Distrib. Fin. Regulatory News (DFCH)

21 August 2020

For Immediate Release

Distribution Finance Capital Holdings plc("DFC", "DF Capital" or the "Company" or together with its subsidiaries the "DFC Group")

SHARE CAPITAL REORGANISATION AND PDMR NOTIFICATION

Introduction

On 7 August 2020 the Company announced that as part of the ongoing bank licence application process and following feedback from the Prudential Regulation Authority (the "PRA"), the Company was required to take certain reorganisation steps in respect of parts of the existing share capital of the Company and its wholly-owned subsidiary, Distribution Finance Capital Limited ("DFC Limited"). The Company also announced that these steps would involve the buy-back and cancellation of certain existing shares and issuance of new shares held by managers and former managers totaling less than 5 per cent. of the Company's issued share capital.

The Company is pleased to provide an update on the proposed reorganisation steps, including the Buy-backs and the Subscription which are required to be completed before any final authorisation decision will be considered by the PRA. Following the completion of the reorganisation steps, the Directors expect to receive notification of the PRA's decision in respect of its application by the end of September.

The effect of the proposed steps is that all loans (other than loans that DFC Limited has made to Intertrust Employee Benefit Trustee Limited, in its capacity as trustee of the Distribution Finance Capital Employee Benefit Trust (the "EBT") that have directly or indirectly funded the acquisition of Ordinary Shares by employees will be repaid and subject to the Buy-back Agreements and Subscription Agreements being entered into, all Ordinary Shares that have been directly or indirectly funded will be cancelled and an equivalent number of new Ordinary Shares (the Subscription Shares) will be issued.

The Reorganisation Steps

As part of the ongoing bank licence application process and the application for the Company and DFC Limited's share capital to be classified as CET 1 and following feedback from the PRA, the following steps are being taken:

Step 1: the Company and DFC Limited have agreed with certain employees and Gavin Morris (being a Director of the Company) that they shall repay loans (together with accrued interest) of, in aggregate, £394,123.29 from the proceeds of the sale of 1,023,882 of their Ordinary Shares (of which Gavin Morris has agreed to sell 85,407 Ordinary Shares) to Watrium. These loans were entered into before the IPO of the Company and related to either the acquisition of shares in DFC Limited or funding of tax arising from such acquisitions.

Step 2: Watrium has agreed to acquire a further 919,611 Ordinary Shares from certain employees, former employees and Gavin Morris (of which Gavin Morris has agreed to sell 116,202 Ordinary Shares) and as consideration for the acquisition Watrium has agreed to transfer an equivalent number of Ordinary Shares to them.

Steps 1 and 2 are expected to complete on Wednesday 26 August 2020.

The Company also expects to very shortly conclude the Buy-back Agreements and the Subscription Agreements with Watrium and the EBT to implement the following steps:

Step 3: Subject to signing the Buy-back Agreements, Watrium and the EBT will, subject to approval of the Resolutions and conditional on Admission, sell the Watrium Buy-back Shares (being the 1,943,493 Ordinary Shares acquired by Watrium in steps 1 and 2) and the EBT Buy-back Shares (being 2,963,283 Ordinary Shares) to the Company in each case at a price of 1 pence per Ordinary Share and an aggregate consideration of £49,067.76. If implemented, the Watrium Buy-back Shares and the EBT Buy-back Shares will be cancelled immediately following Admission.

Step 4: Subject to signing the Subscription Agreements, Watrium and the EBT will, conditional on Admission, subscribe for the Subscription Shares in each case at a price of 1 pence per Ordinary Share and an aggregate consideration of £49,067.76 so that they are issued with a number of new Ordinary Shares that is equal to the number of existing Ordinary Shares that they sell to the Company at Step 3.

If implemented, Steps 3 and 4 will be inter-conditional, and therefore there would be no circumstances where the Buy-back would complete without the Subscription Shares being issued. If any of the Resolutions are not passed by the requisite majority at a General Meeting to be convened, neither of Steps 3 and 4 will take place.

Completion of the Buy-Backs and Subscription will be conditional on Shareholder approval and Admission. The Company will update the market when the Buy-back Agreements and the Subscription Agreements are concluded.

DFC Limited has also agreed to reorganise its share capital by cancelling its existing share capital and using the reserve arising, to pay up new shares. 

Share Incentive Arrangements

In recognition of the employees and Gavin Morris agreeing to repay loans early, the Company has granted the Options.

The Options will be granted under the Company's existing PSP and a new tax-advantaged CSOP to be adopted by the Board. The number of Ordinary Shares subject to each Option will be determined by reference to the number of Ordinary Shares required to be sold by the employees and Gavin Morris to repay their respective loans, and to reflect the fact that income tax and National Insurance contributions will arise when the PSP Options are exercised, as compared to the tax position that would have applied in respect of the sale of the corresponding Ordinary Shares. The CSOP Options have an exercise price per share equal to the market value of Ordinary Shares as at the time of grant and the PSP Options are nil cost options. The Options will become exercisable on the same timeline, and in the same proportions, that the corresponding Ordinary Shares would have become freely transferable on the terms on which they were held. The Options are not otherwise subject to the satisfaction of performance conditions. It is expected that the Options shall (subject to vesting) be satisfied using Ordinary Shares held by the EBT and should not therefore result in any new shares being issued.

Further details of the Options granted to Gavin Morris (being a person discharging managerial responsibility) are set out in the Appendix to this announcement.

Enquiries:

DEFINITIONS

Defined terms used in this announcement shall have the meanings set out below:

APPENDIX

Grant of Options to Directors and Persons Discharging Managerial Responsibilities (together "PDMRs")

 In accordance with the terms of the Distribution Finance Capital Holdings plc Performance Share Plan (the "PSP"), and the Distribution Finance Capital Holdings plc Company Share Option Plan ("CSOP"), the Company's Chief Financial Officer, Gavin Morris, has been granted options over ordinary shares in the capital of the Company ("Shares") as follows:

- a nil-cost option over 19,733 Shares under the PSP; and

- an option with an exercise price of £0.405 per Share over 74,074 Shares under the CSOP.

All options referred to above (subject to vesting) are expected to be satisfied using Shares held by the trustee of the Company's employee benefit trust and should not therefore result in any new shares being issued.

Further to the above, the Company makes the following notification and public disclosure of transactions by persons discharging managerial responsibilities: