SEC Newgate S.p.A. Euro 2.5m Convertible Bond and Notice of EGM (2295C)

TIDMSECG

RNS Number : 2295C

SEC Newgate S.p.A.

06 February 2020

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.

6 February 2020

SEC Newgate S.p.A.

("SEC Newgate", the "Group" or the "Company")

EUR2.5 million Convertible Bond with Inveready

and

Notice of Extraordinary Shareholders' Meeting

SEC Newgate (AIM: SECG), the international communications, advocacy and research group, is pleased to announce that it has signed a EUR2.5 million convertible bond ("Bonds") with Inveready Convertible Finance Capital I FCR and Inveready Convertible Finance Capital SCR S.A., each a fund set up or managed by Inveready Asset Management S.G.E.I.C., S.A., in order to finance the implementation of its strategic plan, announced in November 2019, as well as to support the Company's working capital requirements.

The Bonds have a maturity of 7 years from issuance, with interest payable quarterly at 3.50%. The Bonds, which are to be issued as up to 25 bonds with a nominal value of EUR100,000 each and are freely transferable, may be converted starting from the 3(rd) anniversary from the issuance. If the conversion of any of the Bonds does not occur prior to maturity, an additional non-conversion fee is payable by SEC Newgate equivalent to a 2.5% annual return on top of the interest paid.

Each EUR100,000 Bond is convertible into 152,855 new SEC Newgate shares, equivalent to a conversion price of approximately 55 pence per SEC Newgate share. The total number of new SEC Newgate shares which may be issued in relation to the Bonds, if fully converted, is 3,821,375.

The transaction is subject to the approval of the Company's Extraordinary Shareholders' Meeting ("ESM") that will resolve upon the issuance of bonds 3.5% 2020-2027 convertible into SEC Newgate ordinary shares for a maximum total amount of EUR2,500,000 and with the exclusion of the option right pursuant to art. 2441, paragraph 5, of the Italian Civil Code, with consequent resolution to increase the share capital in divisible ways for a maximum of 3,821,375 shares, serving the aforementioned bond reserved for qualified investors. Consequently, the Company is today publishing a Notice of ESM, to be held at Company's registered office (via Ferrante Aporti 8, Milan) at 11. a.m. (CET) on February 24(th) , 2020 (as first call) and, if needed, same time and place on February 25(th) , 2020, together with an explanatory circular of the Board of Directors (the "Circular") and the opinion of the Board of Statutory Auditors on the fairness of the issue price of the shares required by Article 2441, paragraph 6, of the Italian Civil Code. These documents will also be available on the Company's website, www.secnewgate.com/investors.

Subject to shareholder approval and filing of the ESM resolution with the Companies Register in Italy, the Bonds will be subscribed and issued.

Fiorenzo Tagliabue, CEO of SEC Newgate, commented:

"This convertible loan is a further important element in our Strategic Plan. We have already secured a replacement EUR3m banking facility from Deutsche Bank S.p.A. on preferable terms, and are now delighted to be working with Inveready. It is not only a leading asset manager in Spain, but also a long-term specialist technology-focused investor. This is particularly relevant because the communications industry is undergoing significant transformation against a backdrop of a more complex and interconnected world.

"We are investing in our teams, technology and office footprint to ensure we are able to seize the opportunities that change brings. For example, by investing in innovative Artificial Intelligence (AI) solutions, which are currently being soft-launched in Italy, we will be able to enhance our ability to provide highly specific and profound understanding of market drivers coupled with counsel not only where business, markets, government and media intersect but also in a seamless way locally, nationally and internationally.

As announced on 4 February 2020, our unaudited financial results for the year ended 31 December 2019 incorporate four months of trading following the merger in September 2019; they are in line with our expectations and the Group is profitable. Our current financial year has started strongly and having the support of Inveready, which understands the long term potential of our market, is very welcome."

Carlos Conti, General Partner at Inveready, commented:

"We are delighted to finance truly innovative companies such as SEC Newgate, which apply AI solutions to deliver leading and pioneering solutions to its global client base on the PR industry, a growing market due the greater importance of corporate communications nowadays. We back companies that want to be leaders in their industries and SEC Newgate is clearly executing well on that path. The implicit conversion price represents a 30% premium to the 90-day VWAP and is a reflection of the value creation potential we see in the company's business plans."

