Proposed Restructuring

RNS Number:9955Y
Biofuels Corporation PLC
26 June 2007



Biofuels Corporation plc

Proposed Restructuring


KEY POINTS

*  Restructuring necessitated by level of borrowings and difficult trading
   environment

*  Group currently only able to continue trading as a result of Barclays'
   continuing support

*  Insolvency is unavoidable if restructuring proposals are not approved
   by shareholders at an Extraordinary General Meeting

*  Under proposed terms, Barclays Bank will own a new holding company which will 
   own 94% of the trading entity within the Biofuels group. Barclays to 
   capitalise #40m of debt

*  Cancellation of AIM Listing, subject to shareholder approval of restructuring 
   proposals

*  Independent directors unanimously in favour of proposed restructuring


Mike Buzzacott, Chairman, comments:

"The Board has undertaken a thorough review of the Group's options, including
seeking purchasers of the Company, but the Board has concluded that, given the
existing financial structure, neither a trade sale nor an equity fundraising is
possible taking into account the economic interests of the various stakeholders
in the Company.

"Given the difficult trading backdrop, and the level of Existing Debt, the Board
has concluded that it should enter into restructuring discussions with Barclays
to seek to create a platform from which the Group could fulfil its potential as
a significant force in the renewable transport fuels market. The Board has
accordingly succeeded in agreeing the terms of the Restructuring with Barclays,
from which shareholders could derive some potential value, and this is
unanimously recommended by the Board."

                                                                    26 June 2007

ENQUIRIES:

College Hill               Tel: [phone]
Mark Garraway
Gareth David


Expected timetable of principal events
                                                                            2007
Despatch of circular to shareholders                                                              26 June
Latest time and date for receipt of the forms of              10.30 am and 10.45 am respectively, 21 July
proxy in respect of the EGM and AGM
EGM and AGM                                                                                       23 July
Restructuring becomes effective                                                                   23 July
Cancellation of the Company's AIM trading facility                               07:00 (UK time) 2 August
to be effective



The Circular will be posted to shareholders on 26 June 2007 and will also be
available on the Company's website, www.biofuelscorp.com



Definitions

The following definitions apply throughout this document unless the context
requires otherwise:
"Act"                             the Companies Act 1985 (as amended)
"AIM"                             AIM, a market operated by London Stock Exchange
"AGM" or "Annual General Meeting" the annual general meeting of the Company convened for 10.45 am on 23
                                  July 2007 (or as soon as possible thereafter as the EGM shall have
                                  concluded or been adjourned).
"AIM Rules"                       the rules published by the London Stock Exchange relating to AIM
"Asset Sale Agreement"            the business sale agreement dated on or about the date of this
                                  announcement made between (1) the Company, (2) Biofuels Corporation
                                  Trading and (3) Newco, further details of which are set out at
                                  paragraph 1 of Part II of the Circular.
"Barclays"                        Barclays Bank plc
"Biofuels Trading"                Biofuels Corporation Trading Limited, a wholly owned subsidiary of the
                                  Company
"Circular"                        A circular to Shareholders dated 26 June 2007
"Claims"                          all rights and claims of the Company arising at any time out of or in
                                  connection with the Energea Contract or any subcontracts in connection
                                  with the Energea Contract
"Collins Stewart"                 Collins Stewart Europe Limited
"Company"                         Biofuels Corporation plc
"Cross Guarantee"                 a cross guarantee dated 15 May 2004 made between Biofuels Trading (as
                                  borrower), the Company (as guarantor) and Barclays (as lender)
                                  guaranteeing the obligations of Biofuels Trading under the Facilities
"Directors" or "Board"            the directors of the Company, whose names appear on page 6 of the
                                  Circular
"EGM" or "Extraordinary General   the extraordinary general meeting of the Company convened for 10.30 am
Meeting"                          on 23 July 2007, or any adjournment thereof
"Energea Contract"                the contract dated 30 March 2004, as amended from time to time, between
                                  the Company and Energea Umwelttechnologie GmbH for the design,
                                  manufacture and installation of a biodiesel production facility
"Executive Directors"             Sean Sutcliffe, Richard Nickels and Andy Leeser
"Existing Debt"                   the sum of #99.94 million owed by Biofuels Trading and guaranteed by
                                  the Company pursuant to the Facilities as at 31 May 2007
"Facilities"                      the existing bank facilities available to the Group from Barclays
"Group"                           the Company and its subsidiaries
"Independent Directors"           Mike Buzzacott, Geoff Brady and Clare Spottiswoode
"Inter-company Loan"              all debt owed by Biofuels Trading to the Company as at the date of
                                  completion of the Asset Sale Agreement
"London Stock Exchange"           London Stock Exchange plc
"Newco"                           Broomco (4091) Limited, a company which, it is intended, will be
                                  majority owned by Barclays Converted Investments Limited and Globe
                                  Nominees Limited, wholly owned subsidiaries of Barclays
"Ordinary Shares"                 ordinary shares of 1p each of the Company
"Plant"                           the plant located at Seal Sands, Teesside designed by Energea for the
                                  Company
"Resolutions"                     the resolutions to be proposed at the EGM
"Restructuring"                   the proposed restructuring of the Existing Debt, details of which are
                                  set out in this announcement and the Circular
"Shareholder"                     a holder of Ordinary Shares
"Share Option Schemes"            the employee benefit trust established by the Company in October 2003,
                                  the Company's EMI option scheme established in 2004 and the Biofuels
                                  Corporation Sharesave Scheme adopted on 27 May 2005 and amended on 25
                                  July 2006
"UK"                              the United Kingdom of Great Britain and Northern Ireland




