DQ Entertainment PLC Further re senior secured convertible bonds (3719L)

TIDMDQE

RNS Number : 3719L

DQ Entertainment PLC

11 January 2016

11 January 2016

DQ Entertainment plc ("DQE" or the "Company")

Further re senior secured convertible bonds and requisition of general meeting and proposed issue of warrants

Further to the announcement on 8 January 2016, the Board of DQE announces that with regard to the senior secured convertible bonds issued by the Company's subsidiaries, DQ Entertainment (Mauritius) Limited ("DQE Mauritius") and DQ Entertainment (Ireland) Limited ("DQE Ireland") (the "Bonds"), which are held by OL Master (Singapore) Pte. Limited (the "Bondholder"), on 18 December 2015, DQE Mauritius and DQE Ireland entered into an agreement with the Bondholder in respect of events of default under the DQE Mauritius Bond Instrument and the DQE Ireland Bond Instrument (the "Standstill Agreement"). As of this date, a condition of the Standstill Agreement regarding the issue of certain warrants by the Company (as described below) (the "Warrant Issue Condition") remains unfulfilled, but discussions regarding these matters are ongoing with the Bondholder as explained below.

In the Standstill Agreement, the Bondholder stated that events of default had occurred under the DQE Mauritius Bond Instrument and the DQE Ireland Bond Instrument (the "Bond Instruments") as follows:

   1.    Change of control 

Under the terms of the Bond Instruments only, the Bondholder deemed there to be a change of control event due to Corporate Computer Services, Platinum Consulting Group and their affiliates/associates having acquired, in aggregate, ordinary shares of GBP0.001 par value each in the capital of the Company ("Ordinary Shares") representing more than 50 per cent. of the issued ordinary share capital of DQE. The Bondholder therefore advised that this constituted a continuing event of default under the Bond Instruments (the "Advised Change of Control Event").

By way of background to the Advised Change of Control Event, on 3 June 2015 it was announced that Corporate Computer Services had acquired approximately 29.7 per cent. of the voting rights in the issued ordinary share capital of the Company (the "Acquisition"). Further, on 30 September 2015, Platinum Consulting Group, Anil Chintapalli (a member of the Shareholder Group) and Corporate Computer Services (together, the "Requisitioners") requisitioned an extraordinary general meeting of the Company (the "General Meeting") to propose resolutions to appoint two directors to the board of the Company (the "Proposed Directors"). The UK Takeover Panel therefore ruled that Corporate Computer Services, Platinum Consulting Group, Global MSA and their affiliates/associates (the "Shareholder Group") had come together as a concert party, but only after the Acquisition and not before. The Company agreed with this ruling.

The Acquisition and the determination of a concert party did not and has not resulted in a breach of rule 9 of the UK Takeover Code or the requirement for an offer for the Company under the UK Takeover Code. The Advised Change of Control Event is therefore determined only as a result of the contractual terms of the Bond Instruments and not for the purposes of the UK Takeover Code.

On 27 October 2015 it was announced that in line with the requirements of the AIM Rules for Companies regarding the appointment of new directors, DQE has requested certain due diligence information from the Proposed Directors. Whilst DQE has received due diligence information, the due diligence process is ongoing and DQE intends to proceed with convening the General Meeting as soon as possible once that process is concluded satisfactorily. Further announcements regarding the General Meeting will be made in due course.

It was agreed in the Standstill Agreement that, subject to DQE satisfying the Warrant Issue Condition, the Bondholder would not take any enforcement action in relation to the Advised Change of Control Event for a period of three months from the date of the Standstill Agreement in order for DQE to have the opportunity to remedy the Advised Change of Control Event.

The Company continues to discuss the Advised Change of Control Event with the Bondholder in good faith to resolve any potential breach of the Bond Instruments and come to a resolution amicably and expeditiously.

   2.    Monthly interest payments 

Monthly interest payments due under the terms of the DQE Mauritius Bond Instrument and the DQE Ireland Bond Instrument on 9 December 2015 (the "Interest Payment") were not paid by DQE. In anticipation of such, DQE requested that the Bondholder approve for the Interest Payment to be paid from funds reserved in the Company's blocked account, as put in place for security pursuant to the terms of the Bonds (also pursuant to the terms of the Bonds, the Company is required to maintain at least 6 months of cash interest in this account at all times) (the "Blocked Account"). The Bondholder stated that this amounted to an event of default which is continuing under the DQE Mauritius Bond Instrument and the DQE Ireland Bond Instrument (the "Non-Payment Event").

Under the Standstill Agreement, subject to DQE satisfying certain conditions (details provided below) including the Warrant Issue Condition, it was agreed that DQE Ireland could drawdown funds from the Blocked Account in order to pay the Interest Payment due. Such payment was made by the Company on 28 December 2015 (the "Disbursement"). The Bondholder also agreed it would not take any enforcement action in relation to the Non-Payment Event and failure to maintain the required balance within the Blocked Account, provided that after payment of the Disbursement, a sum equal to the Interest Payment is paid into the Blocked Account by no later than 29 January 2016. The Company expects to be able to reimburse the Blocked Account by 29 January 2016, but a failure to do so would constitute an event of default.

As explained below, discussions regarding these matters are ongoing with the Bondholder.

Proposed issue of warrants

In consideration of entering into the Standstill Agreement and agreeing to the terms above, it was agreed that warrants to subscribe for 16,878,914 Ordinary Shares exercisable at 5.375p per share (the "Warrants") be issued to the Bondholder (the issue of such Warrants, being the Warrant Issue Condition defined above) no later than 31 December 2015. As of this date, the Warrants have not been issued by the Company and therefore, the Company has not fulfilled its obligations under the Standstill Agreement. The Company is discussing with the Bondholders in good faith to resolve this situation under the Standstill Agreement and the issue of the Warrants as a potential remedy for the above deemed events of default.

The Warrants would represent approximately 29.99 per cent. of the current issued share capital of the Company and be issued under the existing authority conferred upon the Board of Directors by the shareholders of DQE in accordance with Resolution 8 and Resolution 9 (ii) at the Annual General Meeting of the Company held on 28 September 2015.

The Warrants are immediately exercisable from the issue date for a period of three years at any time when an event of default under the terms of the Bond has occurred and is continuing. The Warrants may be exercised at the sole discretion of the warrant holder in whole or in part and are freely transferable.

The two alleged events of default described above are those that are referred to as having occurred in the announcement on 8 January 2016. As noted above, the Company continues to discuss these matters with the Bondholder and expects to reach an expeditious resolution with the Bondholder.

The Company will make further announcements in due course.

Enquiries:

 
DQ Entertainment plc                  Tel: [phone] 
 Tapaas Chakravarti - Chairman         53726 
 and CEO 
 Rashida Adenwala - Director Finance 
 & Investor Relations 
 
  Allenby Capital Limited               Tel: +44 (0)20 
  Jeremy Porter / Alex Brearley         3328 5656 
 
  Buchanan                              Tel: +44 (0)20 
  Mark Edwards/Robbie Ceiriog-Hughes    7466 5000 
 

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January 11, 2016 02:00 ET (07:00 GMT)