CIN.L Regulatory News (CIN)

LSE:CIN

19 March 2014

City of London Group plc ("COLG" or "the Company" or "the Group")

Agreement reached for funding growth of the trade finance business

Further to the agreement in principle mentioned in the February Interim Management Statement, the Board is pleased to announce that it has now reached agreement with its existing funding partner, Macquarie Bank Limited ("Macquarie") to support the next stage of growth of the Company's trade finance platform, Trade Finance Partners Limited ("TFPL"). The agreement includes an immediate increase in TFPL's available facility with Macquarie from £18m to £23m (with an agreement in principle for a further £25m), the extension of the facility for a further two years to 2017, an increase in the financial covenant headroom and the injection of a total of £5m of new subordinated debt capital into TFPL to fund growth. Macquarie is providing £3m of this debt capital and the Company's principal creditor is providing £2m (with a corresponding reduction of £2m in the COLG growth funding facility, mentioned in the IMS, from £5m to £3m).

As part of the agreement, Macquarie has exercised its option over 20% of the equity of TFPL, acquired equity from a departing director and subscribed for new equity resulting in Macquarie holding 33% of TFPL's ordinary equity on a fully diluted basis.

In addition to the agreement with Macquarie, COLG has increased its holding in the intermediate holding company through which it held the Group's ordinary shareholding in TFPL from 87% to 100%. As a result of these agreements COLG's economic interest in the ordinary equity of TFPL will be reduced from 44.0% to 43.0% on a fully diluted basis. The balance of 24% of the fully diluted equity is held by, or under option to, TFPL management. As COLG will not be a majority shareholder it will not consolidate TFPL's results from the date of the transaction but account for the business as an associated company.

John Kent, Acting CEO, said: 'I am pleased to announce these additional funds for our trade finance platform. This agreement will increase the size of TFPL's balance sheet enabling the continued, substantial expansion of the business and we look forward to continuing to work closely with Macquarie and TFPL management to support the growth'.

Nikolaus Woloszczuk, Co-Head of Macquarie's Lending Team in Europe, said: 'We are delighted to be able to build on our current engagement with TFPL and to provide the company with additional funds to enable a significant expansion.'

Enquiries:

Note on forward looking statements

This statement may contain certain statements about the future outlook for COLG and its subsidiaries. Although the directors believe their expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause actual outcomes to be materially different. This statement has been drawn up and presented with the purposes of complying with English law. Any liability arising out of or in connection with it will be determined in accordance with English law.

Notes to Editors

City of London Group plc is fully listed on the London Stock Exchange plc (LSE symbol CIN).

COLG is a financial services group focused on providing merchant banking services to finance the SME and professional services sectors. It does this by financing trade and securing specialist funding throughout the supply chain to help fuel growth in these sectors, as major national and foreign banks limit new lending to these borrowers. COLG seeks to identify and exploit product niches and business models in these sectors where they are supported by strong day to day management teams, providing initial equity, working capital and seed funding for those teams.

Since 2009, COLG has focused on Specialist Financing and Alternative Fund Management. As part of its strategy to build a quality Financial Services Group, COLG has developed four specialist financing funds, pledging significant seed funds to Therium Capital Management Limited, a third party Litigation Funder, Credit Asset Management Limited and Professions Funding Limited, which respectively provide asset backed finance to SMEs and working capital loans to professional practice firms and finally Trade Finance Partners Limited, a trade finance provider to the SME market.