NMCN PLC Financing Update (4666C)

TIDMNMCN

RNS Number : 4666C

NMCN PLC

21 June 2021

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY RESTRICTED JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN NMCN PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION, SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH ANY INVESTMENT DECISION IN RESPECT OF NMCN PLC.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY THE COMPANY IN DUE COURSE IN CONNECTION WITH THE ADMISSION OF THOSE SHARES TO THE OFFICIAL LIST OF THE FINANCIAL CONDUCT AUTHORITY AND TO TRADING ON THE LONDON STOCK EXCHANGE'S MAIN MARKET FOR LISTED SECURITIES. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE AND THE COMPANY'S WEBSITE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO 596/2014 WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018

21 June 2021

NMCN PLC

("nmcn" or "the Company" or "the Group")

Proposed GBP24.0 million refinancing by way of a GBP14.0 million equity subscription and GBP10.0 million interim convertible bridging loan

Waiver of obligation to make a mandatory offer under Rule 9 of the Code

New committed bank facilities for a minimum of GBP7.5 million

Proposed Open Offer to raise up to GBP5.0 million

The Company is pleased to announce it has entered into conditional agreements to recapitalise nmcn by way of a GBP24.0 million fundraising, with Svella plc ("Svella") and certain other investors, together with a renegotiation of its facilities with Lloyds Bank plc ("Lloyds") and the Company also proposes to raise up to an additional GBP5.0 million through an open offer to existing shareholders (together the "Transaction").

As previously notified the Company has been working since Q4 2020 to secure a financing package more appropriate to the size and nature of the Group's businesses and risk profile. The Company is pleased to report this key milestone of the refinancing process which is expected, once completed, to fully recapitalise the Group, removing the current working capital strain. The Board would like to place on record its appreciation of the support, commitment and cooperation of our employees, supply chain and customers through this period and look forward to now refocusing on delivering sustainable shareholder returns in our attractive growing markets.

The key terms of the Transaction are as follows:

-- A capital injection of GBP10.0 million by way of a second ranking secured convertible bridging loan ("Bridging Facility"). The principal amount of the Bridging Facility alongside fees and interest accrued will convert, on completion of the Transaction, into new ordinary shares of 10 pence each of the Company ("Ordinary Shares") at a price of 20 pence per Ordinary Share (the "Issue Price").

-- An equity fundraising for up to GBP19 million, conditional upon shareholder approval, at the Issue Price consisting of:

o An equity subscription from new investors for GBP14.0 million ("Equity Subscription"); and

o An Open Offer for up to GBP5.0 million ("Open Offer") available to existing shareholders pro rata to their existing shareholdings.

-- Shareholders wishing to apply for new Ordinary Shares under the Open Offer in excess of their pro rata entitlements will be able to apply for additional shares to the extent that other existing shareholders do not take up their entitlements.

-- The Group's existing bank, Lloyds, has agreed to extend the existing GBP12.2 million uncommitted overdraft to the earlier of 30 September 2021 or completion of the Transaction. In addition, Lloyds has agreed to provide:

o GBP7.5 million of ongoing bank facilities on a committed basis in the form of a GBP5 million revolving credit facility ("RCF") and a GBP2.5 million term loan both with a final maturity date of 18 months from drawdown (together the "New Bank Facilities"). The RCF will increase to GBP6.0 million subject to the Open Offer receiving applications in excess of GBP4.0 million, bringing the total New Bank Facilities to GBP8.5 million. The New Bank Facilities will be available to drawdown from the date of completion of the Transaction and as at that date the overdraft will be cancelled. The terms of the revolving facility agreement and the term loan facility agreement include customary provisions in respect of representations, undertakings and events of default as are usual for committed bank facilities of these types.

-- On completion of the Transaction , the Company will have sufficient cash and debt facilities available to it to generate a positive cash headroom position.

-- In order to execute the Transaction and address the Company's liquidity concerns, the Company has also successfully applied, on behalf of Svella, to the Panel on Takeovers and Mergers (the "Panel") for a dispensation from the requirement to make a general offer under Rule 9 of the City Code on Takeovers and Mergers (the "Code") which would otherwise have arisen as a result of the issue of new Ordinary Shares to Svella pursuant to the Transaction. This dispensation was granted pursuant to Note 5(c) on the Notes on Dispensations from Rule 9.

