HYR.L Regulatory News (HYR)

9 Oct 2007 07:01

HydroDec Group plc09 October 2007 9 October 2007 HYDRODEC GROUP PLC ISSUE OF £13.8 MILLION UNSECURED CONVERTIBLE LOAN NOTES TO FUND USA EXPANSION APPOINTMENT OF DIRECTOR Hydrodec Group plc ("Hydrodec" or "the Company") today announces the conditionalplacing of £13.8 million of Fixed Rate Unsecured Convertible Loan Notes (the "Loan Notes") with institutional and other private investors (the "Placing"). TheLoan Notes will pay interest semi-annually in arrears at a rate of 8% p.a. andwill be convertible into new Ordinary Shares of the Company at 19p per share.The Placing is conditional, inter alia, on the passing of resolutions toincrease the Company's authority to allot relevant securities and to disapplypre-emption rights in respect of certain allotments, including the Placing, atan Extraordinary General Meeting expected to be held on 5 November 2007. Furtherdetails of the Placing are set out under "Principal terms of the Placing" below.Ludgate Investments Limited is acting as placing agent to the Company and isitself participating in the Placing. The Company is also pleased to announce that with immediate effect John Cowan,currently President of Hydrodec North America Inc. will be joining the Board.John joined Hydrodec in 2006 after 10 years with the Dow Chemical Company and 28years in total working in environmental technologies and services businesses. Hehas been and will continue to be instrumental in the development of theCompany's North American business. The funds from the Placing will be used to complete construction of Hydrodec'sfirst American Superfine transformer oil production plant in Canton, Ohio and tofinance the whole of the construction of Hydrodec's second plant in Laurel,Mississippi. This follows the announcement by the Company on 24th September 2007that it had received approval to proceed with the procurement of long term leasepossession of a 12.9 acre site in Laurel at a site adjacent to the facilities ofHoward Industries Inc., a leading manufacturer of oil filled transformers in theUSA and therefore a major potential customer for Hydrodec. Construction of the Ohio plant commenced in June 2007 with site earthworks andtank farm construction. Progress to date has been good and the overall projectis currently expected to be completed on or below budget and ahead of schedule.The weather dependent works have already been completed ahead of the onset ofwinter such that further plant assembly work can now take place under cover.Provided supply contracts are negotiated, the Company expects to start takingdelivery of feedstock into the completed tank farm by the end of the currentyear and to be fully operational by June 2008. Despite this, the Company hasnot budgeted for any revenues from this plant until the end of 2008. The plantwill have a planned capacity of approximately 90,000 litres per day but anassumed annual operating output of around 27m litres. Total capital expenditureis expected to be US$12 million with a further US$3m allowed for pre-operatingexpenses and corporate costs in the US. Construction of the second plant at Laurel, Mississippi is planned to commencein early 2008 and for commissioning to take place in the first half of 2009. All of the funds raised, net of expenses of the issue, are expected to beapplied towards the construction and associated costs of the two US plants. The decision to accelerate development of its second US plant reflects the verystrong interest being generated by Hydrodec's US marketing program. TheCompany's progress in the USA reflects the now widespread acceptance of itsSuperfine transformer oil product in Australia. The Company recently announcedthat production at its Young, New South Wales plant was expected to reach 75% ofcapacity in the near future. In the US, in parallel with its constructionprojects, Hydrodec will continue to develop relations with both transformermanufacturers and electricity distribution companies and will be seekingexpressions of interest as to possible agreements, both supply-side for usedfeedstock oil and demand-side for Superfine oil. The Company will convene an extraordinary general meeting of shareholders ("EGM") to consider resolutions to grant the Directors the necessary authorities toenable the Company to proceed with the Placing and to issue a further 10% of the issued undiluted share capital of the Company for cash on a non pre-emptivebasis without further recourse to shareholders. Further details of the meetingand the resolutions are set out under "Extraordinary General Meeting" below. John Gunn, Chairman, commented, "I am delighted that the Company's planned USexpansion is now fully funded. The development of the two plants in the US alonewill give the Company additional market presence and should enable it to developa profitable business. Equally importantly, however, this will provide theplatform