Issue of Equity - Terms

RNS Number:2040R
Miller Fisher Group PLC
8 February 2002



For immediate release                                            8 February 2002


                   Miller Fisher Group plc ("Miller Fisher")

     Proposed issue of Cumulative Redeemable Convertible Preference Shares

                  Arrangements finalised with Bank of Scotland


Miller Fisher, the provider of outsourcing services to the insurance and
financial services industries, today announces detailed terms of the proposed
issue of preference shares.


Miller Fisher and Bank of Scotland ("BOS") have entered into formal conditional
agreements governing the proposed subscription for 13.25 million Cumulative
Redeemable Convertible Preference Shares ("CRCP Shares") in consideration for
the capitalisation by BOS of £13.25 million of bank debt. The Directors of
Miller Fisher believe that the proposed issue of CRCP Shares will enable the
Miller Fisher Group to achieve a sound financial base and will better position
it for future development.


In addition to the subscription for CRCP Shares, the Board of Miller Fisher is
proposing the adoption of new management incentive arrangements. BOS has also
agreed, subject to the satisfaction of certain conditions, to refinance its
existing facilities to the Miller Fisher Group, which are currently repayable on
demand.


Commenting on the transaction, Sir Timothy Kitson, Chairman said: "We are
confident that on completion of the transaction the Group will be in a better
position to grow the business and deliver shareholder value".


Highlights


  • Conversion of £13.25m of debt into CRCP Shares, significantly reducing
    borrowings which at 30 June 2001 stood at £24.8m, and related interest
    costs.

  • A reduction of balance sheet gearing from the current levels, which the
    Directors believe has previously created uncertainty amongst the Group's
    customers and potential customers.

  • John Hodson will replace Sir Timothy Kitson as Chairman on 1 April 2002
    and the business will be managed by the previously announced team of Malcolm
    Hughes as Group Chief Executive, Tom Anderson as Operations Director and
    Richard Horton, who will continue as Finance Director.

  • EGM to approve the transaction will be held at 11 am on 4 March at 21 New
    Street, Bishopsgate, London EC2M 4HR.


This summary should be read in conjunction with the full text of the
announcement, which follows.


For further information, please contact:

Miller Fisher                                                      020 7398 8700
Malcolm Hughes, Chief Executive
Richard Horton, Finance Director

HSBC Investment Bank plc                                           020 7336 9000
Andrew Galloway
Nick Donald

Grandfield                                                         020 7417 4170
Clare Abbot                                                          07715169326

Laura Foster                                                         07980603829


NOTES TO EDITORS

Miller Fisher Group plc is the holding company of a group that provides claims
and administration services for clients in the insurance and financial services
sectors, both in the UK and internationally. Its activities are carried out
through subsidiaries and branches in the UK, Ireland, Austria, Hong Kong,
Singapore, Dubai and Venezuela.


Key biographical information on the executive directors is as follows.

Malcolm Hughes (42) - Group Chief Executive

Malcolm Hughes is a fellow of the Chartered Institute of Loss Adjusters and an
Associate of the Chartered Insurance Institute. In 1984 he was one of the
founding partners of Miller Farrell, a loss adjusting and claims management
business in the Republic of Ireland. He was central to its development up to its
acquisition by Fishers International (now Miller Fisher Group plc) in 1997.
Malcolm joined the Board of Miller Fisher Group plc in June 2001 with
responsibility for international operations. He was appointed Group Chief
Executive on 6 December 2001.

Tom Anderson (47) - Operations Director

Tom is an Associate Member of the Chartered Institute of Bankers, an Associate
Member of the Institute of Credit Management and a Member of the Institute of
Direct Marketing. He has wide experience of the financial services industry and
particular experience of specialist insurance products such as creditor and
warranty insurance. He has held senior positions in the financial services
industry with subsidiaries of the Fortis Group and prior to that was director of
financial services for Thorn UK.

Richard Horton FCA (49) - Finance Director

A qualified chartered accountant, Richard has been finance director of Miller
Fisher Group plc since 1996. Prior to that he held a number of senior positions,
including main board roles, in financial management and control with other UK
financial services companies. He qualified as a chartered accountant with Price
Waterhouse in 1976.