An extract from the Circular detailing out the background to, and principal terms of, the Bond is set out below.

REPORT OF THE BOARD OF DIRECTORS PREPARED IN ACCORDANCE WITH ART. 2441, PARAGRAPHS 5 AND 6 OF THE ITALIAN CIVIL CODE

in connection with

THE ISSUE OF A BOND CONVERTIBLE INTO SHARES OF SEC NEWSGATE S.P.A. FOR A MAXIMUM AMOUNT OF EUR2,500,000 AND THROUGH THE ISSUE OF A MAXIMUM OF 3,821,375 ORDINARY SHARES AND THE RELATED SHARE CAPITAL INCREASE TO SERVICE THE BOND

INTRODUCTION

This explanatory report, prepared pursuant to and for the purposes of Article 2441, paragraphs 5 and 6, of the Italian Civil Code ("Report"), approved during the meeting of the Board of Directors of SEC Newgate S.p.A., with registered office in Via Ferrante Aporti 8, Milan ("SEC", "Issuer" or "Company") on January 27, 2020, will illustrate and explain the proposal of the Board of Directors of SEC Newgate S.p.A. for the issuance of a bond convertible into ordinary shares of SEC Newgate S.p.A. (the "Bond") and the share capital increase with exclusion of pre-emption rights pursuant to Article 2441, paragraph 5, of the Italian Civil Code ("Capital Increase") to service the Bond, equal to a maximum of Euro 2,500,000 and through the issue of up to 3,821,375 ordinary shares of the Company.

1 - REASONS FOR ISSUING THE BOND AND ALLOCATION OF FUNDS

On 5 November 2019, SEC's Board of Directors approved the business plan for the period 2020-2022 ("Strategic Plan").

The issue of the Bond will provide external funding resources to finance the Company's global growth plans, support working capital requirements and implement the Group's Strategic Plan.

The issue of the Bond allows the Company to benefit from the raising of non-bank capital and long-term financial resources at favorable conditions, also ensuring a wider diversification of financial resources.

2 - DETAILS OF THE CAPITAL INCREASE TO SERVICE THE BOND

The proposed resolution to be passed at the extraordinary Shareholders' meeting provides for a share capital increase of up to Euro 2,500,000 (of which Euro 382,137.5 as par value and Euro 2,117,862.5 as share premium) with the exclusion of pre-emption rights pursuant to Article 2441, paragraph 5, of the Italian Civil Code, through the issue of up to 3,821,375 ordinary shares, without par value, with regular dividend entitlement, to service the Bond (as defined below).

The aforementioned Capital Increase shall be divisible pursuant to Article 2439, paragraph 2, of the Italian Civil Code.

The provisions of the Terms and Conditions (as defined below) apply to the issuance of the aforementioned convertible bonds.

3 - KEY FEATURES OF THE BOND

The Bond will have the characteristics specified in the terms and conditions ("Terms and Conditions"), attached to this Report and to which reference should be made.

3.1 - Nature, amount, bonds and issue price

The Bond is named "Bonds 3.5% 2020-2027 convertible into SEC Newgate S.p.A. shares" and provides for a maximum value of Euro 2,500,000 through the issue of a maximum of no. 25 bonds with a nominal value of Euro 100,000 each (individually also "Bonds").

The Bonds are convertible at the request of the subscribers, in the ratio of a maximum of 152,855 conversion shares with regular dividend entitlement and the same characteristics as the shares of the Company outstanding for each Bond.

The Bonds are issued at the same price net of an issue discount equal to 0.50% of the nominal value of the Bond and will be represented by certificates issued in the name and on behalf of each bondholder; they will be transferable in accordance with Articles from 2021 to 2023 of the Italian Civil Code, by means of registration on the bond certificate and in the relevant register, without the need to obtain any prior consent from the Company and on condition that the transferee qualifies as a "Qualified Investor" (within the meaning of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017, including qualified investors as defined in Article 100, paragraph 1, letter a) of Legislative Decree no. 58 of 24 February 1998 and Article 34-ter, paragraph 1, letter b) of Consob Regulation no. 11971 of 14 May 1999).

