Real Good Food: announces funding update

Liverpool / UK. (rgf) 2017 British Real Good Food Company PLC (RGF) announces an update on its funding. As announced at the time of issuing the Group’s Interim Results on 22 December 2017, the Board had identified that further substantial additional funding will be required over the coming months for working capital and investment purposes in order to implement the Group’s business plan. The Board continues to explore the detail of financing this requirement, including the issue of new equity.

As announced on 31 January 2018, the Group’s three major shareholders, Napier Brown Ingredients Limited («NB Ingredients Ltd»), Omnicane International Investors Limited («Omnicane»), and certain funds managed by Downing LLP («Downing») continue to demonstrate their support for the Group. They have this week executed a term sheet, to that end, to provide additional funds to support the Company’s working capital requirements, in the form of a draw-down loan note facility of up to 4.0 million GBP in aggregate (the «Loan Notes»), with Omnicane and NB Ingredients Ltd each providing up to 1.713 million GBP and certain funds of Downing LLP providing 0.574 million GBP (the «Shareholder Loans»). These funds will relieve pressure on cash availability over the coming months whilst longer term funding arrangements are put in place.

Hugh Cawley, Chief Executive, said: «Today’s additional funding is an important part of meeting our short-term requirements, and further funding will be required for working capital and investment purposes in order to implement the Group’s business plan. The raising of these Loan Notes is part of the longer term funding plan being pursued by the Group».

The terms and conditions of the Loan Notes are as follows:

  • Principal: Up to 4.0 million GBP in aggregate
  • Interest: 10 percent per annum, payable quarterly in arrears
  • Redemption: Redemption of the Loan Notes will be 30 June 2018, at par, or earlier upon the occurrence of certain events of default
  • Transferability: The Loan Notes shall be transferable.
  • Undertakings: The Company undertakes to use all reasonable endeavours to refinance the Loan Notes with new equity or convertible loan notes on such terms as to be agreed at the date of redemption and to obtain grant of a waiver from The Panel on Takeovers and Mergers from any obligation that might arise under Rule 9 of the City Code from the raising of new equity or the conversion of the new convertible loan notes by the Subscribers («Whitewash»).
    In the event that the Loan Notes are not refinanced with new equity or convertible loan notes as a result of the Whitewash not being received, the Company will be responsible for the costs associated with the Whitewash procedure and the Subscribers shall be entitled to payment of a penalty rate of interest, in cash, equivalent to 20 percent of the principal and interest due.
    The Company undertakes to use all reasonable endeavours to obtain such authorisations as may be necessary from shareholders in due course to facilitate the refinance of the Loan Notes via new equity or convertible loan notes.
    The Company undertakes to use all reasonable endeavours to agree with the Subscribers a future capital restructuring (the «Capital Restructuring»). The Capital Restructuring will be in a form such that the Directors will be in a position to make a working capital statement in form set out in Schedule Two (c) of the AIM Rules for Companies.

Shareholder Loans and Related Party Transactions

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

The Board has considered alternative forms of funding but has concluded that these options are not available to the Company in the required timeframe and that the Loan Notes therefore provide the most appropriate and flexible option to meet the Company’s short-term cash requirements.

Hugh Cawley, Harveen Rai and Christopher Thomas (the Directors of the Company who are Independent for the purpose of considering this), having consulted with the Company’s Nominated Adviser, finnCap Ltd, consider the terms of the Loan Notes to be fair and reasonable insofar as the Company’s shareholders are concerned.

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