The Bridging Facility and up to GBP7.42 million of the Equity Subscription have been provided by Svella. Svella is a UK-based company founded to make acquisitions in underperforming and distressed businesses and assets. Svella is led by Andrew Tinkler and Ben Whawell, former executives of Stobart Group. The Svella team will look to use their detailed operational management and entrepreneurial skills to help drive the performance of nmcn.

Shore Capital & Corporate Limited (" SCC ") is acting as sponsor and financial adviser to the Company in relation to the Transaction and Shore Capital Stockbrokers Limited (" SCS ") is acting as broker.

Ian Elliot, Non-Executive Chairman, commented:

"We are pleased to have concluded this arrangement with Svella and other stakeholders, which will fully re-capitalise the Company, providing a platform for sustainable long term value creation in our chosen markets. Our employees, supply chain partners and customers have shown tremendous solidarity and supported the Company during this difficult period, for which the Board are grateful. Today's announcement is a positive first step towards a brighter future."

This Announcement should be read in its entirety.

Overview of the Transaction

Equity Subscription, Bridging Facility and Open Offer

-- GBP 24.0 million is proposed to be raised through a conditional fundraising to recapitalise the Company:

o GBP14.0 million has been conditionally raised from new investors through a subscription for 70,000,000 new Ordinary Shares ("Subscription Shares") at the Issue Price, including up to GBP7.42 million or 37,100,000 new Ordinary Shares from Svella.

o A further GBP10.0 million has been raised from Svella, initially in the form of the Bridging Facility which will be provided to the Company immediately. The Bridging Facility principal, fees and accrued interest will convert into up to 62,400,000 new Ordinary Shares ("Bridging Conversion Shares") at the Issue Price at the time of completion of the Equity Subscription.

-- Up to a further GBP5.0 million will be raised through the Open Offer of up to 25,000,000 new Ordinary Shares in nmcn (the "Open Offer Shares") at the Issue Price. Shareholders on the register at the record date to be set in due course (subject to certain exclusions as a consequence of securities laws where shareholders are based overseas) ("Qualifying Shareholders") will be able to participate in the Open Offer. If Qualifying Shareholders' basic entitlements are taken up in full, Qualifying Shareholders are expected to be able to apply for excess Open Offer Shares not otherwise taken up under the under the Open Offer as part of an excess application facility, subject to availability.

-- Further to the Company's announcements of 28 May 2021 and 14 June 2021, the Company has been working since Q4 2020 to secure a financing package more appropriate to the size and nature of the Group's businesses and risk profile and to address the working capital strain on the Group. The Transaction will strengthen nmcn's balance sheet considerably and will allow the Group to take advantage of the growth prospects within its addressable markets. The Transaction also enables nmcn to agree new committed debt facilities with Lloyds which will be available from completion of the Transaction.

-- The Issue Price represents a discount of approximately 89.9 per cent. to the closing price of 197.5 pence per Ordinary Share on 18 June 2021 , being the latest practicable date prior to this announcement (the "Latest Practicable Date").

-- Completion of the Transaction is conditional upon, inter alia, the publication of a prospectus and circular (the "Prospectus and Circular") in due course to seek the approval by shareholders of the resolutions to be proposed at a general meeting to provide the directors with the authorities to issue and allot, and dis-apply relevant pre-emption rights in respect of, the Bridging Conversion Shares, the Subscription Shares and the Open Offer Shares at the issue price, currently expected to be convened and held in August 2021 (the "General Meeting"). Completion of the Transaction is therefore expected to take place in August or early September 2021.

-- The Company has received irrevocable undertakings to vote in favour of the resolutions at the General Meeting to be convened in respect of, in aggregate, 6,660,086 Ordinary Shares (representing approximately 64.1 per cent. of the Ordinary Shares in issue (excluding Ordinary Shares held in treasury) on the Latest Practicable Date.

