CGLO.L Regulatory News (CGLO)

Chagala Group Limited

6 September 2016

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA, SWITZERLAND OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT

This announcement is not an offer of securities for sale, or an offer to buy or subscribe for, directly or indirectly, securities to any person in the United States or any other jurisdiction, including in or into Canada, Japan, South Africa, Switzerland and Australia or any other jurisdiction in which such offer or solicitation is unlawful. This announcement is an advertisement and not a prospectus (or prospectus equivalent document). Any offer to acquire shares pursuant to the proposed capital raise will be made, and investors should not subscribe for or purchase any shares referred to in this announcement and should make any investment decision, solely on the basis of information contained in the prospectus (the "Prospectus") to be published by Chagala Group Limited ("Chagala" or the "Company" and, together with its subsidiaries, the "Group") on or around 6 September 2016 in connection with the admission of the new ordinary shares in the Company ("New Ordinary Shares") to be issued under the proposed placing and open offer (the "Placing and Open Offer") to listing on the standard listing segment of the Official List of the Financial Conduct Authority ("FCA") and to trading on the main market for listed securities of the London Stock Exchange (the "Admission"). A copy of the Prospectus will, following publication, be available on the Company's website (www.chagalagroup.com) and will be available for viewing at the National Storage Mechanism at www.hemscott.com/nsm. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

Proposed Placing and Open Offer of in aggregate 5,750,000 New Ordinary Shares at US$1.00 per New Ordinary Share to raise approximately US$5.75 million and Potential Additional Placing of up to 380,407 Additional Placing Shares at US$1.00 per Additional Placing Share

Chagala Group Limited announces a proposed Placing and Open Offer of New Ordinary Shares and potential placing of Additional Placing Shares (the "Capital Raise") to raise gross proceeds of approximately US$5.75 million (approximately US$5.5 million net of fees and expenses).

Highlights

· Intention to undertake a Capital Raise to raise gross proceeds of approximately US$5.75 million (approximately US$5.5 million net of fees and expenses).

· The Issue Price is US$1.00 per New Ordinary Share.

· Qualifying Shareholders are being given the opportunity to apply for New Ordinary Shares at the Issue Price, subject to the terms and conditions of the Open Offer, pro rata to their holdings of Existing Ordinary Shares.

· The net proceeds of the Capital Raise will be used to finance the repayment of the Company's KZT Bonds, which mature on 1 December 2016, and will further strengthen the Company's balance sheet.

The Prospectus, containing details of the Capital Raise, is expected to be published on 6 September 2016 and, following publication, will be available on the Company's website, www.chagalagroup.com.  

Commenting on today's announcement, Michael C. Carter, Jr., Chairman of Chagala Group Limited, said:

"We are pleased to announce this capital raise, which provides an opportunity for Chagala shareholders to participate in a fundraising being made in order to provide the Company with additional capital to redeem its outstanding KZT Bonds when they mature on 1 December 2016. This will result in a reduction of the Company's debt and therefore strengthens the Group's financial position and puts the Company in a stronger position to take advantage of a market recovery."

Proposed Capital Raise

The Company intends to raise gross proceeds of approximately US$5.75 million (approximately US$5.5 million net of fees and expenses) through the issue of New Ordinary Shares (and Additional Placing Shares, if any) by way of the Capital Raise. The Capital Raise is being made in order to provide the Company with additional capital to redeem its outstanding KZT Bonds when they mature on 1 December 2016.

The Placing Shares, which are subject to clawback under the Open Offer, are being conditionally placed with certain institutional investors. The Company may sell up to 380,406 Additional Placing Shares, which are Existing Ordinary Shares that are currently held by the Company as treasury shares, at the Offer Price on a non-pre-emptive basis in a separate Additional Placing to the Placees. Neither the Placing nor the Additional Placing (if any) is being underwritten. No commission will be paid to Placees in the Placing or in the Additional Placing (if any).

Qualifying Shareholders will be given the opportunity to apply for the Open Offer Shares at the Issue Price, subject to the terms and conditions of the Open Offer, pro rata to their holdings of Existing Ordinary Shares on the Record Date.

Fractions of New Ordinary Shares will not be allotted and each Qualifying Shareholder's entitlement under the Open Offer will be rounded down to the nearest whole number of New Ordinary Shares. Fractional entitlements will be aggregated and will be placed pursuant to the Placing for the benefit of the Company.

Qualifying Shareholders may apply for any whole number of New Ordinary Shares up to their maximum entitlement which, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Open Offer Entitlements as shown on their Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their stock account in CREST.

No application in excess of a Qualifying Shareholder's Open Offer Entitlement will be met, and any Qualifying Shareholder so applying will be deemed to have applied for his Open Offer Entitlement only.