Biofuels Corporation plc - Restructuring Proposals; Delisting and Change of
Name; Extraordinary General Meeting and Annual General Meeting

The following details of the proposals are extracted from the Circular, which is
being posted to Shareholders on 26 June 2007


Introduction

The Board today announces the terms of the Restructuring, the key element of
which is the forgiveness of #40 million of the Existing Debt in exchange for the
issue of ordinary shares in Biofuels Trading, the release of the Company from
its guarantee obligations to Barclays of the Existing Debt and the consequent
ownership by Newco of 94 per cent. of the enlarged ordinary share capital of
Biofuels Trading. Newco will become the largest shareholder in Biofuels Trading.
  As a result, the Company will have disposed of the majority of its business
and, therefore, in accordance with the AIM Rules, the Restructuring is
conditional upon the approval of Shareholders at the Extraordinary General
Meeting, notice of which appears at the end of the Circular.  Furthermore, as a
consequence of the Restructuring the Directors have given, subject to the
passing of the Resolutions, notification to London Stock Exchange of the
Company's intention to cancel the trading facility for the Ordinary Shares on
AIM.

Set out below are some of the circumstances which have led to the need for the
Restructuring, and in this announcement and the Circular Shareholders will find
detailed information on the current financial situation, details of the
consequences for Shareholders following the Restructuring and a unanimous
recommendation from the Independent Directors that Shareholders vote in favour
of the Resolutions. As the Executive Directors will have an involvement (on
their existing employment terms) with Biofuels Trading and Newco after the
Restructuring, they have not taken part in the recommendation of the
Restructuring which is made by the Independent Directors alone.

Background to the Restructuring

First sales of biodiesel from the Group's Plant began in April 2006 and by
September 2006 the Plant had been tested at production rates of 30 tonnes of
biodiesel per hour, representing more than 90 per cent. of its maximum rated
capacity. A number of technical and commercial issues, however, affected the
Company, as indicated in the Group's previous announcements.

The extent of technical issues with the Plant has necessitated a remedial
engineering programme, focussed on the intermediate product re-processing unit,
and has led to the requirement for further expenditure on plant remediation
works, as indicated in the update statements issued on 13 March 2007, 28 March
2007 and 1 June 2007. The Company is actively pursuing a potential claim in
respect of design deficiencies against the Plant providers, Energea.

