Posting of Circular

 

TIDMCLEA 
 
RNS Number : 4749L 
Cleardebt Group PLC 
06 May 2010 
 

ClearDebt Group plc ("ClearDebt" or the "Company") 
 
As announced on 19 April 2010, CDG (Guernsey) Limited ("CDG"), a wholly owned 
subsidiary of the Company, issued a Loan Note Instrument constituting up to 
GBP2,300,000 Fixed Rate Secured Loan Notes 2013 ("Loan Notes").  Also announced 
on 19 April 2010, the monies raised from the issue of the Loan Notes have been 
used to pay the balance of the consideration due for the assets of Relax Group 
plc acquired in December 2009, to repay a loan from Synergy Capital Limited 
("Synergy") and to part repay the Company's Chief Executive Officer, David Mond, 
in respect of a loan made by him to the Company in 2007.  The Loan Notes were 
admitted to the Official List of the Channel Islands Stock Exchange on 16 April 
2010.  No application has been made or will be made to admit the Loan Notes to 
trading on AIM or any other investment exchange. 
 
The Company's 2 pence ordinary shares ("Existing Ordinary Shares") are currently 
trading at or below nominal value. In order to declare dividends and undertake 
future equity fundraisings, the directors of the Company (the "Directors") 
propose a reorganisation of the Company's share capital (the "Subdivision"). 
Further details of the proposed Subdivision are set out below. 
 
The Directors have convened a general meeting for 25 May 2010 (the "General 
Meeting") at which the Company's shareholders will be asked to vote, inter alia, 
on the Subdivision, the authority to allot shares pursuant to conversion of the 
Loan Notes (the "Conversion Shares") and certain consequential amendments to be 
made to the Articles of Association of the Company (the "Articles"). 
 
Conversion of Loan Notes into shares in the Company 
 
Until the Loan Notes are redeemed CDG shall pay interest quarterly at the rate 
of 10% per annum. If the resolutions proposed at the General Meeting (the 
"Resolutions") have not been passed by 30 June 2010 this rate increases to 14% 
per annum until redemption, purchase or conversion of the Loan Notes. 
 
At any time when any of the Loan Notes are to be redeemed CDG and/or the Company 
shall also pay to the subscriber an additional amount equal to either 25% or 
200% of the principal amount of the Loan Notes redeemed. The lower of these two 
amounts is payable after 30 June 2010 where the Resolutions have been passed by 
that date. The higher amount shall be payable after 30 June 2010 where the 
Resolutions have not been passed by that date. Unless previously redeemed or 
converted, CDG will redeem the Loan Notes on the third anniversary of the Loan 
Note Instrument. 
 
The Loan Notes will be convertible into new 0.5 pence Ordinary Shares ("New 
Ordinary Shares") only following the passing of the Resolutions. Subject to the 
Resolutions being passed, subscribers to the Loan Notes shall have the right at 
any time prior to the third anniversary of the Loan Note Instrument to serve a 
conversion notice on CDG and the Company to immediately convert all or part of 
the Loan Notes held by them into New Ordinary Shares at a specified conversion 
price. The conversion price ("Conversion Price") will be the lower of (1) 1.8 
pence per New Ordinary Share, (2) the price per New Ordinary Share at which any 
New Ordinary Shares are issued by the Company following the date of the Loan 
Notes and (3) if any other convertible security is issued, the lowest price per 
New Ordinary Share at which such security can be converted into New Ordinary 
Shares. 
 
The Loan Notes may be redeemed by CDG at any time by giving the Loan Note 
holders at least 30 days' notice.  Subject to the Resolutions being duly passed, 
such Loan Note holders may elect to convert their Loan Notes into New Ordinary 
Shares as set out above at any time during the 30 day notice period. 
 
The Company and CDG entered into an investment agreement dated 19 April 2010 
("Investment Agreement") with Synergy. The Investment Agreement contains limited 
warranties regarding the Company and CDG and contains usual orderly market 
obligations on Synergy in relation to any Conversion Shares which it may hold. 
 
The Company is seeking approval to increase the Directors' authority to issue 
and allot New Ordinary Shares to effect a conversion of the Loan Notes and issue 
the Conversion Shares and to issue New Ordinary Shares for cash after 
disapplying pre-emption rights of up to approximately 5 per cent. of the nominal 
value of the current issued ordinary share capital of the Company and otherwise 
to effect a conversion of the Loan Notes and issue of the Conversion Shares. 
 
Related Party Transaction 
 
The subscription of Loan Notes by David Mond constitutes a related party 
transaction for the purposes of the AIM Rules. 
 
Where a company enters into a related party transaction the independent 
directors of the company are required to consult with the company's nominated 
advisers. 
 
The independent directors of the Company, having consulted with Seymour Pierce 
Limited in its capacity as nominated adviser to the Company, consider the 
related party transaction to be fair and reasonable and in the best interests of 
the Company's shareholders as a whole.  In providing such advice Seymour Pierce 
Limited has taken into account the independent directors' commercial 
consideration in respect of the related party transaction. 
 