Dispensation from Rule 9 of the Code

-- In order to address the Group's challenging financial position and consummate the Transaction, the Company sought a dispensation from the Panel on behalf of Svella from the application of the mandatory bid provisions contained in Rule 9 of the Code. Assuming (i) no Open Offer Shares are taken up, (ii) there are no further changes to the Company's issued share capital other than in respect of the Transaction, (iii) Svella subscribes for all of the Subscription Shares that it has committed to acquire, and (iv) the Bridging Facility (including interest and fees) converts in full into new Ordinary Shares on 27 August 2021, Svella could hold up to 132,400,000 Ordinary Shares, representing 92.7 per cent. of the Company's total voting rights on completion of the Transaction (excluding Ordinary Shares held in treasury). In accordance with Note 5(c) of the Notes on Dispensations from Rule 9 of the Code, Svella has been granted a dispensation by the Panel from making a mandatory offer under Rule 9 of the Code in relation to the Transaction on the basis that independent shareholders holding shares carrying more than 50% of the voting rights of the Company which would be capable of being cast on a "whitewash" resolution have confirmed to the Panel in writing that they approve the proposed waiver and would vote in favour of any resolution to that effect at a general meeting. Further details of Rule 9 of the Code and the dispensation received by Svella are contained below.

Relationship Agreement

-- On completion of the Transaction Svella will be considered a "controlling shareholder" for the purposes of the Listing Rules.

-- The Company and Svella will, therefore enter into a legally binding relationship agreement in compliance with Chapter 6.5 of the Listing Rules to ensure that the protections afforded to Shareholders of nmcn are meaningful and that nmcn can carry on an independent business as its main activity.

Board

   --      Lee Marks, CEO, and Alan Foster, CFO, will continue to lead the executive team. 

-- The Company intends to appoint a new independent Non-Executive Director who will work with the Board and with the support of investors to constitute the appropriate board structure to meet the Company's strategy. The Company will make a further announcement on such an appointment in due course.

nmcn Plc - [phone]

Ian Elliott, Chairman

Lee Marks, Chief Executive

Alan Foster, Chief Financial Officer

Shore Capital - [phone]

Edward Mansfield

Daniel Bush

John More

About nmcn

nmcn Plc (TIDM: NMCN) is a leading engineering and construction company in the UK. Its talented 1,700-strong team offers multi-sector engineering and construction skills, technical innovation, design, and specialist fabrication.

The Company delivers major built environment and water industry projects across the UK - from buildings and highways to large-scale water networks and treatment plants. With its history dating back to 1946, nmcn now has 12 UK offices and three off-site manufacturing facilities.

LEI Number: 213800ANYQVA5OS51A68

www.nmcn.com

IMPORTANT INFORMATION

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions other than the United Kingdom and the availability of any offer to shareholders of nmcn who are not resident in the United Kingdom may be affected by the laws of relevant jurisdictions. Therefore, any persons who are subject to the laws of any jurisdiction other than the United Kingdom or shareholders of nmcn who are not resident in the United Kingdom will need to inform themselves about, and observe, any applicable requirements.

The issue of this announcement shall not, for the avoidance of doubt, in any circumstances, create any implication that nmcn shall be required to provide any further updates on the status of any matters contemplated in this announcement (save as may be required by law or regulation).

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States. The securities may not be offered or sold in the United States, except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. No public offering of the securities referred to herein is being made in the United States.

This Announcement includes "forward looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding the Group's financial position, business strategy, plans and objectives of management for future operations, or any statements proceeded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forward looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward looking statements. Such forward looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward looking statements speak only as at the date of this Announcement. Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by the Listing Rules, the Prospectus Regulation, the Prospectus Rules, MAR and the Disclosure Guidance and Transparency Rules), the Company expressly disclaims any obligation or undertaking to disseminate or release publicly any updates or revisions to any forward looking statements contained in this Announcement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

SCC and SCS (together, "Shore Capital"), each of whom is authorised and regulated in the UK by the Financial Conduct Authority, are acting exclusively for the Company and for no one else in relation to the matters described in this Announcement and will not regard any other person as a client of Shore Capital in relation to the matters described in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Shore Capital nor for advising any other person on the contents of this Announcement or any transaction or arrangement referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on Shore Capital under FSMA or the regulatory regime established thereunder, Shore Capital nor any of their respective affiliates accepts any responsibility whatsoever or makes any representation or warranty, express or implied, concerning the contents of this Announcement, including its accuracy, completeness or verification, or concerning any other statement made or purported to be made by any of them, or on behalf of them in connection with the Company or any of the matters described in this Announcement and nothing in this Announcement is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Subject to applicable law, Shore Capital and its affiliates accordingly disclaim all and any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise (save as referred to above)) which any of them might otherwise have in respect of this Announcement or any statement purported to be made by them, or on their behalf, in connection with the Company, or the matters described in this Announcement.

