Refinancing

RNS Number:4302G
Healthcare Enterprise Group PLC
26 October 2007

26 October 2007

Healthcare Enterprise Group PLC

Recommencement of share dealings and new financing package

Healthcare Enterprise Group PLC ("HCEG", the "Company" or "the Group", AIM:
HCEG), the international healthcare products group, announces that it proposes
to raise up to #1.75 million in a refinancing package and that trading in the
Company's shares, which was suspended on 28 September 2007 pending clarification
of its financial position, is expected to recommence immediately.

Highlights
     
*    Up to #1.75 million refinancing package to enable the immediate repayment 
     of the substantial part of a bank term loan and inject additional working 
     capital into the Group, significantly reducing debt and strengthening its 
     position to seek an orderly disposal or demerger of a number of its
     businesses.

*    Sales of the Ridgecrest Healthcare Group Inc. interests and the Company's 
     dental subsidiary, CICS, in order to repay the outstanding balance of the 
     bank term loan.

*    The Board is also looking at all alternatives for other Group assets in 
     order to realise shareholder value.

*    The refinancing package comprises the placing of up to #1.75 million of 
     Convertible 8% Unsecured Loan Stock ("Loan Stock"). Subject to shareholder
     approval the Loan Stock will be able to convert into up to 140 million new
     Ordinary Shares.

*    In addition, the Group has granted the Loan Stock holders options to
     subscribe up to #2.25 million of additional capital for stakes in the 
     Ebiox (up to 45%) and Reproductive Sciences (up to 51%) subsidiary 
     operations.  The total implied value of the Ebiox and Reproductive Sciences 
     businesses based on these options is #4.8 million.

*    The refinancing package includes a #200,000 commitment from Nicholas
     Brigstocke, a non-executive director, and #600,000 from Nigel Wray, who was 
     a director in the last 12 months.

*    Costs and expenses continue to be reduced with Crest Medical approaching 
     breakeven before the share suspension and central overheads to be reduced 
     significantly by the year end.

*    The directors (the "Board" or the "Directors") intend to appoint John Gunn 
     to join the Board at the next general meeting in order to oversee the
     disposal and demerger process

Mark Tompkins, HCEG Chairman, said:

"We have given careful consideration to a number of potential alternatives for
the Group's future.  In the light of the current severe financial circumstances,
but given our belief in the value of the underlying businesses, the Directors
are of the view that the refinancing package is the best alternative available.
 This decision was reached after detailed consultation with our advisors.
                                      
"We have now secured additional funding to repay immediately #900,000 of the
bank term loan of #1.35m and provide working capital to allow us to realise
value from the Group's assets.

"The Board is confident that the capital injection should enable shareholders to
realise value in the short to medium term."


Enquiries:

Healthcare Enterprise Group                                 + 44 (0)1925 898 200
Lyndon Gaborit, Executive Deputy Chairman

Numis Securities
David Poutney/Oliver Cardigan                               [phone]

College Hill                                                [phone]
Adrian Duffield/Jon Davies


Introduction

Trading in HCEG's shares was suspended on 28 September 2007 pending
clarification of the Company's financial position. Losses sustained by the
operating subsidiaries in the half year to 31 August 2007, coupled with a slower
than expected sale of some non-core assets, put undue financial pressure on HCEG
and the Company was advised by its bankers, Barclays Bank plc ("Barclays"), that
it wanted repayment of the outstanding term loan prior to the repayment date of
31 December 2007.

Refinancing Package

The Group has now arranged a financing package of up to #1.75 million which
allows for the immediate repayment of part of the term loan and the injection of
additional working capital.

The refinancing package comprises:
     
a.   The issue of up to #1.75 million of Loan Stock, of which #1.5 million has 
     been irrevocably committed, with interest of 8% per annum and a five year
     final repayment date. The Company has committed to propose the necessary
     facilitating resolutions to shareholders at a general meeting to be called
     shortly, to permit such Loan Stock to be convertible into up to 140 million 
     new ordinary shares in the Company at a conversion price of 1.25p each, 
     should the holders elect to do so.

b.   Options granted to the Loan Stock holders for an aggregate exercise price 
     of up to #1.5 million in cash over up to 45% of the equity in the Company's 
     wholly owned subsidiary, Ebiox Limited ("Ebiox"). This implies a valuation 
     of Ebiox of #3.33 million.

