Graphene Nanochem Regulatory News (GRPH)

Graphene NanoChem PLC

("Graphene NanoChem" or the "Group")

Approval of Terms of Debt Restructuring

Proposal to dispose of non-core assets

Trading update

Graphene NanoChem (AIM:GRPH), the international provider of nanotechnology performance enhancing solutions for global industries, is pleased to announce a significant milestone in the Group's rationalization plan with the receipt of formal approval from its primary financier, Malaysia Debt Ventures Berhad ("MDV"), for the restructuring of Graphene NanoChem's short term debt of c.£16.0 million to MDV ("MDV Restructuring Approval").

HIGHLIGHTS:

· A leaner and stronger nanotechnology company

· Debt rationalization exercise that addresses 100% of the Group's total debt:

· Short term debt of c.£16.0 million to be converted into longer term debt with 2 year payment moratorium and repayment obligations mapped against the growth plan of the Group; and

· Agreement in principle to repay c.£12.0 million of long term debt through proposed disposal of non-core assets. Initial discussions with potential purchasers progressing well.

· Subject to full implementation of the rationalization plan, the Group has a stronger balance sheet and improved cashflow by virtue of the debt rationalization exercise

· Resulting realignment of business portfolio to focus on solid, higher margin and longer term opportunities in oilfield chemicals and water treatment solutions

· Despite the challenging operating environment, a positive first quarter for the Group with the launch of its water treatment solutions by Scomi at the Offshore Technology Conference

Jespal Deol, Chief Executive Officer of Graphene NanoChem, commented:

"Your Board is delighted by today's news. These landmark transactions, once completed, are expected to provide Graphene NanoChem with the necessary capital to execute the next phase of its stated growth plan. The Board has endeavoured that the agreements reached will deliver the best available outcome for the business and for shareholders. We look forward to continuing to work alongside Malaysia Debt Ventures, a relationship which has proved to be extremely valuable and productive.''

Debt Restructuring Approval

The salient terms of the MDV Restructuring Approval include:

· a two (2) year payment moratorium up to 31 December 2017;

· an extended maturity date from November 2015 to December 2021;

· a pay down in the aggregate amount of £0.35 million only in 2016 and 2017 respectively; and

· effective interest rate of 8% per annum.

Pursuant to this, the Group's c.£16 million immediate repayment obligation to MDV will be converted into a longer term debt with the repayment structure extended to 2021 mapped against the recalibrated business plan of the Group, effectively reducing the Group's short and immediate term cash pressure within a challenging operating environment amidst the oil and gas industry downturn.

The Group is now progressing the detailed mechanics and documentation for the implementation of the MDV Restructuring Approval, taking into account its business streamlining process, which will be subject to the final agreement by MDV.

The MDV debt constitutes approximately 53% of the Group's total debt to secured financiers and on the heels of the MDV Restructuring Approval, the Group has progressed the second phase of its debt restructuring plan with its remaining secured financiers, Bank Pembangunan Malaysia Behad and Bank Rakyat, for the settlement of its balance of secured debt of approximately £12.0 million (at a current average effective interest rate of 7.3% through the planned realisation and disposal of its non-core assets and the utilisation of proceeds thereof towards reducing the Group's term loan debt. Such non-core assets include the fuel additive assets and the palm oil refinery ("Non-core Assets")].

The successful implementation of the restructuring plan is expected to significantly reduce its debt balance and interest rate expense, which will have a positive impact of strengthening the Group's balance sheet. Further, the utilization of operating cash flows in the near term for advancement of the recalibrated business plan rather than repayment of debt, bodes well for the Group as it focuses on available resources and growth strategies on long term, higher margin business opportunities.

Business Reorganization

Faced with the challenges of a global downturn in the oil and gas markets, the Group has been taking decisive action in improving operating efficiency, reducing its cost base and recalibrating and streamlining its portfolio of businesses to maximize growth opportunities.

As part of the execution of its rationalisation plan, the Group has exited from the low margin fuel additive business, which is not expected to have any significant growth in margins. The Group has successfully managed a structured operational exit of the business and is now progressing the next phase of the exit, which is the realisation of the assets and closure of the related subsidiaries in the most expedient and efficient manner ("Business Exit").

The proposed sale of the Non-core Assets will be done through a structure that works for its secured financiers, debt holders and the Group and the Group is in detailed discussion on the final terms of arrangement with its secured financiers who are supportive of the process. The Group is anticipating receiving claims and/or legal suits from unsecured creditors during the implementation of this process which will eventually result in the winding down of the relevant subsidiaries ("FA Subsidiaries") and the utilisation of proceeds of sale of the assets to satisfy the existing liabilities of the FA Subsidiaries. This is not expected to have any material operational impact to the Group and will be dealt with at the FA Subsidiaries' level save and except for one claim brought by an unsecured creditor of the FA Subsidiaries against Graphene Nanochem for approximately £700,000, which is currently contested by the Group. For prudence, the claim has been accordingly provisioned for in the Group's cashflow.

The Business Exit is expected to realise operational cost savings that will enhance its cashflow position with an additional advantage of realising net cash from sale of the Non-core Assets for the repayment of the £12.0 million long-term debt and overall debt reduction for the Group.

The Business Exit are not anticipated to have any material impact on the Group's core business portfolio, consisting of the oilfield chemicals and water solutions businesses, in which the Group is continuing to have strong market traction and growth opportunities.

Business Outlook

In spite of the challenging period of the oil and gas industry, compounded further by the financial restructuring undertaken, the Group has delivered on its two core near term strategies:

· establishing market access and presence in 67 locations and 23 countries with engagement, contracts, purchase orders and upcoming tenders through its Scomi Joint Venture, negating the need to incur cost that would otherwise be required; and

· the launch of the enhanced water treatment solution platform with marketing efforts focused towards securing early wins.

Operationally, 2016 continues to be a period of market building for the Group and a number of commercial opportunities have been identified to increase sales volumes and expand market reach particularly in light of the urgent needs for water treatment solutions and significant progress is being made.

Looking further ahead, improvements in key financial metrics can be achieved and the deployment of our partnership based market access strategy will continue to strengthen the business and enhance shareholder returns. After a difficult year, the business will become right sized, leaner and well positioned to capitalize upon future prospects in the two large markets in which we operate.

Graphene NanoChem remains focused on preserving and enhancing its cash position and the Board continues to evaluate all financing options available, including the raising of new debt finance and the raising of additional funds from the capital markets.

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About Graphene NanoChem

Graphene Nanochem plc (AIM: GRPH), is an international provider of nanotechnology performance enhancing solutions for global industries. The Group employs nanoprocesses and nanomaterials to design, engineer and enhance the performance of mainstream products for a wide range of industrial applications. It has established two major functional platforms in the energy and water sectors, and the Group, through partnerships with established industry players, is focused on building market opportunities in both sectors whilst continuing its developmental work in other strategic application areas of nanotechnology.

Headquartered in Malaysia, Graphene Nanochem was admitted to the AIM of the London Stock Exchange on 26 March 2013, following the reverse acquisition of Biofutures International plc, and trades under the symbol GRPH.L. To find out more, please visit www.graphenenanochem.com.