Neither to content of the Company's website (or any other website) not the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

MARKET ABUSE REGULATION

Market soundings, as defined in the Market Abuse Regulation (596/2014) as it forms part of retained law by virtue of the EUWA as defined below ("UK MAR"), were taken in respect of the Fundraising, with the result that certain persons became aware of inside information, as permitted by UK MAR. That inside information is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of UK MAR. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

INFORMATION TO DISTRIBUTORS

Solely for the purposes of the product governance requirements contained within the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK Product Governance Rules"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any 'manufacturer' (for the purposes of the UK Product Governance Rules) may otherwise have with respect thereto , the of the Subscription Shares and Open Offer Shares have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of (a) retail clients, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2019 ("EUWA"), (b) investors who meet the criteria of professional clients as defined in Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA and (c) eligible counterparties, each as defined in chapter 3 of the FCA Handbook Conduct of Business Sourcebook ("COBS"); and (ii) eligible for distribution through all distribution channels as are permitted by Directive 2014/65/EU (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of such securities may decline and investors could lose all or part of their investment; such securities offer no guaranteed income and no capital protection; and an investment in such securities is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Subscription and Open Offer.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of COBS; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to such securities.

Each distributor is responsible for undertaking its own target market assessment in respect of such securities and determining appropriate distribution channels.

Further details of the Equity Subscription, the Bridging Facility, the New Bank Facilities, the Open Offer and the dispensation from Rule 9 of the Code

Introduction

The Company has entered into conditional agreements to recapitalise nmcn by way of the GBP24.0 million capital injection together with a renegotiation of its facilities with Lloyds. The Company also proposes to raise up to an additional GBP5.0 million through an Open Offer to existing shareholders at 20 pence per Ordinary Share.

nmcn has conditionally agreed to raise GBP14.0 million from new investors by way of the Equity Subscription to provide it with additional capital to support its business activities and for working capital purposes. The convertible Bridging Facility of GBP10.0 million has today been provided by Svella to provide the Company with interim wording capital financing through to completion of the Transaction.

nmcn has also agreed a new committed RCF and a new committed term loan facility with Lloyds, both with a final maturity date of 18 months from drawdown which will replace the Group's existing GBP12.2 million uncommitted overdraft facility, conditional, inter alia, on the completion of the Equity Subscription and conversion of the Bridging Facility. The Company's lender has agreed to extend the existing GBP12.2 million uncommitted overdraft to the earlier of 30 September 2021 or completion of the Transaction.

The completion of the Transaction is conditional upon, inter alia, the Company publishing the Prospectus and Circular and thereafter on receiving the approval of shareholders to issue the new Ordinary Shares pursuant to the Transaction at the Issue Price.

Background to and Reasons for the Transaction

2020 was an extremely challenging year for the Group. The Covid-19 pandemic resulted in site shutdowns, productivity restrictions, changes in working methodology, and the prolongation of contracts and this has extended into Q1 2021 as the government continued to apply restrictions on movement. Most significantly though, the Group experienced operational and commercial challenges on a number of major contracts.

In October 2020, the Company issued a trading update following a review of its major contracts, which resulted in the expectation that the Group would report a loss before tax of between GBP13.5 million and GBP15.0 million for FY 2020. An external investigation was commissioned to verify the extent of the prior year adjustments included within this loss.

In December 2020, the Board reported that losses before tax were expected to be circa GBP16.5 million. In addition to these matters, the impact of Covid-19 and the slower than expected release of projects under the current five year Asset Management Period ("AMP") with the Company's Water customers resulted in some GBP20.0 million of secured orders originally scheduled to be completed in FY 2020 slipping into FY 2021.

The Company provided further updates in February 2021 and May 2021, following the identification of additional costs, particularly in relation to two major contracts within the Group's Water division and performance issues in the Building business unit. A significant proportion of these losses were attributable to Covid-19 and programme delivery delays, as well as costs associated with process commissioning and handover. As a result of these additional costs, the Company noted on 28 May 2021 that the Board expected to report an underlying loss before tax of GBP24 million for the year ended 31 December 2020, of which losses of approximately GBP6 million are attributed to 2019. The Company announced on 14 June 2021 that it was expected that the Group would report a loss for the year ending 31 December 2021.

