyne & Wear, Magpie and CPG, respectively) at GBP0.01 per share.

The issue of the A Shares pursuant to the Conversion the Subscription is conditional, amongst other things, on the passing of the Resolutions.

The Company has given customary warranties to the proposed holders of the A Shares in the Conversion and Subscription Agreement. Further details of the agreement are set out below.

As of the date of this announcement, the Company has 163,472,662 Ordinary Shares in issue. If the Proposed Capital Restructuring is approved and completed this will increase to a total of 163,472,662 Ordinary Shares and 305,000,000 A Shares. The A Shares will not be publicly traded and will not carry voting rights.

The Independent Directors are of the view that unless the Proposed Capital Restructuring is put in place, the Company will not be able to meet its obligations to creditors, in particular, under its existing Loan Facility Agreements, the Secured Loan Notes and the Convertible Loan Notes and will, in all likelihood, enter insolvency proceedings and cease to continue as a going concern.

Pursuant to the proposed rights and restrictions attaching to the A Shares, the Board will have flexibility to seek further equity funding from A Shareholders in the future, without the need for additional Shareholder approvals or the need to make a pre-emptive offer to Shareholders in the event that alternative sources of funding are unavailable (and assuming that the A Shareholders agree to the terms offered by the Board).

Shareholders should note in particular that the Proposed Capital Restructuring is conditional upon the passing of the Resolutions. Any failure to pass the Resolutions will result in the Proposed Capital Restructuring not being able to proceed.

Terms of the A Shares

The rights and restrictions to attach to the A Shares are as follows:

(A) the A Shares and the other Ordinary Shares in the capital of the Company shall rank equally as if they were the same class of share in all respects and the rights attaching to such shares shall be identical, save to the extent set out in paragraphs (i) and (ii) below:

(i) the holders of the A Shares shall not be entitled, in their capacity as holders of such shares, to receive notice of any general meeting of the Company nor to attend, speak or vote at any such general meeting; and

(ii) on a distribution of assets on a winding up of the Company, the holders of the A Shares shall be entitled, in priority to any payment to the holders of every other class of shares in the capital of the Company, to an amount equal to the nominal amounts of capital paid up or credited as paid up on the A Shares held by them or, if on such a winding up the amounts available for payment are insufficient to cover in full the amounts payable on the A Shares, the holders of such shares shall be entitled to their pro-rata proportion of the amount to which they would otherwise be entitled. In the event that, following such payments, there are surplus assets of the Company available for distribution among the members, payments shall be made on the following basis:

(a) first, to the holders of every class of shares in the capital of the Company other than the A Shares, pari passu and rateably among them, an amount equal to the nominal amounts of capital paid up or credited as paid up on the shares held by them; and

(b) second, to the holders of every class of shares in the capital of the Company (including the A Shares), pari passu and rateably among them, an amount in proportion to the nominal amounts of capital paid up or credited as paid up on the shares held by them;

(B) the Directors shall have a general and unconditional authority pursuant to section 551 of the Companies Act 2006 to allot further A Shares up to an aggregate nominal amount of GBP2,000,000 for a period expiring on the fifth anniversary of the date of the passing of the relevant resolution adopting the changes to the Articles;

(C) the Company shall be able to, at any time before the expiry of the proposed authority referred to in paragraph (C) above, make an offer or agreement which would or might require relevant securities to be allotted pursuant to it after the expiry of that authority and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred by it had not expired; and

(D) the Company shall not make any further allotments of A Shares to a person on any terms unless it has first made an offer to each of the A Shareholders to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by him of the A Shares and the period during which any such offer may be accepted has expired or the Company has received notice of the acceptance or refusal of every such offer so made.

Details of the Conversion and Subscription Agreement

Under the Conversion and Subscription Agreement dated 29 June 2011, Tyne & Wear, Magpie and CPG have conditionally agreed with the Company as follows:

(a) Tyne & Wear has agreed to subscribe for 134,331,060 A Shares at a price of GBP0.01 per share with Tyne & Wear's obligation to subscribe for such shares being satisfied by: (i) the Company setting off the subscription price against GBP1,195,365.60 being the value of the debt (including interest) owed by the Company to Tyne & Wear; and (ii) Tyne & Wear paying GBP147,945 in cash as further consideration;

(b) Magpie has agreed to subscribe for 83,810,940 A Shares at a price of GBP0.01 per share with Magpie's obligation to subscribe for such shares being satisfied by: (i) the Company setting off the subscription price against GBP584,292 being the value of the debt (including interest) owed by the Company to Magpie; and (ii) Magpie paying an additional GBP253,817.40 in cash as further consideration;