Up until September 2006, biodiesel margins were relatively strong and
underpinned future business plans. However, recent market conditions have been
very difficult for the Company. The combination of higher vegetable oil prices
and lower biodiesel prices have together meant that the Company has been unable
to make profits from the production of biodiesel. In particular the price of
European biodiesel has been depressed by US biodiesel that benefits from both
European market support mechanisms and US production subsidies. This situation
has been exacerbated by a high $/# exchange rate. Whilst the Directors believe
that steps are being taken in the EU and the US to address this issue, the
situation is having an impact on European biodiesel producers in general.

As a consequence, high-capacity production of biodiesel at acceptable margins
has not been possible and as reported in the announcement of 13 March 2007, the
Board maintained a policy of limiting production, by only taking on contracts
that provided acceptable margins.  This policy has proved effective in
containing losses, and effective cash management has allowed the Group to trade
within its banking facilities.

The Board is still of the view that the Renewable Transport Fuel Obligation in
the UK and other government programmes for mandated use of biofuels across
Europe should underpin longer term demand for biodiesel. However, the Board
considers that there are few immediate indications that the oil industry is
gearing itself up for implementation of the Renewable Transport Fuel Obligation
in the UK and that its real impact on the Group, therefore, remains uncertain.


Purpose of the Restructuring

The Board has undertaken a thorough review of the Group's options, including
seeking purchasers of the Company, but the Board has concluded that, given the
existing financial structure, neither a trade sale nor an equity fundraising are
possible taking into account the economic interests of the various stakeholders
in the Company.

Given the difficult trading backdrop, and the level of Existing Debt, the Board
has concluded that it should enter into restructuring discussions with Barclays
to seek to create a platform from which the Group could fulfil its potential as
a significant force in the renewable transport fuels market and Shareholders
could derive some potential value. The Board has accordingly succeeded in
agreeing the terms of the Restructuring with Barclays.

A restructuring of the Group has become essential in view of the scale of
borrowings (which are currently circa #100 million, as previously set out in the
Company's announcement dated 29 May 2007) in order to avoid an insolvent
liquidation of the Company and the consequent total negation of Shareholder
value. The Restructuring will provide an improved financial basis for the
business.

The level of the Existing Debt has meant that the Group has only been able to
continue trading as a result of the support of Barclays, which has provided
funding facilities to the Group since flotation and continues to support the
Group. On 28 March 2007, the Board announced additional facilities from
Barclays, but indicated that further funds would still be required for working
capital and fixed capital purposes from 31 May 2007. This announcement also
indicated that options to restructure the current debt were under review,
including the possibility of a debt for equity swap.

On 29 May 2007, the Board announced that it had received outline proposals from
Barclays, which would be likely to lead to significant dilution for Shareholders
and could lead to a cancellation of the trading facility for the Ordinary Shares
on AIM. A further update to Shareholders was issued by the Board on 1 June 2007,
confirming that its on-demand facilities from Barclays had been rolled over to
31 December 2007, with an additional #7 million provided to meet interim
requirements for working and fixed capital purposes and the deferral until 31
December 2007 of future interest payments.


Financial information relating to the Group

The Group's fixed assets (property plant and equipment) have a net book value at
31 March 2007 of #34.4 million. At this date the Group had net current
liabilities of #96.5 million, negative shareholder funds of #62.1 million and
made a loss before taxation of #32.0 million. Total exceptional items for the
period ended 31 March 2007 amounting to #12.0 million included an impairment
charge for the Plant of #6.5 million.

The Directors have considered the likely cash requirements of the Group over the
next 12 months and believe that the current level of Facilities, which are
provided on an on-demand basis and extend only until December 2007, are highly
unlikely to meet these requirements. These facilities total #106.1 million and
were agreed with Barclays on 31 May 2007. At the same time Barclays has agreed
to defer the payment of interest due to them on borrowings since 1 January 2007
until 31 December 2007.

Nevertheless, the Directors believe that it is appropriate to prepare the Report
and Accounts of the Group for the financial year ended March 2007 on a going
concern basis.