The Board has also, since September 2020, been seeking to futureproof the ongoing development of the business by working to secure a debt package more appropriate to the size and nature of the Group's businesses and risk profile, with the goal of replacing its overdraft facility with committed banking facilities. The Company was unable to secure a debt package of the scale required, on acceptable terms. Alongside this, Lloyds had indicated their desire to reduce their exposure and provide a smaller committed facility that meets the Group's requirements when combined with equity capital being raised as part of the transaction. The Company has therefore agreed that, conditional on the completion of a Transaction, the Group's GBP12.2 million uncommitted overdraft facility will be replaced with the New Bank Facilities.

In view of the recent difficult operating conditions in the Group's markets and the Group's level of leverage with no secured facilities, the Board and its advisers have examined ways of recapitalising the business in order to create additional financial headroom and a more appropriate long-term capital structure. Despite the ongoing support of Lloyds, it was clear that the Group's existing debt facilities were not sustainable.

The Equity Subscription, Bridging Facility and Open Offer

Overview and reasons for the proposed Transaction structure

As previously announced by the Company, the Group has been exploring options to refinance its existing overdraft facility and seek a financing package that will provide additional capital and liquidity to meet the Group's needs going forwards. Without a refinancing, all options would have needed to be considered, including whether it is appropriate, having considered the solvency position, for the Group to continue to operate.

Having evaluated a number of possible options and financing alternatives, the Directors have given careful consideration as to the structure of the proposed Transaction and have concluded that the GBP24.0 million fundraising by way of the Equity Subscription and the Bridging Facility, and up to an additional GBP5.0 million by way of an Open Offer, is the most suitable option available to the Company and its shareholders at this time.

The Board considers that the Equity Subscription provides the Company with high levels of certainty over the additional capital it requires in order to strengthen the Group's balance sheet and to agree the New Bank Facilities, and the Bridging Facility provides the Company with immediate additional cash resources to satisfy its working capital requirements, before converting into Ordinary Shares which represent long-term equity capital. The Board is grateful for the continuing support received from its existing shareholders and accordingly wishes to offer all Qualifying Shareholders the opportunity to participate via the Open Offer. The Directors recognise that the Equity Subscription is not a pre-emptive offer and so will be dilutive to existing shareholders. The Directors consulted, where possible, with the Company's major shareholders ahead of the issue of this announcement and concluded that the Transaction structure is the most suitable option considering the Company's financial position.

In the event that the Transaction does not complete, and the Group is unable to extend or refinance its current overdraft, the Company may be unable to meet its liabilities as they fall due, which could result in the Group becoming insolvent and having to cease trading and in an enforcement of security held by creditors. The Board expects that in an insolvency situation there would be little or no value remaining for shareholders.

The allotment and issue of the Subscription Shares, Bridging Conversion Shares and the Open Offer Shares (together the "New Transaction Shares") will be conditional, inter alia, on the approval by shareholders of certain resolutions at the General Meeting which are required for the Directors to allot the New Transaction Shares at the Issue Price and for statutory pre-emption rights to be disapplied in respect of such allotments. The Company intends to publish a prospectus and circular convening the General Meeting in due course.

It is expected that the Bridging Facility proceeds will be made available immediately, and the proceeds from the Equity Subscription and Open Offer will be received by the Company following the General Meeting, which is expected to take place in August 2021.

Use of proceeds

The Group intends to use the net proceeds of the Transaction to pay down part of the Group's existing facilities and strengthen the Group's balance sheet, as well as to allow the Group to take advantage of the growth prospects within its addressable markets.

Principal Terms of the Equity Subscription and the Subscription Agreement

The terms of the Equity Subscription have been agreed between the Company, Svella and certain other institutional investors under the terms of a subscription agreement (the "Subscription Agreement"). Under the Subscription Agreement:

-- the investors have conditionally agreed to subscribe for 54,500,000 new Ordinary Shares at the Issue Price raising gross proceeds of GBP10.9 million; and

-- Svella has agreed to use reasonable endeavours to procure subscribers for a further 15,500,000 new Ordinary Shares at the Issue Price raising gross proceeds of GBP3.1 million , failing which Svella will itself purchase such Ordinary Shares at the Issue Price.