The Board of Miller Fisher Group plc comprises:

Sir Timothy Kitson (as previously announced, Sir Timothy will be retiring as
director and Chairman on 31 March 2002)

John Hodson (non-executive. John Hodson will replace Sir Timothy Kitson as
Chairman on 1 April 2002)

Christopher Sheridan (non-executive)

Robert Wood (non-executive)

Malcolm Hughes (Chief Executive)

Tom Anderson (Operations Director)

Richard Horton FCA (Finance Director)


                            Miller Fisher Group plc

                  Arrangements finalised with Bank of Scotland


Introduction

On 6 December 2001, Miller Fisher announced that it had reached agreement in
principle with Bank of Scotland whereby Bank of Scotland would subscribe for
13.25 million Cumulative Redeemable Convertible Preference Shares in Miller
Fisher in consideration for the capitalisation of £13.25 million of bank debt.
Miller Fisher and Bank of Scotland have today entered into formal conditional
agreements governing the proposed subscription for CRCP Shares and related
matters. The Board is also proposing the adoption of new management incentive
arrangements as the existing arrangements are considered ineffective. A circular
giving details of the Proposals and convening an Extraordinary General Meeting
for 4 March 2002 to approve them is being despatched to Miller Fisher
shareholders today.


The Company has previously announced the appointment of Malcolm Hughes as Group
Chief Executive and Tom Anderson as Operations Director. Having attained the age
of 71, Sir Timothy Kitson shall retire as Chairman and from the Board with
effect from 31 March 2002. John Hodson, presently the Company's senior
Non-Executive Director, will succeed Sir Timothy as Chairman with effect from 1
April 2002.


Background to and reasons for the Proposals

At the beginning of 2001, the Group's borrowings stood at £29.8 million. As a
result of cost reductions made in the first six months of 2001 and the
application of part of the proceeds from the disposal of Homecare Insurance
Limited to reducing bank debt, borrowings decreased in the first six months of
2001 by £5 million to £24.8 million. At the time of the announcement on 10
September 2001 of the Group's interim results for the six months to 30 June
2001, the Board believed that further reductions in borrowings could be achieved
by positive cash flow and better management of working capital. However, the
Board also stated that the Group was trading against a difficult market
background.


As announced on 16 January 2002 and as discussed below in the section headed
"Current trading and future prospects", trading conditions continued to be
difficult in the second half of 2001. In particular, revenues in the UK were
substantially lower than in the first half of the year and the Group also
incurred exceptional non-recurring expenses partly as a result of restructuring
its UK operations. As a result it has not been possible to achieve further
substantial reductions in the Group's borrowings. The Board believes that the
Group's debt level gives rise to excessive balance sheet gearing. This has
created uncertainty amongst the Group's customers and potential customers and
unless rectified will continue to be an impediment in securing existing and
future revenue streams.


The Board believes that the over-riding priority is to remove this uncertainty
surrounding the Group's prospects and restore financial confidence. A number of
detailed discussions have been held with potential investors and a number of
financing structures and transactions have been considered. However, no proposal
arose from this process which could be put to Shareholders for approval. In view
of this, the Board entered into discussions with Bank of Scotland, the Group's
principal bankers, with a view to agreeing terms for a debt restructuring which
would relieve the Group of its excessive debt burden. These discussions have
resulted in the Proposals. The Board's view is that the elimination of
uncertainty and the restoration of financial confidence in the Group amongst the
Group's customers and potential customers will enable the Group to stabilise its
revenue and resume its development.


The Proposals

The Proposals consist of two main components: the issue of the CRCP Shares and
the Management Incentive Arrangements. In addition to the Proposals, as part of
its debt restructuring the Group has also conditionally agreed the terms of new
financing arrangements with Bank of Scotland as set out below.


The CRCP Shares

The Proposals provide for Bank of Scotland to subscribe, pursuant to the
Subscription Agreement, for 13.25 million CRCP Shares in consideration for the
capitalisation by Bank of Scotland of £13.25 million of existing debt. The
Subscription is conditional, inter alia, on the passing of the Resolutions to be
proposed at the EGM.