3.2 - Placement, term and effective time

The term of the Bond is 7 (seven) years except in the event that the effective time (i.e. godimento) of the securities ceases before the Expiry Date, due to early redemption in the event of a so-called change of control or in the event of conversion, as well as in the event of further events provided for in the Terms and Conditions, to which reference should be made.

The Bonds will become effective from the Issue Date.

Pursuant to Article 1353 of the Italian Civil Code, ancillary documentations such as the purchase agreement, terms and conditions of the Bond, shall be conditional upon resolution of the Extraordinary Shareholders Meeting that will resolve on the approval of the main terms and conditions of the financing transaction by means of the issuance of the Bonds, including the exclusion of the option rights and pre-emption rights upon issuance and allotment of new SEC Newgate shares upon exercise of the conversion right by each Bondholder and the resolution will be duly recorded by an Italian notary as a public act and it will be registered, with the Companies Registry of Milan.

3.3 - Interest

The Bonds bear interest at a nominal annual rate of 3.50% ("Interest Rate in Cash") gross of any withholding tax or charges. The Company will pay the Interest Rate in Cash to each bondholder for each bond issued each three months in advance on the last working day of each three-month period (i.e. in March, June, September and December), unless otherwise provided for in the Terms and Conditions, to which reference should be made.

3.4 - Conversion Right

Each bondholder may, during the conversion period commencing on the 4th (fourth) year after the Issue Date and up to the 14th (fourteenth) day prior to the Expiry Date, exercise his right of conversion by requesting the Company to convert all or part of the Bonds held into conversion shares.

The Bonds will be convertible into the ratio of 152,855 shares for each bond submitted for conversion ("Conversion Ratio").

The Terms and Conditions also provide, in the event that the bondholders will not exercise, in whole or in part, their conversion rights, a premium for non-conversion ("Premium for non-conversion") equal to 19.0598% of the nominal value of the bonds during the 7-year term of the Bond, gross of any withholding or charge, payable in cash together with the Interest Rate in Cash, on the Expiry Date and subject to gross-up clause.

The Terms and Conditions, to which reference should be made, provide for certain events that entails the adjustment of the Conversion Ratio. It is also provided that no adjustment to the aforesaid ratio will be made if the relevant change (calculated as set out in the Terms and Conditions) leads to a change of less than 1% in the Conversion Ratio.

The Terms and Conditions, to which reference should be made, also provides for certain events leading to the early termination of the Bond with consequent obligation of early repayment by the Company, as well as specific obligations not to do (so-called Negative pledge) and information obligations (so-called Information Undertakings), to which reference should be made.

3.5 - Conversion Period

Each Bond may be converted into SEC ordinary shares at the holder's discretion:

(i) at any time, starting on the 3rd (third) anniversary of the Issue Date and up to the 14th (fourteenth) business day before the Expiry Date (both included) or

(ii) during the period of 30 working days following the date on which a change of control of the Issuer occurs

(iii) in case of a public tender offer on the Issuer's ordinary shares.

3.6 - Redemption of bonds at maturity

On the Maturity Date, the non-converted bonds will be redeemed at their nominal value, together with the interest accrued and not paid for each bond, without any charges and/or fees, together with the above-mentioned premium for non-conversion (equal to 19.0598% of the nominal value of the Bond).

The Terms and Conditions also provide that in the event of a so-called change of control following a public tender offer, each bondholder will have the right to request the Company to redeem all of its Bonds at the price that the bondholder would have received if he had converted his Bonds into ordinary shares at the Conversion Ratio applicable on the settlement date of the public tender offer, having accepted the tender offer at the offer price.

The terms and conditions for the exercise of this right are better specified in the Terms and Conditions, to which reference shall be made.

3.7 - Other Provisions

The financing granted in consideration of the issue of the Bond to the Company will be supported by the InnovFin SME Guarantee with the financial support of the European Union within the initiative promoted by the European Commission and the European Investment Bank Group in the framework of Horizon 2020.

Furthermore, the issuer of the Bond will be guaranteed through a first request guarantee both by the Company and jointly and severally by each subsidiary qualifying as guarantor under the Terms and Conditions. The obligations of each guarantor will constitute direct, unconditional, unsecured and unsubordinated obligations and will rank at least equal to all present and future unsecured and unsubordinated obligations of such guarantor (with the exception of the obligation mandatorily privileged by law), so-called pari passu.