(c) CPG has agreed to subscribe for 86,858,000 A Shares at a price of GBP0.01 per share with CPG's obligation to subscribe for such shares being satisfied by: (i) the Company setting off the subscription price against GBP573,754.40 being the value of the debt (including interest) owed by the Company to CPG under the Loan Facility Agreements; and (ii) CPG paying an additional GBP294,825.60 in cash as further consideration;

(d) to extend the due date for repayment of the amounts referred to above to the earlier of either immediately prior to completion of the Conversion and Subscription or (in the event of failure to obtain Shareholder approval of the Resolutions) the date of the General Meeting; and

(e) that accrued interest as a result of the extension referred to in paragraph (d) above will be due for payment on 31 July 2013, such interest being an aggregate gross amount of GBP23,373 assuming completion takes place on 29 July 2011.

Each party's obligations under the Conversion and Subscription Agreement are conditional, amongst other things, on the passing of the Resolutions.

The Company has agreed to apply the proceeds of the Subscription to finance the payment of withholding taxes related to the Loan Facility Agreements, the Company's professional fees, costs and expenses in connection with the Proposed Capital Restructuring and the repayment of the Secured Loan Notes in accordance with their terms.

Related party transactions

The Conversion and Subscription Agreement is an agreement between the Company and CPG, Tyne & Wear and Magpie. As a result of that agreement Tyne & Wear, Magpie and CPG will be issued with an aggregate of 305,000,000 A Shares (134,331,060, 83,810,940 and 86,858,000 respectively), being the shares to be issued as a result of the Conversion and the Subscription. In addition, upon completion of the Conversion, the existing Loan Facility Agreements will be terminated without further liability to the Company, and the repayment of certain accrued interest from 30 June 2011 until completion of the Conversion and Subscription will be repayable to CPG, Tyne & Wear and Magpie on 31 July 2013 (such interest being an aggregate gross amount of GBP23,373 assuming completion of the Conversion and Subscription takes place on 29 July 2011). These transactions are classified as transactions with a related party for the purposes of the AIM Rules.

In accordance with the AIM Rules, the Independent Directors, having consulted with the Company's nominated adviser, Canaccord Genuity, consider that the terms of these transactions are fair and reasonable insofar as Shareholders are concerned.

The Independent Directors exclude Daniel Goldman due to the nature of his family relationship with Cynthia Goldman and by virtue of his relationship as an adviser to Tyne & Wear and Magpie.

General Meeting

A circular, including a notice of the General Meeting which is scheduled to take place at 3.00 p.m. on 29 July 2011 at the Company's offices at The Beren, Blisworth Hill Farm, Stoke Road, Blisworth, Northamptonshire, NN7 3DB, will be sent to Shareholders shortly. The circular will provide Shareholders with full details of the Proposed Capital Restructuring and explain why the Independent Directors consider the proposals to be in the best interests of the Company and its Shareholders as a whole and will recommend that Shareholders vote in favour of the Resolutions required to implement the proposals.

Annual General Meeting

The circular will also include notice of the Company's forthcoming Annual General Meeting which is scheduled to take place at 3.15 pm on 29 July 2011 at the Company's offices at The Beren, Blisworth Hill Farm, Stoke Road, Blisworth, Northamptonshire, NN7 3DB. The circular will provide Shareholders with full details of the resolutions to be proposed at the Annual General Meeting and explain why the Directors consider the proposals to be in the best interests of the Company and its Shareholders as a whole and will recommend that Shareholders vote in favour of such resolutions.

 
 Enquiries: 
  Invu plc          01604 859893 
 Colin Gallick, CEO 
 Ian Smith, CFO 
  Canaccord Genuity 020 7050 6500 
  Simon Bridges, Kit Stephenson 
 

About Invu

Invu [LSE, AIM, Symbol: INVU] develops software that incorporates document management, content management, workflow, automation and collaboration specialising in solutions for the mid-market and smaller businesses.

Also known as the paperless office, Invu typically gives a return on investment in under six months, allowing companies to see efficiency savings in terms of both money and time.

Invu's Open Search integration allows SharePoint users to utilise fully the benefits of WSS or MOSS whilst retaining the functions of specialist document and content management.

Invu's solutions enable automated scan, capture and management, processing and output transformation. Invu also integrates with all major accounting systems including ERP and CRM systems.

For more information about Invu: www.invu.net

This information is provided by RNS

The company news service from the London Stock Exchange

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