Subdivision 
 
The Board of the Company proposes a reorganisation of the capital structure of 
the Company in two stages.  The first stage is the Subdivision which is being 
proposed at the General Meeting, of which further details are set out below. 
The second stage comprises a share capital cancellation in order to eliminate 
the accumulated deficit on the Company's profit and loss account.  The deficit 
on the profit and loss account prevents the Company from paying dividends and 
purchasing its own shares.  The Board intends to further consider a share 
capital cancellation later in the year. Following such cancellation (if granted 
by the Court), the Company would seek to pursue a robust dividend policy 
commensurate with the profits of the Company but taking into account the working 
capital requirements of the Group. 
 
The Board is currently focused on satisfying the conditions of conversion of the 
Loan Notes into shares in the Company and, for this reason, proposes that only 
the Subdivision is undertaken at this time. 
 
The Directors propose to subdivide each Existing Ordinary Share into one New 
Ordinary Share of 0.5p and one Deferred Share of 1.5p.  The rights attaching to 
the Deferred Shares are set out in detail below. 
 
If the Subdivision is approved, the share capital of the Company will comprise 
308,340,567 New Ordinary Shares and 308,340,567 Deferred Shares, subject to any 
adjustments which may arise as a result of dealing with fractional entitlements. 
 
It is proposed that the Deferred Shares will eventually be cancelled as part of 
the share capital cancellation referred to above.  No application will be made 
for the Deferred Shares to be admitted to trading on AIM. 
 
The rights attaching to the New Ordinary Shares shall be identical to the rights 
attaching to the Existing Ordinary Shares. 
 
The rights attached to the Deferred Shares will be as follows: 
 
(a)        as regards income, the right as a class to receive 0.1p for each 
GBP999,999 of dividends or other distributions resolved to be distributed out of 
the profits of the Company available for distribution, the same to be 
distributed amongst the holders of the Deferred Shares in proportion to the 
amounts paid up or credited as paid up thereon; 
 
(b)        as regards capital, in the event of the winding up of the Company or 
other return of capital, the Deferred Shares shall confer upon the holders 
thereof as a class the right to receive 0.1p for each GBP999,999 of the assets 
of the Company available for distribution amongst the members, the same to be 
distributed amongst the holders of the Deferred Shares in proportion to the 
amounts paid up or credited as paid up thereon; and 
 
(c)        as regards voting, the Deferred Shares shall not at any time confer 
on the holders thereof any right to attend, vote or speak at any general meeting 
of the Company or to receive notices thereof. 
 
5.         General Meeting 
 
The following resolutions are to be proposed at the General Meeting: 
 
Resolution 1 
 
Resolution 1 proposes the Subdivision as described above and is proposed as an 
ordinary resolution therefore requiring approval by a simple majority of those 
Shareholders attending and entitled to vote in person or by proxy at the General 
Meeting. 
 
Resolution 2 
 
Resolution 2 authorises the general issue of shares pursuant to a conversion of 
the Loan Notes in accordance with their terms.  Such authority will expire at 
the conclusion of the next annual general meeting of the Company or the date 
which is 6 months after the next accounting reference date of the Company 
(whichever is the earlier). 
 
Resolution 2 requires approval by a simple majority of those Shareholders 
attending and entitled to vote in person or by proxy at the General Meeting. 
 
Resolution 3 
 
Resolution 3 proposes that statutory pre-emption rights be disapplied and also 
enables the Directors to allot shares (a) pursuant to conversion of the Loan 
Notes and (b) up to an aggregate nominal value of GBP77,085, which is equal to 
5% of the nominal value of the current ordinary share capital of the Company. 
Unless previously revoked or varied, the disapplication will expire on the 
conclusion of the next annual general meeting of the Company or on the date 
which is 6 months after the next accounting reference date of the Company 
(whichever is the earlier). 
 
Resolution 3 requires approval by holders of 75% of the Ordinary Shares 
attending and entitled to vote in person or by proxy at the General Meeting. 
Resolution 3 is conditional upon the passing of Resolution 2. 
 
Resolution 4 
 
Resolution 4 proposes certain amendments to the Articles to make the changes 
necessary to reflect the new class of shares.  Resolution 4 requires approval by 
holders of 75% of the Ordinary Shares attending and entitled to vote in person 
or by proxy at the General Meeting. Resolution 4 is conditional upon the passing 
of Resolution 1. 
 
6.         Admission 
 
Application will be made to the London Stock Exchange for the New Ordinary 
Shares to be admitted to trading on AIM.  It is expected that Admission will 
become effective and dealings in the New Ordinary Shares will commence on 26 May 
2010.  The Deferred Shares will not be admitted to trading on AIM. 
 
A document convening the General Meeting has been posted to all shareholders 
today and will be available on the Company's website at www.cleardebtgroup.co.uk 
shortly. 
 
For further information, please contact: 
 
 
+--------------------+--------------------+--------------------+ 
| David Mond, CEO    | ClearDebt Group    | Tel: [phone] | 
|                    | plc                |                    | 
+--------------------+--------------------+--------------------+ 
| David Shalom, FD   | ClearDebt Group    |                    | 
|                    | plc                |                    | 
+--------------------+--------------------+--------------------+ 
|                    |                    |                    | 
+--------------------+--------------------+--------------------+ 
| John Cowie         | Seymour Pierce     | Tel: [phone] | 
|                    | Limited            |                    | 
+--------------------+--------------------+--------------------+ 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 MSCUGUACAUPUGWQ