     Ebiox produces a range of patented cleansing, decontamination and 
     disinfectant products and in the year ended 28 February 2007 total Group 
     sales of Ebiox were approximately #929,000.

c.   Options granted to the Loan Stock holders for an aggregate exercise price 
     of up to #750,000 in cash over up to 51% of the equity in the Company's
     wholly owned subsidiary, Reproductive Sciences Limited ("RSL"), (which is
     proposed to be the holding company for the Company's 19.8% holding in
     Fertiligent Limited ("Fertiligent"), HCEG's option to acquire the majority 
     of Fertiligent, and HCEG's entitlement to Fertiligent's associated sales 
     and marketing rights). This implies a valuation of RSL of #1.47 million.

     Fertiligent is a high quality, low cost intrauterine sperm pump to help 
     assist infertile couples conceive in a more effective, natural, less 
     invasive manner than other more costly, conventional fertility treatments. 
     Neither RSL nor Fertiligent had any turnover in the most recent full 
     financial year.

The options in the equity in Ebiox and RSL are exercisable between one and three
years after the date of grant but exercise can be accelerated on the occurrence
of certain triggering events, such as the realisation of HCEG's holding in these
companies.

The placing of the Loan Stock is expected to close on or around 30 October 2007.

Should the shareholders at the proposed general meeting not approve the
conversion terms of the Loan Stock, the Company has agreed to procure that the
Loan Stock will become secured over the assets and undertakings of the Group,
such security ranking behind Barclays. There will also be an additional charge
equal to one year's interest. If the conversion terms are approved, the Loan
Stock holders would, assuming full conversion, hold, together with their
existing holdings, 37.52% of the Company's enlarged issued ordinary share
capital.

The failure of the Company to complete this new financing would have resulted in
the Board having to give serious consideration as to the financial viability of
the Group going forward and to taking any appropriate consequential steps.

The Board intends to use the proceeds from the refinancing package to
immediately repay #900,000 of the Barclay's term loan of #1.35 million. The
balance of the term loan is due by 31 December 2007 and is intended to be repaid
from the sales of non-core assets. It is also currently intended that the fees
attached to the term loan due on repayment will be satisfied by granting
warrants over ordinary shares.  Should these asset sales not be achieved, it is
intended that the balance of the loan will be repaid from the options exercise
monies, replacement debt or additional funds raised from shareholders.

Accordingly, there can be no certainty that the Company will have sufficient
funds to repay the balance when it falls due to be paid in the absence of such
events although the Board is confident that sufficient amounts will be
available. Further, should the bank require repayment in circumstances where
insufficient funds are available from realisations or further financings, the
Company is unlikely to have sufficient working capital to continue the operation
of the business as currently contemplated.

The Company is also in discussions with other mainstream clearing banks to
refinance its invoice discounting facility with Barclays, currently drawn down
by approximately #700,000 against total debtors of #1.1 million.

Commitments under the refinancing package

Irrevocable commitments from investors in respect of the Loan Stock have been
received by the Company's nominated adviser and broker, Numis Securities Limited
("Numis") in respect of #1,500,000 of the Loan Stock.

The above commitments include a #200,000 commitment for Loan Stock from Nicholas
Brigstocke a non-executive director of the Company. He will also be granted
options over 5.14% and 5.83% of Ebiox and RSL respectively. Following such
subscription he will hold, 2,072,186 ordinary shares, #200,000 of Loan Stock and
options over 5.14% and 5.83% respectively of the equity in these subsidiary
companies. The exercise of options by Nicholas Brigstocke will be subject to
shareholder approval which will be proposed at the same general meeting to
approve the convertibility of the Loan Stock. Assuming full conversion of the
Loan Stock and the maximum size of the placing, his total equity holding in the
Company will be 18,072,186 ordinary shares representing 3.96% of the enlarged
share capital (assuming no further issues by that time).

Nigel Wray, who was a director in the last 12 months, has given a commitment for
#600,000 of Loan Stock and will be granted options over 15.43% and 17.49% of
Ebiox and RSL respectively. Assuming full conversion of the Loan Stock and the
maximum size of the placing, his total equity holding in the Company will be
65,199,836 ordinary shares representing 14.28% of the enlarged share capital
(assuming no further issues by that time).

