ACE.L Regulatory News (ACE)

FOR IMMEDIATE RELEASE

1 September 2010

Accident Exchange Group plc ("the Company")

STATUS OF REFINANCING DISCUSSIONS AND UPDATE ON ANNOUNCEMENT OF RESULTS FOR YEAR ENDED 30 APRIL 2010

Background

As the Company has previously reported, it has been engaged in discussions with Morgan Stanley, its senior lender ("Senior Lender"), concerning a restructuring of the Company's existing £40.0m credit facility (the "Senior Facility") in order to amend the terms and extend the current repayment date beyond 30 September 2010. Those discussions continue to progress and whilst the detailed terms have not yet been finalised and the Company continues to trade with the ongoing support of its Senior Lender, the Company has reached agreement in principle with its Senior Lender to amend the terms of the Senior Facility to, inter alia, extend the repayment date until July 2013 on an amortising basis. Any formal amendment to the Senior Facility is however conditional upon, inter alia:

·; the holders of the Company's £50.0m 5.50% unsecured convertible notes due 2013 (the "Convertible Notes") converting that debt into equity in the Company; and

·; the finalisation of the detailed terms of the amended Senior Facility, including agreement on appropriate covenants.

Conversion of Convertible Notes

The Company's previously announced discussions regarding a restructuring of the Convertible Notes are also progressing and holders of in excess of 94 per cent by value of the Convertible Notes have now expressed their support in principle for a complete conversion of the outstanding Convertible Notes into Ordinary Shares on amended conversion terms to be agreed.

As well as being a condition of the extension to the Senior Facility, the Board believes that a conversion of the Convertible Notes is in the best interest of the Company as it will materially de-gear the balance sheet of the Company by removing any obligation of the Company to repay the £63.3 million otherwise due in January 2013 and will also remove the ongoing annual cash interest costs of £2.75 million to the Company.

At this stage, the Company has not concluded its discussions with the holders of the Convertible Notes as to the precise terms on which the Convertible Notes will convert into Ordinary Shares. However, it is expected that such conversion will be on significantly amended terms to the current conversion price of 75.4p and that existing shareholders will be significantly diluted as a result of such subsequent conversion. Any amendment to the terms of the Convertible Notes to effect the proposed conversion of 100% of the outstanding Convertible Notes is subject to approval by noteholders holding at least 75 per cent of the aggregate principal amount of the Convertible Notes then outstanding and therefore sufficient CLN support exists for such amendment.

Following discussions with the Company's advisers and the holders of the Convertible Notes, it is also clear to the Board that following a conversion of the Convertible Notes the Company will no longer meet the requirements of Listing Rule 6.1.19R for its shares to remain listed on the Official List because fewer than 25 per cent of the Ordinary Shares will be in public hands. This is because in excess of 90 per cent by value of the Convertible Notes are currently held by just five institutional holders and therefore on conversion (even on the current terms), their resultant holdings will each exceed 5 per cent of the Ordinary Shares then in issue and will therefore not be treated as being in public hands. Combined with the holdings of other material shareholders and the enhanced conversion terms expected, materially fewer than 25 per cent of the Ordinary Shares will be in public hands after conversion. Given the relative illiquidity of the Ordinary Shares it is considered very unlikely that this position would change.

In order to effect the refinancing the Board therefore intends to convene a general meeting to propose a resolution to approve the cancellation of admission of the ordinary shares to trading on the London Stock Exchange and to listing on the Official List. It is currently anticipated that the circular containing the notice of such meeting will be posted to Shareholders on or before 10 September. Such circular will contain more detailed information on the expected timing of the effective date of cancellation of the admission of the ordinary shares to trading on the London Stock Exchange and to admission to the Official List.

As stated above the Company continues to trade with the support of its Senior Lender and the Board expects that support to remain in place such that shareholders can vote on the resolutions required to implement the overall refinancing even though the timetable for concluding it will extend beyond 30 September 2010.

Amended conversion terms will also require existing ordinary shareholder approval to the issue of an increased number of new Ordinary Shares and the Company intends to convene a second general meeting and circulate a notice of such meeting containing details of the proposed conversion terms when they have been agreed.  

Annual Report and Financial Statements

DTR 4.1 of the Disclosure Rules and Transparency Rules requires the Company to make available its annual report and accounts for the year ended 30 April 2010 ("Accounts") on or before 31 August 2010. However, until the refinancing is completed, the Company is not in a position to finalise the preparation of the Accounts and as such they have not yet been concluded or published. Since the Company intends to circulate a notice of general meeting to propose a resolution to approve the cancellation of the ordinary shares to trading on the London Stock Exchange and admission to the Official List, the UKLA has confirmed that the Company's ordinary shares will not be suspended from admission to the Official List.

ENDS

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