The CRCP Shares will be issued at a price of £1.00 each, comprising the nominal
value of 1p and a share premium of 99p. Miller Fisher has the right to redeem
the CRCP Shares at a price of £1.00 per share plus any accrued dividend after
the second anniversary of the date on which the CRCP Shares are issued. They
will be redeemed in 2017 at the issue price plus any arrears of dividend unless
they have been redeemed or converted into Ordinary Shares earlier.


The CRCP Shares will be convertible, until 2017, at the option of the holder
into Ordinary Shares at the rate (rounded to four decimal places) of 12.3568
ordinary shares for each CRCP Share converted. This represents an effective
issue price of 8.09p per Ordinary Share as compared with the mid-market closing
price of 4.25p per Ordinary Share as at 7 February 2002 (being the latest
practicable trading date prior to the date of this announcement). Full
conversion of the CRCP Shares would result in the issue of 163,728,131 Ordinary
Shares, representing 49.9 per cent. of the enlarged issued ordinary share
capital of Miller Fisher (ignoring the potential exercise of share options and
warrants).


The CRCP Shares will pay a total annual dividend of 2p per CRCP Share, payable
semi-annually on 31 March and 30 September in respect of the 6 month periods
ending on 31 December and 30 June immediately prior to such dates. No dividend
will be payable in respect of any period ending on or before 31 December 2002;
in consequence the first dividend will be paid on 30 September 2003 in respect
of the period from 1 January 2003 until 30 June 2003. The CRCP Shares will not
be listed on any exchange and will not be transferable outside the Bank of
Scotland Group without the Company's consent. The approval of the Panel will be
required for any transfers of CRCP Shares within the Bank of Scotland Group.


The CRCP Shares, will not entitle the holder(s) to vote at general meetings of
the Company unless the dividend payable on the CRCP Shares is at least six
months in arrears or Miller Fisher has failed to redeem on the due date any CRCP
Shares due to be redeemed or in certain other circumstances. In such situations
CRCP Shareholders will be able to cast votes as if their CRCP Shares had then
fully converted.


If Bank of Scotland converts the CRCP Shares into Ordinary Shares its present
intention is that the business of the Group would not be affected and the
employment rights of the employees of the Group would be fully safeguarded.


The Panel has agreed, subject to the approval of independent Shareholders on a
poll, to waive the requirement that would otherwise arise under Rule 9 of the
Code for Bank of Scotland (or any company within the Bank of Scotland Group
approved by the Panel) to make a general offer to Shareholders as a result of
the implementation of the Proposals and any conversion or enfranchisement of the
CRCP Shares. The necessary resolution will be proposed at the EGM convened for 4
March.


Management Incentive Arrangements

The Board believes that a key prerequisite to the Group improving its financial
and trading position and realising the opportunities available in its market
place is to have a properly incentivised management. Whilst the Group has a
number of plans in place, the Board believes that the combination of recent
share price performance and the recent inclusion of new key members of
management have rendered the existing arrangements ineffective as a means of
incentivisation. Accordingly it is proposed to put in place the Management
Incentive Arrangements.


Under the Executive Warrant Programme, grants of warrants to acquire an
aggregate maximum of 30 million Ordinary Shares at a price of 5p per Ordinary
Share in relation to warrants granted within 42 days following the date on which
the Executive Warrant Programme is adopted and thereafter at the higher of the
market value and the nominal value of an Ordinary Share on the date of grant may
be made to Directors and other management. Any warrants granted would vest over
a period of three years commencing on the date of the grant: 25 per cent. of a
warrant would vest on the date of grant, the balance of the warrant would vest
at a rate of 25 per cent. per annum. Warrants may only be exercised to the
extent that they have vested and subject to the middle market closing price of
an Ordinary Share as derived from the London Stock Exchange Daily Official List
having reached an average, over 15 consecutive trading days, of at least 10p
during the period of 4 years from the date of grant. The warrants would vest in
full immediately in the event of a change of control of the Company or if any of
the CRCP Shares (or Ordinary Shares arising on their conversion) cease to be
held by Bank of Scotland or any member of its group.


