HYR.L Regulatory News (HYR)

19 December 2012

Hydrodec Group plc

("Hydrodec", the "Company" or the "Group") 

Repayment of £2m secured loan notes and £5m new debt financing

The Board of Hydrodec Group plc, the cleantech industrial oil re-refining group (AIM:HYR), announces that the Company will repay its existing £2 million loan notes secured over its Canton site in Ohio, USA. The Board is also pleased to announce that it has received a commitment for £5 million in new debt financing on improved terms to fund expansion in the US, invest in current operations to further strengthen underlying performance and develop the Hydrodec technology for extended application in industrial oils.

Repayment of existing £2m secured loan notes

The Company will shortly repay its existing £2 million secured loan notes issued in 2011 ("2011 Notes"). The 2011 Notes were secured over the Canton site and the Company will remove this security in the light of its proposed US joint venture arrangement, announced on 30 November 2012. The 2011 Notes carried a 10 per cent per annum coupon. In order to preserve cash resources, the Company has offered the holders of the 2011 Notes the option of receiving their repayment, together with accrued interest and early prepayment fee, in shares in the Company calculated by reference to the latest available closing mid-price at the date the Company made the offer (being 11.88p per share as at close on 17 December 2012). 

£5m new debt financing

At the time of its interim results on 6 September 2012, the Company announced that it would benefit significantly from a larger capital base to provide flexibility and access options for growth and that a range of options were being considered. Since then, the Company has announced that it has signed Heads of Terms in respect of the potential US joint venture and also recently announced its success in achieving proof of concept in extending the application of the Hydrodec technology to the re-refining of paraffinic industrial oils.

Having considered a variety of possible funding alternatives, the Company has elected to accept a commitment from Andrew Black, a non-executive director, to subscribe for £5.0 million of secured fixed rate notes ("Notes"). The Notes have a three year term and are repayable at the Company's option at any time after six months from their date of issue, subject to a final repayment date of 19 December 2015. The Notes pay a 5 per cent per annum coupon. Security will be granted over the Company's shares in Hydrodec Development Corporation Pty Ltd, a wholly-owned Australian subsidiary and the Group's principal IP holding company. In addition, Mr Black has been granted a total of 25 million warrants to subscribe for ordinary shares in the Company at a price of 16 pence per share (representing a 33 per cent premium to the latest closing mid-price of 12p per share), exercisable at any time within five years from the date of grant ("Warrants"). The Notes and the Warrants are transferable with the consent of the Company.

Following the completion of these transactions, and on the basis that Andrew Black has elected to receive the repayment of his £1.4 million of the 2011 Notes in shares, Mr Black's beneficial holding of ordinary shares will be approximately 81.3 million shares (representing approximately 19.2 per cent. of the Company's issued voting shares). Mr Black will also hold warrants to subscribe for 32 million ordinary shares. 

As a director of the Company, Andrew Black's participation in these arrangements constitute related party transactions for the purposes of the AIM Rules. The directors, with the exception of Mr Black, consider, having consulted with the Company's Nominated Adviser, Numis Securities Limited, that the repayment arrangements for the 2011 Notes and the terms of the new Notes are fair and reasonable insofar as Shareholders are concerned.

Ian Smale, Chief Executive of Hydrodec, commented: "This is an attractive and uncomplicated financing option that will specifically provide the Company with the capacity required to deliver on our existing plans as well as maintain our momentum for the future. The focus of management is on delivery of our opportunities to expand, as well as the necessary re-structuring of our business to deliver a clear plan to profitability."

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Notes to Editors

Hydrodec's technology is a proven, highly efficient oil re-refining and chemical process which is being initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. The Group takes spent oil, including polychlorinated biphenyl ("PCB") contaminated oil, as the primary feedstock, which is then processed at its two plants enabling 99 per cent or greater recovery of oil for reuse while also eliminating PCBs, a toxic additive banned under international regulations, without environmentally harmful emissions.

Hydrodec's plants are located at Canton, Ohio, US and Young, New South Wales, Australia. The Group's shares are listed on the AIM Market of the London Stock Exchange. For further information, please visit www.hydrodec.com.