Svella and the other investors have given customary representations, warranties and undertakings to the Company concerning their ability to invest in the Equity Subscription and compliance with securities laws.

Summary of the terms of the Bridging Facility

-- An injection of GBP10.0 million in cash through a second ranking secured convertible bridging loan

   --      The Bridging Facility includes 

o an arrangement fee of 10% of the total principal amount;

o an exit fee of 10% of the total principal amount; and

o An interest rate payable of 25% per annum.

Subject to Shareholder approval at the general meeting to be held in respect of the Transaction the principal amount of the loan, the fees and accrued interest will be converted into new Ordinary Shares in the Company at the Issue Price simultaneously with completion of the Equity Subscription and Open Offer.

Based on the assumption that settlement will take place no earlier than 27 August 2021, the fees due to Svella would be GBP2.0 million with anticipated accrued interest payable of GBP480,000, which, together with satisfaction of the principal amount, fees and accrued interest would result in the issue of 62,400,000 new Ordinary Shares in the Company to Svella. Svella has the right until maturity for two representatives to attend board meetings of the Company as observers.

Summary of the terms of the New Bank Facilities

The Company and Lloyds have entered into a revolving facility letter and a term loan facility letter (together the " Facility Letters ") under which Lloyds has agreed to provide to the Company with a minimum GBP5.0 million RCF and a GBP2.5 million term loan facility. The RCF will increase to GBP6.0 million subject to a minimum GBP4.0 million of applications under the Open Offer. The New Bank Facilities are capable of being drawn to refinance existing financial indebtedness owed by the Company to Lloyds under an uncommitted overdraft and for general working capital purposes. The New Bank Facilities each have a term of 18 months from drawdown and shall accrue interest at an annual rate which is the sum of an agreed rate plus the Bank of England's base rate. The Facility Letters each contain certain representations and warranties, positive and negative covenants and financial covenants which the Company has provided in favour of Lloyds. The Facility Letters state that the New Bank Facilities are only capable of being drawn subject to satisfying certain conditions precedent. Once drawn by the Company, the term loan facility is payable in instalments the amount of which will relate to a percentage of the amount of sale proceeds received by the Company in respect of the sale of properties owned by joint ventures of which the Company is a joint venture partner, with the balance of the term loan being repayable on the final day of the term of that facility. Advances under the revolving credit facility are repayable on the last day of the interest period relating to the advance, but is then available for redrawing during the availability period which ends one month prior to the final day of the term of that facility. All outstanding amounts under the revolving facility are repayable in full on the final day of the term of that facility. The New Bank Facilities will be secured against all of the Company's assets which are domiciled in England and Wales pursuant to existing security documents (the "Security Documents") entered into prior to the date of this announcement and guaranteed by certain members of the Group pursuant to a guarantee (the "Guarantee") entered into prior to the date of this announcement. Under the Security Documents the Company has granted security to Lloyds over all of its assets in England and Wales, on terms customary for general corporate lending transactions. Pursuant to the Guarantee, the Company and certain of its subsidiaries are also to guarantee the Company's and these other companies' liabilities to Lloyds under the Group's finance arrangements with Lloyds. The Security Documents and the Guarantee are on terms customary for general corporate transactions.

The Open Offer

The Directors consider it important that Qualifying Shareholders have the opportunity to participate in the Transaction and the Directors have concluded that the Open Offer is the most suitable option available to the Company and its shareholders.

At the time the Prospectus and Circular is published, the Directors intend to make the Open Offer to Qualifying Shareholders to raise up to a further GBP5.0 million by way of the issue of up to 25,000,000 Open Offer Shares at the Issue Price.

Qualifying Shareholders will be able to participate in the Open Offer by subscribing for a basic entitlement of Open Offer Shares. If Qualifying Shareholders take up their basic entitlements of Open Offer Shares in full, it is expected that they will be able to apply for excess Open Offer Shares not otherwise taken up under the under the Open Offer as part of an excess application facility, subject to availability. Svella will not be eligible to participate in the Open Offer. The Company reserves the right to seek subscribers for any Open Offer Shares not taken up by Qualifying Shareholders.