4 - CRITERIA USED TO DETERMINE THE CONVERSION RATIO INTO NEWLY ISSUED SHARES

It is underlined that Terms and Conditions provides for a Conversion Ratio equal to 152,855 ordinary shares of the Company for each Bond for which the conversion is demanded, equal therefore to a price per share of GBP 0.552 (equal to Euro 0.654 per share) at the conversion rate of Sterling/Euro of 27 January 2019, of which Euro 0.10 as par value and Euro 0.554 as share premium. This price has been calculated on the basis of the market price of the Company's shares recorded from 2 January 2020 to 27 January 2020 and equal to GBP 0.413 (equal to EUR 0.489 per share) at the Pounds/Euro conversion rate of 27 January 2020, with the addition of a premium of 34%. This price, also taking into account the criteria set out in Article 2441, paragraph 6, of the Italian Civil Code with reference to the price, is considered adequate.

Article 2441, paragraph 6, of the Italian Civil Code states, in fact, that the issue price of shares shall be determined on the basis of the net equity value. According to established scholarship, this provision shall be interpreted as meaning that the issue price of the shares shall not be calculated on the basis of the book value of the net equity value, since its determination shall be made by looking rather at the "economic" value of the Company, also in light of the overall context in which the Transaction takes place.

To this end, the market value of SEC's shares at the above date is deemed to be an adequate criterion for defining the economic value of the company in accordance with the provisions of Article 2441, paragraph 6, of the Italian Civil Code. In this regard, it should be noted that the stock market price of Company's ordinary shares, intended as a weighted average value for the volumes traded, in the last three months of the year fluctuated between a minimum of GBP 0.37 and a maximum of GBP 0.44, respectively equal to EUR 0.439 and EUR 0.521, at the Pounds/Euro conversion rate of 27 January 2020, as published by Il Sole24Ore.

* * * * *

The Board of Statutory Auditors will make available to the Company its opinion on the fairness of the issue price of the shares resulting from the Capital Increase, pursuant to Article 2441, paragraph 6 of the Italian Civil Code.

*****

Nctm, with a team led by Lukas Plattner and Federica Ciabattini, have advised SEC Newgate S.p.A. in the issuance of the Bond while BSVA, with a team led by Marco Lantelme, advised Inveready Convertible Finance Capital I FCR and Inveready Convertible Finance Capital SCR S.A..

Further information:

For further information please contact:

 
 SEC Newgate S.p.A. 
 Fiorenzo Tagliabue (Group CEO)        Telephone: [phone] 
                                        [e-mail] 
 Emma Kane (Deputy Group CEO,          Telephone: +44 (0) 20 
  CEO Newgate Communications UK)        3757 6860 
                                        [e-mail] 
 Federico Vecchio (Group CFO)          Telephone: +44 (0) 20 
                                        7680 6500 
                                        [e-mail] 
 
   Arden Partners (Nominated Adviser 
   and Broker) 
 Richard Johnson / Benjamin Cryer      Telephone: [phone] 
                                        5900 
 

Notes to Editors about SEC Newgate

   --          Further information is available at www.secnewgate.com 

-- On 3 September 2019, SEC S.p.A. and Porta Communications Plc merged to create SEC Newgate S.p.A.

-- The Group's principal brands are: ACH SEC Global (Spain); Cambre Associates (Belgium); Cambre Maroc (Morocco); Clai (France); Kohl PR (Germany); Martis Consulting (Poland); SEC Latam (Colombia); Newgate Communications (Abu Dhabi, Australia, Greater China, Singapore, UK); Newington (UK); Publicasity (UK); SEC Newgate S.p.A. (Italy); and 2112 (UK).

Note to Editors about Inveready

   --          Further information is available at www.inveready.com 

-- Inveready Convertible Finance is a closed-end fund operating in Europe, focused on growth companies listed on alternative markets and has backed success stories such as MasMovil (MAS:SM), Agile Contents (AGIL:SM), Gigas Hosting (GIGA:SM), VozTelecom (VOZ:SM), Clerhp (CLR:SM), Audiovalley (ALAVY:FP) and Nextil (NXT:SM). The fund is managed by Inveready Asset Management SGEIC, a technology focused fund management company with more than 150 portfolio companies and EUR450 mm. Assets Under Management.

***

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February 06, 2020 07:43 ET (12:43 GMT)