Application will be made for the Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST at 8.00 a.m. on 7 September 2016, and that the Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 7 September 2016.

The New Ordinary Shares issued under the Placing and Open Offer, when issued and fully paid, will be identical to and rank pari passu with the Existing Ordinary Shares, including the right to receive all dividends or other distributions made, paid or declared after Admission.

The Capital Raise is conditional, inter alia, upon Admission becoming effective by not later than 8.00 a.m. on 29 September 2016 (or such later time and/or date as the Company may determine, not being later than 8.00 a.m. on 9 October 2016). 

If any such conditions are not satisfied, the Capital Raise will not proceed, any Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies received under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter.

Current Trading and Outlook

On 22 August 2016, the Company released its preliminary results for the period ended 30 June 2016. The Group's operating profit increased to US$2.2 million in the six months ended 30 June 2016 from US$1.8 million in the six months ended 30 June 2015, an increase of 22.6%. The increase in U.S. dollar terms is explained mainly by the effects of the Tenge depreciation that occurred in August 2015. The average KZT:USD exchange rate in the six months ended 30 June 2016 was 85% lower than it was in the six months ended 30 June 2015, which had the effect of decreasing the revenues and operating expenses of the Group in U.S. dollar terms in the six months ended 30 June 2016 as compared to the six months ended 30 June 2015. However, revenues decreased by a lesser percentage than operating expenses, primarily because U.S. dollars represent a larger percentage of the Group's revenues than they do of the Group's operating expenses. The Group's continuing cost optimisation and performance improvement also contributed to the increase in operating profit. Revenue decreased to US$10.0 million in the six months ended 30 June 2016 from US$12.8 million in the six months ended 30 June 2015, a decrease of 21.8%. The decrease in revenue in U.S. dollar terms is attributable to the effect of the depreciation of the Tenge as between the two periods. The decrease in revenue was offset in part by increases, in Tenge terms, in room and rent revenue and in other operating revenue as between the two periods. The Group's net profit for the period was US$1.4 million for the six months ended 30 June 2016 as compared to US$0.3 million for the six months ended 30 June 2015. The main reasons for the increase were an increase in operating profit and a decrease in finance costs.

The following are certain significant recent developments in or affecting Chagala's business:

· In May 2016, the Group completed the Uralsk Reconstruction Project and in June 2016 began leasing the office building to KPO, which is using the building as its headquarters.

· In July 2016 the Group renewed the Chagala Centre Office lease agreement with NCOC for a period of five years. This is a significant lease agreement for the Group as rent from this office building represents a significant part of the Group's revenues.

· According to public statements made by NCOC, oil production from the Kashagan field is now expected to resume in October 2016. Resumption of production at the Kashagan field is expected to have a positive impact on the Group's results going forward.

· In July 2016 the Tengizchevroil consortium announced the financing of a project on expansion of production capacities at the Tengiz oil field, in the Atyrau region, with a budget of US$36.8 billion. This project is expected to positively affect the Group's business through increased demand for accommodation and office space from the Tengizchevroil consortium and its servicing companies and contractors.

Expected Timetable of Principal Events

Each of the times and dates is subject to change without further notice. Please refer to the notes regarding the timetable set out below.

Notes regarding Timetable:

1. All references to time in this timetable are to London time unless otherwise stated.

2. The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement and the Prospectus and in any other documents issued by the Company in connection with the Capital Raise or Admission may be adjusted by the Company, in which event details of the new times and dates will be notified to a Regulatory Information Service and, where appropriate, to Qualifying Shareholders. In particular, in the event that withdrawal rights arise under Section 87Q(4) of the FSMA prior to Admission, the Company may determine to defer Admission until such time as such withdrawal rights no longer apply.

3. Different deadlines and procedures for return of forms may apply in certain cases.

4. Shareholders should note that any Existing Ordinary Shares sold prior to the close of business on 5 September 2016, the last day on which the Existing Ordinary Shares trade with entitlement, will be sold to the purchaser with the right to receive Open Offer Entitlements.

5. The ability to participate in the Open Offer is subject to certain restrictions relating to Shareholders who have registered addresses, or who are resident or located, outside the United Kingdom, details of which are set out in Part 17: "Terms and Conditions of the Open Offer" of the Prospectus.

Application for Admission

Application will be made for the admission of the New Ordinary Shares to be issued under the Capital Raise to listing on the standard listing segment of the Official List of the FCA and to trading on the main market for listed securities of the London Stock Exchange. Subject to the various conditions being satisfied, it is expected that Admission will become effective on 8.00 a.m. on 29 September 2016 and that dealings for normal settlement in the New Ordinary Shares (and Additional Placing Shares, if any) will commence at 8.00 a.m. on the same day.