Further details of the Open Offer will be contained in the Prospectus and Circular to be published in due course.

Conditionality

The completion of the Transaction is conditional on, inter alia, the following:

   --      the publication by nmcn of the Prospectus and Circular; 

-- the passing at the General Meeting of the resolutions required to complete the Equity Subscription, conversion of the Bridging Facility and the Open Offer at the Issue Price;

-- the Subscription Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and

-- the admission of the New Transaction Shares to the Official List of the FCA and to trading on the London Stock exchange's Main Market for listed securities by not later than 30 September 2021.

If the conditions set out above are not satisfied or waived (where capable of waiver):

-- the Equity Subscription and Open Offer will lapse the Bridging Facility will not convert into new Ordinary Shares;

-- the New Transaction Shares will not be issued and all monies received in respect of the Subscription Shares and Open Offer Shares from subscribers will be returned (at the subscriber's risk) as soon as possible thereafter ; and

   --      the Revised Facility will not take effect. 

Effect of the Transaction and dilution on shareholders

The Issue Price of 20 pence for the Bridging Conversion Shares, Subscription Shares and Open Offer Shares (together the "New Transaction Shares") represents a discount of approximately 89.9 per cent. to the middle market closing price of 197.5 pence per Ordinary Share on the Latest Practicable Date. In setting the Issue Price, the Directors have considered the process by which the New Transaction Shares need to be offered to investors to ensure the success of the Transaction and raise a significant level of equity compared to the market capitalisation of the Company. The Directors believe that both the Issue Price and the discount are appropriate. The New Transaction Shares are expected to represent, in aggregate, approximately c.94 per cent. of the Company's share capital (excluding Ordinary Shares held in treasury) as enlarged by the Transaction ("Enlarged Share Capital"). The exact total of New Transaction Shares to be issued will be dependent on the timing of the conversion of the Bridging Facility and associated interest accrued into Bridging Conversion Shares.

The proposed issue of the New Transaction Shares will dilute existing shareholdings of shareholders. Qualifying Shareholders will be able to reduce the extent of this dilution by applying for Open Offer Shares under the Open Offer in due course.

Based on an assumed completion date of 27 August 2021 the maximum dilution which a shareholder will be subject to if he/she does not participate in the Open Offer (assuming all Open Offer Shares are issued and allotted under the Open Offer), as a result of completion of the Transaction, is c.94 per cent.

Rights attaching to the New Transaction Shares

The New Transaction Shares will be issued free of all liens, charges and encumbrances and will, following admission to trading on the Main Market of the London Stock Exchange, rank pari passu in all respects with the Ordinary Shares in issue at the Latest Practicable Date and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Ordinary Shares.

Companies Act and other matters

The Company is required to call a general meeting when the net assets of the Company are half or less of its called up share capital which is considered a "serious loss of capital" under section 656 of the Companies Act 2006 ("Companies Act"). As a result of the losses recently identified and announced by the Company on 28 May 2021, this threshold was met and so, under the Companies Act, a meeting must be called by 24 June 2021 and held by not later than 23 July 2021. The only prescribed business for this general meeting is to consider whether any, and if so what, steps should be taken address the situation. In view of the recapitalisation of the Company announced today, the Directors do not consider it necessary to propose any resolutions in relation to this matter at the general meeting. It does however welcome dialogue with shareholders on this point and the general meeting will provide a forum for this. The Company will post, on or by 24 June 2021, a circular convening a general meeting for this purpose. Details of how shareholders will be able to participate in the meeting in light of the ongoing restrictions as a result of the COVID-19 pandemic will be set out in the circular.

The Group has entered into a formal "time to pay" agreement with HMRC in respect of historical tax liabilities.

Rule 9 of the Code and the accelerated whitewash procedure

Assuming that: (i) there is no take-up of Open Offer Shares, (ii) Svella subscribes for all of the Subscription Shares that it has committed to acquire in the absence of other subscribers, (iii) there are no further changes in the Company's issued share capital other than in respect of the Transaction, and (iv) the Bridging Facility principal, fees and accrued interest converts in full on 27 August 2021, Svella could hold up to 132,400,000 Ordinary Shares, representing c.92.7 per cent. of the Company's total voting rights (excluding Ordinary Shares held in treasury) on completion of the Transaction.

