Real Good Food PLC New funding arrangements agreed (4220O)

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RNS Number : 4220O

Real Good Food PLC

17 May 2018

Real Good Food plc

("Real Good Food", "the Company" or "the Group")

New funding arrangements agreed

The Company announces today that, following its announcement on 4(th) May that it had agreed terms for at least GBP8.2 million in new financing arrangements with the Company's three major shareholders, Napier Brown Limited ("NB Ltd"), Omnicane Limited ("Omnicane"), and certain funds managed by Downing LLP ("Downing") (together the "Noteholders"), it has now finalised the terms and signed the relevant documentation to effect these new arrangements, by means of secured loan notes, with Omnicane and NB Ltd each providing GBP3.3m and certain funds of Downing LLP providing at least GBP1.6m (with a further GBP0.5m provided at the sole discretion of Downing prior to 30 September 2018) (the "Shareholder Loans"). The further funds to be provided by certain funds of Downing LLP are intended to provide the Group with further working capital headroom.

The financing arrangements will fund the GBP4.5 million deferred consideration due to the vendors of Brighter Foods, and also provide up to GBP4.2 million (depending on whether the further GBP0.5m is received from funds managed by Downing LLP) to fund the Company's foreseeable working capital needs, including for the build-up of inventory in advance of the Group's third quarter in October to December.

It is intended that the Shareholder Loans will be replaced by convertible loan notes (the "Replacement CLNs") within 3 months, with the issue of such Replacement CLNs being subject to a whitewash process pursuant to Rule 9 of the Takeover Code. The conversion price of the Replacement CLNs is expected to be 5 pence, significantly lower than the Company's current share price. A redemption premium is payable on repayment of the Shareholder Loans which, when added to interest already received, will generate a total annualised return of 30%. In the event of the replacement of the Shareholder Loans by the Replacement CLNs then no redemption premium will be payable, but interest shall accrue on the Shareholder Loans until they are replaced by the Replacement CLNs at which point interest shall be paid or capitalised and added to the principal amount of the Replacements CLNs.

In addition, the coupon on funding advanced to the Company by the Noteholders being:

   --      GBP7.25m in the case of Downing on 28 June 2017; 
   --      GBP2.0m in the case of each of NB Ltd and Omnicane on 28 June 2017; and 
   --      GBP1.0m in the case of each of NB Ltd and Omnicane on 16 August 2017; 

will become 10% (from 6.5%) with effect from drawdown of the first tranche of the Shareholder Loans (the "Rate Change").

All monies owed by the Company, J F Renshaw Limited and Haydens Bakery Limited to the Noteholders (including current debt instruments and not limited to the Shareholder Loans) are secured over all the assets of those companies.

These terms are reflective of the severe financial challenges the company has faced over the last twelve months. Without this funding the Directors believe that there was a significant risk that the Company would fail to be able to trade, but this additional financing will allow the Company to meet its obligations and trade without working capital constraint.

The key terms and conditions of the Shareholder Loans are as follows:

 
Principal:       Up to GBP8.7m in aggregate 
Interest:        12% per annum, payable when the Loan Notes are repaid or capitalised 
                  and added to the principal amount of the Replacements CLNs. 
Redemption:      Redemption of the Loan Notes on or before the date that is 
                  36 months from today, at par, or earlier if prepaid or upon 
                  the occurrence of certain events of default 
Redemption                         A redemption premium is payable on repayment of the Shareholder 
 Premium:                        Loans which when added to interest already received will generate 
                                     a total annualised return of 30%. In the event of replacement 
                               of the Shareholder Loans by the Replacement CLNs then no redemption 
                                                                          premium will be payable. 
Transferability  The Shareholder Loans shall be transferable 
Undertakings:                1. Confirmation of continued support to the Company from its 
                              bank in a form acceptable to the Noteholders, including confirmation 
                              of use of proceeds of the Shareholder Loans. 
                              2. An undertaking from the Company to use all reasonable endeavours 
                              to: (i) obtain such approvals as are necessary from shareholders 
                              to permit the issue and conversion of the Replacement CLNs 
                              within 3 months of the first draw down of the Shareholder 
                              Loans, including a whitewash to avoid a Rule 9 offer under 
                              the Takeover Code.; and (ii) procure that the independent 
                              directors of the Company recommend independent shareholders 
                              vote in favour of the proposals and the whitewash. 
                              3. An undertaking from the Company that prior to accepting 
                              funding from third parties in the 18 months following draw-down 
                              of the Shareholder Loans, the Noteholders will be given reasonable 
                              notice of the proposed terms of such funding and the right 
                              to provide that funding on those terms. 
                              4. An undertaking that the Company shall use all reasonable 
                              endeavours to agree with the Noteholders a future capital 
                              restructuring (the "Capital Restructuring"). 
 

Shareholder Loans and Related Party Transactions

As each of NB Ltd, Omnicane and Downing are substantial shareholders of the Company and have Board representation, each of the Shareholder Loans and the Rate Change are deemed to be related party transactions pursuant to the AIM Rules for Companies.

The Board considers that a fundraising by way of the Shareholder Loans is the most appropriate route for the Company to raise the capital it needs in the timescale available. Hugh Cawley, Harveen Rai and Christopher Thomas, the Independent Directors of the Company for this purpose, having consulted with the Company's Nominated Adviser, finnCap Ltd, consider the terms of the Shareholder Loans and the Rate Change to be fair and reasonable insofar as the Company's shareholders are concerned.

The information communicated in this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Enquiries:

 
 Real Good Food plc                      Tel: [phone] 
  Hugh Cawley, Chief Executive 
  Harveen Rai, Finance Director 
 
 finnCap Limited (Nomad and Broker)      Tel: [phone] 
  Matt Goode / Carl Holmes / James 
  Thompson (Corporate Finance) 
    MHP Communications (Financial        Tel: [phone] 
     PR)                                       [e-mail] 
     Reg Hoare / Katie Hunt 
 About Real Good Food 
  Real Good Food plc is a diversified food business 
  serving a number of market sectors including retail, 
  manufacturing, wholesale, foodservice and export. 
  The Company focuses on three main markets: Cake 
  Decoration (Renshaw and Rainbow Dust Colours), 
  Food Ingredients (R&W Scott and Brighter Foods) 
  and Premium Bakery (Haydens and Chantilly Patisserie). 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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May 17, 2018 05:30 ET (09:30 GMT)