Important Notice

Shareholders should note that the Open Offer is not a rights issue. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying non-CREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer, but will be subscribed for under the Placing for the benefit of the Company.

Prospectus

The Prospectus is expected to published on 6 September 2016 containing full details of how Shareholders can participate in the Open Offer. Copies of the Prospectus are available from Chagala Group Limited at Wyndham Place, 26th Floor, 44 Wyndham Street, Central, Hong Kong, during normal business hours on any weekday (except Saturdays, Sundays and public holidays) from the date of its publication until Admission. Following publication, the Prospectus will be available on the Company's website, www.chagalagroup.com.

For more information: 

Chagala Group

Chagala is a service company focused on providing long and short term accommodation solutions to domestic and international oil and gas companies developing Kazakhstan's largest hydrocarbon discoveries. With the ownership of hotels, guest houses, serviced apartments, remote site facilities, restaurants and offices in its portfolio, Chagala is well positioned to capitalize on the oil and gas investment being made in Kazakhstan.

Important Notices

This announcement has been issued by Chagala Group Limited and is the sole responsibility of Chagala Group Limited. The information in this announcement is for background purposes only and does not purport to be full or complete. The material set forth herein is for information purposes only and should not be construed as an offer of securities for sale in the United States or any other jurisdiction. Any subscription for New Ordinary Shares (or Additional Placing Shares, if any) in the Capital Raise should be made solely on the basis of the information contained in the Prospectus issued by the Company in connection with Admission. The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, the proposals referred to herein are tentative and are subject to verification, material updating, revision and amendment.

This announcement is an advertisement and not a prospectus and investors should not purchase or subscribe for any New Ordinary Shares (or Additional Placing Shares, if any) referred to in this announcement except on the basis of information in the Prospectus to be published by the Company in connection with the admission of such New Ordinary Shares. Copies of the Prospectus are available from the Company's registered office and will shortly be available on the Company's website (www.chagalagroup.com) and will shortly be available for viewing at the National Storage Mechanism at www.morningstar.com. 

The distribution or publication of this announcement, any related documents, and the offer, sale and/or issue of the New Ordinary Shares (and Additional Placing Shares, if any) in certain jurisdictions may be restricted by law. Persons into whose possession any document or other information referred to herein comes are required to inform themselves about and to observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdiction.

This announcement does not constitute or form part of an offer to sell, or the solicitation of an offer to buy or subscribe for, New Ordinary Shares to any person in the United States, Australia, Canada, Japan, Switzerland or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful and, in particular, is not for release, publication or distribution in or into the United States, Australia, Canada, Japan, Switzerland or South Africa.

This announcement is not an offer of securities for sale in the United States, and is not for publication or distribution, directly or indirectly, in or into the United States of America. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration under the Securities Act. No public offering of securities is being made in the United States.

The New Ordinary Shares, the Additional Placing Shares (if any) and the Open Offer Entitlements have not been and will not be registered under the applicable securities laws of Australia, Japan, Switzerland or South Africa, and the Company is not a "reporting issuer", as such term is defined under applicable Canadian securities laws. Subject to certain exceptions, the New Ordinary Shares and the Open Offer Entitlements referred to herein may not be offered or sold in Australia, Canada, Japan, Switzerland or South Africa or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan, Switzerland or South Africa. There will be no public offer of securities in Australia, Canada, Japan, Switzerland or South Africa.

The New Ordinary Shares (and the Additional Placing Shares, if any) are only suitable for investors who understand the potential risk of capital loss and that there may be limited liquidity in the underlying investments of the Company and in the Ordinary Shares, for whom an investment in the New Ordinary Shares (or Additional Placing Shares, if any) is part of a diversified investment programme and who fully understand and are willing to assume the risks involved in such an investment programme. There is no guarantee that the Capital Raise will proceed and that Admission will occur and you should not base your financial decisions on the Company's intention in relation to the Admission and Capital Raise at this stage. Acquiring New Ordinary Shares (or Additional Placing Shares, if any) to which this announcement relates may expose an investor to a significant risk of losing all of the amount invested. When considering what further action, you should take you are recommended to immediately consult, if you are resident in the United Kingdom, a person authorised under the Financial Services and Markets Act 2000, as amended, or another appropriately authorised professional adviser if you are in a territory outside the United Kingdom. This announcement does not constitute a recommendation concerning the Capital Raise. The price and value of the Ordinary Shares may decrease as well as increase. Information in this announcement, past performance and any documents relating to the Capital Raise or Admission cannot be relied upon as a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Capital Raise for the person concerned.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth or strategies. Forward-looking statements speak only as of the date they are made.

The contents of this announcement are not to be construed as legal, financial or tax advice. Each prospective investor should consult his own legal adviser, financial adviser or tax adviser for legal, financial or tax advice, respectively.