Further, John Gunn and associated parties have given a commitment for #400,000
of Loan Stock and will be granted options over 10.29% and 11.66% of Ebiox and
RSL respectively.  The Directors intend to appoint John Gunn to the Board at the
next general meeting following the implementation of the refinancing proposals.
Assuming full conversion of the Loan Stock and the maximum size of the placing,
John Gunn's and his associated parties' total equity holding in the Company will
be 44,000,000 ordinary shares representing 9.64% of the enlarged share capital
(assuming no further issues by that time).  An announcement in accordance with
the AIM Rules will be made once this appointment is approved and implemented.

The fees and expenses of the above proposals are expected to be approximately
#60,000 (excluding any value added tax) and will be borne out of the proceeds of
the refinancing. In addition, Numis will receive an option over 2% of Ebiox
exercisable for nominal consideration over the equity of Ebiox in lieu of a cash
fee.

The independent Directors, Mark Tompkins and Lyndon Gaborit, consider having
consulted with Numis, that the terms of the refinancing package taken as a whole
are fair and reasonable insofar as the shareholders of the Company are
concerned.

Strategic disposals and acquisitions

The Board has received approaches to buy certain of the Group's core and
non-core assets. It believes that an orderly process of realisation should
enhance shareholder value. In particular, the Group is progressing the first
stage of its planned realisation of its Ridgecrest Healthcare Group interests
and the sale of its dental subsidiary, CICS.

To strengthen the business of Crest and enable it to achieve break-even more
quickly the Board is finalising the introduction into Crest of senior industry
management. It is now the Board's intention to de-merge Crest which will seek
further growth in the first aid and medical supplies sector.

The commitment to issue options in Ebiox and Reproductive Sciences totalling
#2.25 million is the first stage in not only establishing a valuation benchmark
for these businesses, but also securing a source of funds for the Group which
should be triggered by the anticipated corporate action.

Current trading and Interim Results

The interim results for the six months ended 31 August 2007, which are planned
to be published before the end of November, are expected to show a net loss for
the half year of approximately #1.6 million, before any adjustment to intangible
assets which may be necessary following this refinancing, although prior to
suspension the Group was moving towards breakeven. Further cost savings have
been identified and should accelerate this process and help to create further
value for shareholders.

Since the end of the half year, losses have continued to be incurred as the
Company downsizes further to meet the current revenue levels. The Crest Medical
business in Warrington has underperformed relative to expectations, and expenses
have, accordingly, been reduced further. The announcement of the share
suspension had a negative effect on customers and suppliers of Crest resulting
in poorer sales and increased losses. Going forward, further cost cutting is
planned at Crest Medical to reach a break-even position in the near future.

The Board is of the opinion that following receipt of the refinancing package,
the Company has sufficient working capital for its immediate needs pending
receipt of proceeds from realisation of certain assets proposed to be disposed
of or further financing being put in place at the time of any demand by Barclays
to repay the balance of the term loan as described above.

End


Note to Editors

Healthcare Enterprise Group PLC (www.hcegroup.com)

HCEG is a business engaged in medical product distribution, occupational health,
and first aid markets.  These businesses underpin a range of innovative medical
devices. HCEG is listed on the AIM Market of the London Stock Exchange.

Ebiox (www.ebiox.com)

Patented decontamination and disinfectant products that are safe and alcohol
free but substantially more effective than conventional methods at destroying
embedded micro-organisms.  The Ebiox range includes hand hygiene products,
surface disinfectants, products to clean and decontaminate surgical instruments
and dental cleaning products.

Reproductive Sciences Limited

Reproductive Sciences Limited will own the Group's interest in Fertiligent.
Fertiligent is a high quality, low cost intrauterine sperm pump to help assist
infertile couples conceive in a more effective, natural, less invasive manner
than other more costly, conventional fertility treatments.  Fertiligent's first
product, the IQI-100, is a disposable, slow-release insemination device that
extends the "window of opportunity" for ovum fertilisation by emulating the
natural insemination process.  Fertiligent IQI-100 has already been successful
in trials in Israel and Germany, achieving success rates up to three times
greater than those of traditional intra-uterine inseminations (IUIs).


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