The conditional investment by Svella gives rise to certain considerations under the Code. Brief details of the Panel, the Code and the protections they afford are described below. The Code is issued and administered by the Panel. The Code applies to all takeover and merger transactions, however effected, where the offeree company, inter alia, has its registered office in the United Kingdom and any of its securities are admitted to trading on a UK regulated market or UK multilateral trading facility. The Code applies to the Company, and as such its shareholders are entitled to the protections afforded by the Code. The Code and the Panel operate to ensure fair and equal treatment of shareholders in relation to takeovers, and also provide an orderly framework within which takeovers are conducted. Svella is also a company that is subject to the jurisdiction of the Code.

Under Rule 9 of the Code, where any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares in which persons acting in concert with them are interested) carry 30 per cent. or more of the voting rights of a company that is subject to the Code, that person is normally required to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights in that company to acquire the balance of their interests in the company.

Rule 9 of the Code also provides that, among other things, where any person, together with persons acting in concert with them, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company that is subject to the Code, but does not hold shares carrying more than 50 per cent. of the voting rights of that company and such person, or any person acting in concert with them acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which they are interested, such person will normally be required to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights of that company to acquire the balance of their interests in the company.

An offer under Rule 9 must be in cash (or with a cash alternative) and must be at the highest price paid within the preceding 12 months for any shares in the company by the person required to make the offer or any person acting in concert with them.

Dispensation from General Offer

Under Note 1 on the Notes on Dispensations from Rule 9, the Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 if, inter alia, those shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with them and do not have any interest in the transaction which may compromise their independence (the "Independent Shareholders") pass an ordinary resolution on a poll at a general meeting (a "Whitewash Resolution") approving such a waiver.

Under Note 5(c) on the Notes on Dispensations from Rule 9, the Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Code) if Independent Shareholders holding more than 50 per cent. of a company's shares capable of being voted on such a resolution confirm to the Panel in writing that they approve such a waiver and would vote in favour of a Whitewash Resolution were one to be put to the shareholders of the company at a general meeting.

In accordance with Note 5(c) on the Notes on Dispensations from Rule 9, Independent Shareholders holding shares carrying more than 50% of the voting rights of the Company which would be capable of being cast on a "whitewash" resolution have confirmed in writing to the Panel that they approve the proposed waiver and would vote in favour of any resolution to that effect at a general meeting. Accordingly, Svella has been granted a dispensation by the Panel from making a mandatory offer under Rule 9 of the Code in relation to the Transaction.

By virtue of the fact that, as consequence of the Transaction, Svella is expected to hold more than 50 per cent. of the voting rights of the Company, Svella will be able to acquire further interests in Ordinary Shares without incurring any obligation to make a general offer under Rule 9 of the Code.

Prospectus and Circular

The New Transaction Shares are expected to represent c.94 per cent of the Company's current issued share capital. Accordingly, the Company is required to draw up and publish the Prospectus and Circular in relation to the issue and admission to the Official List of the FCA and to trading on the Main Market of the London Stock Exchange of the New Transaction Shares.

The Company will in due course publish the combined Prospectus and Circular to set out further details of the Transaction and to convene the General Meeting.

Full details of the Open Offer will also be included in the Prospectus and Circular.

Irrevocable undertakings

The Directors who hold Ordinary Shares have irrevocably undertaken to vote in favour of the Resolutions that may be proposed at the General Meeting, in respect of their own beneficial holdings of, in aggregate, 499,094 Ordinary Shares (representing approximately 4.8 per cent. of the Ordinary Shares in issue on the Latest Practicable Date).

Certain other Shareholders have also irrevocably undertaken to vote in favour of the Resolutions that may be proposed at the General Meeting, in respect of their own beneficial holdings of, in aggregate, 6,160,992 Ordinary Shares (representing approximately 59.3 per cent. of the Ordinary Shares in issue on the Latest Practicable Date).

The Company has therefore received irrevocable undertakings with respect to, in aggregate, 6,660,086 Ordinary Shares (representing approximately 64.1 per cent. of the Ordinary Shares in issue on the Latest Practicable Date).

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June 21, 2021 02:00 ET (06:00 GMT)