for further expansion of the Company's technology into other markets.In light of the strong interest we are seeing in the US for the Company'srenewable oil solution, I look forward over coming months to being able toannounce progress on the development of key supplier and customer relationshipsas our production capability becomes a reality". Principal terms of the Placing The Placing, principally with institutional investors, is for £13.8 million ofFixed Rate Unsecured Convertible Notes. The Loan Notes will pay interestsemi-annually in arrears at a rate of 8% p.a. with the first payment being forthe period from the issue of the Loan Notes to 31st December 2007. The LoanNotes which will not be listed are convertible into approximately 72.63 millionnew Ordinary Shares of the Company in aggregate. This represents 27.3% of theCompany's enlarged issued share capital assuming that all the Loan Notes areconverted into Ordinary Shares. The Conversion price of 19p per sharerepresents a premium of 13.4% to the closing mid-market price of 16.75p perOrdinary Share on 5 October 2007. If not subsequently converted, the Companywill have the right to redeem the Notes at any time from 1st November 2012 to31st October 2014, by which date they must be redeemed. The Company has entered into an agreement relating to the Placing (the "PlacingAgreement") with Ludgate Investments Limited ("LIL") under which Ludgate hasagreed to use its reasonable endeavours to procure subscribers for the LoanNotes. The terms of settlement in relation to the Placing are set out in placingletters issued by Ludgate. The issue of the Loan Notes is conditional, interalia, on the passing of the resolutions to be proposed at the EGM as describedbelow and to the Company notifying LIL in writing that none of therepresentations, warranties or undertakings referred to in the Placing Agreementhas been breached. For as long as not less than £3 million of Notes are outstanding, theNoteholders will have the right by extraordinary resolution to nominate a personto be appointed as a director of the Company. Any person nominated pursuant tothis power must be approved by the Board and Numis Securities Ltd, as theCompany's nominated adviser. Any such appointee will be required to put himselfforward for re-election by Shareholders at the annual general meeting followinghis appointment. The Company has undertaken to apply for Admission of the Ordinary Shares to beissued on conversion of the Loan Notes to trading on AIM. Assuming theconversion of all of the Loan Notes (and assuming no other Ordinary Shares havebeen issued in the meantime), the total number of Ordinary Shares in issue willthen be 266,476,980. The New Ordinary Shares will rank pari passu in allrespects with the existing Hydrodec shares in issue. Extraordinary General Meeting The size of the Placing will exceed the Company's current dis-applicationauthority, as well as the Directors' general authority to allot equitysecurities. Accordingly, the Company is proposing to convene an EGM on oraround 5 November 2007. At such meeting, the Company will propose an ordinaryresolution to grant further general authority to the Directors to allot relevantsecurities up to an agreed limit and a special resolution to authorise theDirectors to allot equity securities for cash without the application ofstatutory pre-emption rights in respect of the Placing and, in addition, inrespect of up to 10 per cent. of the issued undiluted share capital of theCompany following the implementation of the Placing. A circular convening the EGM is expected to be despatched to shareholders laterthis week and will be made available on the Company's website www.hydrodec.com. Assuming that the EGM is held on 5 November 2007, completion of the Placing isalso expected to take place on 5 November 2007. For further information please contact: John Gunn, ChairmanHydrodec Group plcTel: 0207 621 5770 Emma DavisCurve PRTel: 07764 197 003 Notes to Editors Hydrodec's technology is a patented sustainable oil refining process that takesexisting spent oil as feedstock to produce new specialty oils thus creating avirtuous "green" cycle. The process is closed loop and produces no harmfulemissions. It can indefinitely return "as good as new" oil ("Superfine") toutilities and transformer manufacturers (who supply the utilities) and at thesame time removes their lifetime stewardship liabilities for these harmfulsubstances. Hydrodec's first commercial process re-refines the used transformeroils that insulate and cool utility transformer boxes. It currently has oneoperating plant in Young, New South Wales in Australia. Hydrodec Group plc is a public company, quoted on AIM since December 2004 andits market capitalization as at 5 October 2007 is £36.8 million. For furtherinformation please go to hydrodec.com This information is provided by RNS The company news service from the London Stock Exchange