It is intended to grant warrants to Messrs. Horton, Anderson and Hughes (in the
latter case via a warrant agreement with a management service company, Haalim
Limited) upon adoption of the programme to subscribe for 6.5 million, 6.0
million and 7.5 million Ordinary Shares respectively at a price of 5p per share.
The resolutions to be proposed at the EGM convened for 4 March include
resolutions to approve these arrangements.


If the Management Incentive Arrangements are adopted, Messrs. Horton, Anderson
and Hughes have agreed to surrender for nil consideration their existing share
options granted under the Miller Fisher Group plc Executive Scheme and the
Fishers International plc Executive Scheme.




In addition, Bank of Scotland has agreed with Messrs. Horton and Anderson and
Haalim Limited that it will not, during the period of two years from the date of
issue of the CRCP Shares, accept any offer for any or all of its CRCP Shares (or
any Ordinary Shares arising on their conversion) unless such offer values each
Ordinary Share at not less than 20p or, if such offer values each Ordinary Share
at less than 20p, Bank of Scotland makes loyalty payments, subject to the offer
becoming unconditional, to Messrs. Horton and Anderson and Haalim Limited. The
aggregate amount of the loyalty payments will be between £200,000 and £1.6
million, depending on the amount by which the offer price is less than 20p per
Ordinary Share.


The Subscription is conditional upon the passing at the EGM of the resolutions
to adopt the Executive Warrant Programme and approve the warrant agreement with
Haalim Limited referred to above.


New Finance Arrangements

Bank of Scotland has also agreed, subject to the satisfaction of certain
conditions, including the passing of the Resolutions, to refinance its existing
facilities to the Group which are currently repayable on demand. The
restructured facilities will consist of a £6,250,000 term facility, repayable in
instalments over five years, a £3,250,000 bridging facility repayable after 12
months and two weeks and a £4,000,000 working capital facility repayable on
demand. The term and bridging facilities will be made available on a committed
basis.


The facilities will be secured by cross guarantees and debentures from the
Company and its English and Irish subsidiaries with the exception of certain
dormant subsidiaries.


Current trading and future prospects

As announced in the trading statement on 16 January 2002, trading conditions
continued to be difficult in the second half of 2001. Revenues in the UK, in
both loss adjusting and third party administration, were substantially lower in
the six months ended 31 December 2001 than in the first half of 2001. As a
consequence, the Board expects the Group to report an operating loss before
interest for the year ended 31 December 2001. The Board will not be declaring a
dividend for the year ended 31 December 2001.


In addition, in the second half of 2001 the Group incurred exceptional
non-recurring expenses in respect of the proposed issue of the CRCP Shares and
through further restructuring of its UK operations. These costs will be greater
than those reported in the first half. The restructuring was carried out to
reduce the cost base of the Group in order to return to operating profitability.
Financing costs and interest are likely to be at a similar level to those
incurred in the first half.


As previously announced, the Board will be considering whether there is a
permanent impairment to the carrying value of goodwill and tangible fixed
assets. It is not possible at this stage to estimate whether any impairment will
be identified by this review. If there is any impairment, any resultant
writedown of goodwill and tangible fixed assets would not impact on cash flow
although it may further reduce the reported results for the year ended 31
December 2001.




The Group has had an encouraging start to the current year. In the UK loss
adjusting operation, incoming claims are in line with expectations. Revenues in
the third party administration business in the UK are also in line with
expectations. Incoming claims in Miller Farrell Group Limited in Ireland are
significantly ahead of forecasts, mainly because of the recent spells of bad
weather. The international business is also in line with its forecasts. In
addition, the Group is benefiting from the cost savings made during 2001.


