Issue of Loan Stock

RNS Number:6046O
Creative Education Corp Plc
22 December 2006

            Creative Education Corporation ("CEC" or the "Company")



                              Issue of Loan Stock



                            Appointment of Director



On 4 September 2006, the Company announced that, following an extended period of
underperformance and adverse trading conditions at several sites within the
portfolio of childcare nurseries, it had agreed to issue #1 million nominal
value convertible unsecured loan stock ("September Loan Stock") to provide
additional working capital.



The original subscriber for the September Loan Stock did not meet the
subscription conditions and consequently the Company has terminated its
agreement with the original subscriber and has entered into a new agreement with
Solent Nominees Limited ("SNL") to subscribe for #1 million nominal value
convertible loan stock ("Loan Stock") in replacement. Additionally, the Company
has granted SNL, or its nominees, an option, to subscribe for up to a further
#1,500,000 of Loan Stock on or before 31 March 2007 ("Option").

The Directors consider that the monies receivable by the Company from the issue
of the Loan Stock and the exercise of the Option will enable the new management
team, lead by Paul Ayres, who was appointed CEO on 22 November 2006, to improve
the Company's commercial position.



The new management team is implementing a revised business plan with the
objective of eliminating losses as soon as reasonably practicable. Although at
an early stage, there are indications that the Company's performance is
improving. Both revenue growth and cost reductions have already been achieved
across the group and the new management team are focused on rationalising the
business to continue to improve the

trading performance.



Details of the Loan Stock

The principle terms of the Loan Stock are as follows:



1. the Loan Stock, unless previously converted will be repayable on 30 June
2007;



2. unless converted or repaid prior to 30 June 2007 the Loan Stock will be
repaid with accrued interest at a rate of 2 per cent. above the base rate of
Bank of Scotland plc, calculated on a daily basis from 30 June 2007;



3. subject to the restriction referred to in paragraph 6 below, the Loan Stock
will at SNL's request convert into new fully paid ordinary shares of 0.1p
nominal value each ("New Ordinary Shares") in the capital of the Company on the
passing, before the repayment date, at an extraordinary general meeting of the
Company of resolutions to include a capital reorganisation of the Company to
divide the existing ordinary shares of 1p each into New Ordinary Shares and
deferred shares of 0.9p each ("Deferred Shares"). Such a resolution will be
proposed at the an extraordinary general meeting of the Company convened for 22
January 2007 ("EGM");



4. following the creation of New Ordinary Shares and Deferred Shares any further
Loan Stock issued to SNL pursuant to the Option will be convertible at SNL's
request;



5. on such a conversion, the Loan Stock shall convert into fully paid New
Ordinary Shares at a conversion price of 0.33 pence per share, equivalent to 303
new ordinary shares per #1 nominal of Loan Stock;



6. except as otherwise agreed by the Company and SNL, the Loan Stock may only be
converted up to a maximum of 29.9 per cent of the voting share capital of the
Company unless and until SNL receives a waiver of the requirement under Rule 9
of the City Code on Takeover and Mergers to make an offer to the other
shareholders of the Company if it were immediately receive all of the shares
arising on conversion of the Loan Stock then held; and



7. the Loan Stock may be transferred, in whole or in part, at SNL's discretion
subject to having received the Company's prior approval to the transfer, such
approval not being unreasonably withheld or delayed.





New Ordinary Shares and conversion of outstanding loans

In addition to the issue of the Loan Stock, The Company has entered into
arrangements with certain of its creditors such that following the successful
completion of the EGM and part conversion of the Loan Stock permitted under the
restrictions above it will issue up to 301,657,526 New Ordinary Shares.
Application will be made for the New Ordinary Shares to be admitted to trading
on the AIM market of the London Stock Exchange with effect from 23 January 2007.



As at the date of this document the company has an issued share capital of
311,615,930 ordinary shares of 1 pence each. Following the EGM, assuming all of
the resolutions proposed are passed and the part conversion of the Loan Stock
permitted under the restrictions above is enacted, the issued share capital of
the company will comprise 613,273,456 ordinary shares of 0.1 pence each and
311,615,930 deferred shares of 0.9 pence each.



A circular setting out details of the Loan Stock and related proposals and
containing the notice of EGM has been sent to shareholders today.



Board Change

The directors propose to appoint Rhidian Llewelyn as non executive deputy
chairman following the EGM. Mr Llewellyn is the founder of Llewellyn Education
Limited, a consulting business and served as the Head Master at Papplewick
School in Ascot Berkshire. Before this, he served as a Housemaster at The Dragon
School in Oxford.








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