Principal terms of the Restructuring

The effect of the Restructuring will be to reduce the shareholding of the
Company in Biofuels Trading to 6 per cent. Without the Restructuring being
implemented an insolvency of the Company is unavoidable. In the event of an
insolvency, in view of the level of Existing Debt and the guarantee structures
which are in place in respect of the Facilities, Shareholders would receive
nothing. Although Barclays has, as the Group's banker, supported and continues
to support the Group, it has indicated as conditions of its continued support
that the level of secured debt must be reduced and that it must receive a
significant equity stake in Biofuels Trading.

The Restructuring gives Biofuels Trading an opportunity to reduce its secured
debt considerably and continue its business. The proposed shareholding of 6 per
cent. that will remain with the Company allows Shareholders to participate in an
upturn in the business of Biofuels Trading should this occur.

The principal steps of the Restructuring are, that subject to the passing of the
Resolutions, the Company will be released from its obligations to Barclays under
the Cross Guarantee in exchange for:

(a)  the right for Newco to acquire new ordinary shares in Biofuels Trading.
     These shares will be paid up by application of #40 million of the Existing 
     Debt, such that Newco will own 94 per cent. of the enlarged ordinary share 
     capital of Biofuels Trading;

(b)  the sale by the Company of all of its trading assets (other than its
     interest in Biofuels Trading and its interest in certain contracts, 
     including the Energea Contract) including the goodwill attaching to its 
     name to Biofuels Trading;

(c)  the release by the Company of Biofuels Trading from the obligation to repay 
     the Inter-company Loan;

(d)  a cash sum adequate to pay all the outstanding creditors of the Company;

(e)  a commitment by Biofuels Trading to pay to the Company on an annual
     basis a sum to allow it to comply with certain ongoing legal and 
     administrative obligations relating to its position as a private limited 
     company; and

(f)  funding to be paid by Biofuels Trading to the Company to pursue Claims
     under the Energea Contract, to the extent that Biofuels Trading requests 
     such Claims to be pursued.  The proceeds of these Claims (if any) received 
     by the Company will belong to Biofuels Trading.

As part of the Restructuring, the Company's executive directors, Sean Sutcliffe,
Andy Leeser and Richard Nickels will have their existing terms of engagement
transferred to Biofuels Trading. They will also become Directors of Newco.
Newco will have a Chairman, Stephen Boyd, appointed by Barclays Ventures. Clare
Spottiswoode will, upon completion of the Restructuring, cease to be a Director
of the Company and Paul Elliott will become a Director of the Company. The
Independent Directors have agreed, as a term of the Restructuring, to waive the
six months' notice period contained in their terms of engagement with the
Company. Mike Buzzacott and Geoff Brady will remain as Directors of the Company.

Stephen Boyd (57) is Chairman of Pittards plc, a company whose shares are
admitted to trading on AIM. A chemical engineer by training, Mr. Boyd has worked
in a number of manufacturing industries, including five years as Group Chief
Executive of Capital Industries plc. He now owns a number of companies from
plastic injection moulding to building materials businesses.

Further details of the documents relating to the Restructuring are set out in
the Circular.


Shareholder position following Restructuring

Following the Restructuring, the Company's only significant asset will be its 6
per cent. minority shareholding in Biofuels Trading. In the event that at a
future date, Biofuels Trading is in a position to pay dividends or the Company
is in a position to realise any value for its investment, such value will accrue
to the Company and on any subsequent liquidation of the Company would in
principle be available for distribution to Shareholders.  There can be no
guarantee that such will be the case.

The Board will give notice to London Stock Exchange pursuant to Rule 41 of the
AIM Rules to effect, subject to the passing of the Resolutions, the cancellation
of the admission of the Ordinary Shares to trading on AIM. In accordance with
Rule 41, the cancellation of admission of the Ordinary Shares to trading will
require the consent of 75 per cent. of votes cast at the EGM. The cancellation
of admission should result in the Company achieving some administrative
cost-savings. Such cancellation is likely to take effect on or about 2 August
2007. AFTER THIS TIME THERE WILL BE NO PUBLIC MARKET THROUGH WHICH ORDINARY
SHARES CAN BE TRADED AND NO PRICE WILL BE PUBLICLY QUOTED FOR THE ORDINARY
SHARES.  AS SUCH, HOLDINGS OF ORDINARY SHARES ARE UNLIKELY TO BE CAPABLE OF SALE
AND WILL BE DIFFICULT TO VALUE.