Since the announcement that the Company has reached agreement in principle with
Bank of Scotland on 6 December 2001, there have been signs of renewed confidence
in all areas of the UK business and increased opportunities for developing new
revenues. Miller Farrell Group Limited in Ireland has many encouraging
opportunities, as has the international business. The Group is currently
involved in a number of tenders and similar proposals with existing and
prospective clients. Considerable challenges remain ahead and the market
background is not without risk. However, the Directors are confident that
implementation of the Proposals should provide a foundation for future
development.


The immediate objective, following the implementation of the Proposals, will be
the development of further revenues, the continued containment of costs and the
generation of sustainable levels of profits and cash flow, through organic
growth. The Group's intention is to focus on the attractive opportunities that
the Board believes exist in third party administration in the UK and Ireland, as
well as reinvigorating the Group's loss adjusting capabilities in the UK and
internationally.


Importance of the Proposals

The Directors believe the Proposals are vital to the future of the Group. In the
event that the Resolutions are not passed by Shareholders at the EGM, the
Directors believe that the Group would face significant difficulties going
forward. The current banking facilities would remain repayable on demand and the
Group would immediately recommence negotiations for additional debt or other
financing facilities. The timescale for these negotiations cannot be estimated.
If the negotiations were unsuccessful, the Directors believe that there would be
substantial uncertainty over the future of the Group's operations and
alternative courses of action such as disposals would be explored.


The Directors believe that there are opportunities to develop further the
Group's business. However, with current gearing levels and present working
capital availability, it will not be possible to take advantage of these
opportunities. The Directors believe that the proposed issue of the CRCP Shares
will enable the Group to achieve a sound financial base and will better position
the Group for future development.






DEFINITIONS

"Bank of Scotland"                           The Governor and Company of the Bank of Scotland

"Bank of Scotland Group"                     Bank of Scotland and its subsidiary undertakings

"Code"                                       the City Code on Takeovers and Mergers

"CRCP Shares"                                new 2 per cent. cumulative redeemable convertible preference shares of
                                             1p each in the capital of the Company

"CRCP Shareholders"                          holders of CRCP Shares

"Directors" or "Board"                       the existing directors of the Company

"EGM" or "Extraordinary General Meeting"     the extraordinary general meeting of the Company to be held at 11 a.m.
                                             on 4 March 2002, and any adjournment thereof

"Executive Warrant Programme"                the Miller Fisher Group plc Executive Warrant Programme 2002

"Group"                                      the Company and its subsidiaries

"Haalim Limited"                             a company registered in Ireland with company number 352723 which has
                                             entered into a consultancy agreement to provide the services of
                                             Malcolm Hughes as chief executive of the Company

"HSBC"                                       HSBC Investment Bank plc

"London Stock Exchange"                      London Stock Exchange plc

"Management Incentive Arrangements"          The arrangements described in this announcement providing for the
                                             grant to management or persons connected with them of warrants to
                                             subscribe for Ordinary Shares and the agreements with certain of the
                                             Company's senior management in relation to loyalty payments from Bank
                                             of Scotland arising in certain circumstances

"Miller Fisher" or the "Company"             Miller Fisher Group plc, a company incorporated in England and Wales
                                             with registered number 3775169

"Ordinary Shares"                            the ordinary shares of 5p each in the capital of the Company

"Panel"                                      the Panel on Takeovers and Mergers

"Proposals"                                  the arrangements between Bank of Scotland and the Company and the
                                             Management Incentive Arrangements

"Resolutions"                                the resolutions to be proposed at the Extraordinary General Meeting

"Shareholders"                               holders of Ordinary Shares

"Subscription Agreement"                     the conditional agreement dated 8 February 2002 and made between the
                                             Company (1) and Bank of Scotland (2) pursuant to which Bank of
                                             Scotland will subscribe for 13,250,000 CRCP Shares

"UK"                                         United Kingdom of Great Britain and Northern Ireland


This announcement has been prepared for information purposes only and is not to
be relied upon in substitution for the exercise of independent judgement. It is
not intended as investment advice, and under no circumstances is it to be used
or considered as an offer to sell, or a solicitation of an offer to purchase,
any securities nor a recommendation to enter into any transaction; nor shall it
or any part of it form the basis of or be relied on in connection with any
contract or commitment whatsoever.




                                     -ends-



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