Shareholders should also note that, as a consequence of the dilution of the
Company's shareholding in Biofuels Trading to 6 per cent., the Company will no
longer have the benefit of certain minority protection rights in relation to its
investment in Biofuels Trading.  These include, for example, the inability of
the Company, as shareholder of Biofuels Trading, to prevent a special resolution
being passed by the shareholders of that company.

In addition, Biofuels Trading's New Articles of Association contain provisions
(sometimes known as "drag-along" provisions) which would enable Newco
unilaterally to oblige the Company to transfer its shareholding in Biofuels
Trading to a third party purchaser on a sale by Newco of its shares in that
company.

The Company proposes to put in place a facility which, it is intended, will
enable shareholders to crystallise their tax losses in relation to their
shareholdings in the Company. If the Restructuring is completed further details
in respect of this facility will be made available to Shareholders in due
course.  All shareholders are strongly recommended to consult their own
independent advisers if they are in any doubt as to their tax position.


Extraordinary General Meeting

An Extraordinary General Meeting of the Company is to be held at 10.30 am on 23
July 2007 at Belasis Business Centre, Belasis Hall Technology Park, Billingham,
Teesside TS23 4EA.

At the EGM special resolutions will be proposed (all of which, other than the
final one, are interconditional):

(a)  authorising the Directors to implement the Restructuring including
     authorising the Directors to do all such things they might consider 
     necessary or desirable in connection with the Restructuring, including 
     but not limited to, approving any non-material amendments to any of the 
     documents required to implement the Restructuring;

(b)  changing the name of the Company to Earls Nook plc;

(c)  authorising and approving the giving of notification by the Directors
     to London Stock Exchange  pursuant to Rule 41 of the AIM Rules for 
     Companies to effect cancellation of admission of the Company's ordinary 
     shares to trading on the AIM market of London Stock Exchange; and

(d)  changing the status of the Company to a private limited company.

The resolutions set out at (a) to (c) above are not conditional on the
resolution set out at (d) above being passed.


Directors' Recommendation

The Independent Directors, who have received advice from Collins Stewart, the
Company's Nominated Adviser and broker, consider the terms of the Restructuring
to be in the best interests of the Company and Shareholders as a whole.  In
providing such advice, Collins Stewart has placed reliance on the Independent
Directors' commercial assessments in relation to the Restructuring.

THE BOARD DRAWS SHAREHOLDERS' ATTENTION TO THE IMPORTANCE OF VOTING IN FAVOUR OF
THE RESOLUTIONS.  SHAREHOLDERS SHOULD PAY PARTICULAR ATTENTION TO THE FACT THAT
IF THE RESTRUCTURING DOES NOT PROCEED AN INSOLVENCY PROCESS WILL BE UNAVOIDABLE.
IN SUCH CIRCUMSTANCES, GIVEN THE LEVEL OF EXISTING DEBT, SHAREHOLDERS WILL
RECEIVE NO VALUE.

The Independent Directors unanimously recommend that Shareholders vote in favour
of the Resolutions as they intend to do in respect of, in aggregate, 73,709
Ordinary Shares in which they are interested, representing approximately 0.15
per cent. of the existing issued Ordinary Shares.

The Executive Directors intend to vote in favour of the Resolutions in respect
of, in aggregate, 67,563 Ordinary Shares in which they are interested,
representing approximately 0.14 per cent. of the existing issued Ordinary
Shares.


Annual General Meeting

The Annual General Meeting of the Company for 2007 will take place at 10.45 am
on 23 July 2007 (or as soon as possible thereafter as the Extraordinary General
Meeting shall have concluded or been adjourned).




                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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