Kellan Group Regulatory News (KLN)

15 September 2017

The Kellan Group PLC

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

Purchase of Secured Fixed Rate Loan Notes

Further to the announcement dated 5 January 2017, the Company is pleased to announce that it has agreed terms to purchase from BMN Commercial Limited ("BMN Commercial") all of the outstanding Secured Fixed Rate Secured Loan Notes 2022 (the "Loan Notes") that were issued to BMN Commercial pursuant to the terms of a Fixed Rate Secured Loan Note Instrument dated 26 October 2016 ("2016 Loan Note Instrument") and which Loan Notes are currently outstanding in the principal sum of £523,000. The purchase price for all the Loan Notes is £366,100 (such sum being equal to 70 per cent. of the aggregate principal amount ("Purchase Price")). 

The Purchase Price will be funded by drawdown on the existing confidential invoice discounting facility provided to the Company by Barclays. The Barclays drawdown is at a substantially lower rate of 1.6% over base (1.85%), than the interest on the Loan Notes (5%) and ensures the Company uses its cheapest means of funding first. In addition, the purchase of the Loan Notes will improve the balance sheet to the extent of the discount obtained.

In summary, before the first refinancing and redemption transaction dated 26 October 2016, the Group had loan notes amounting to £3,206,000 outstanding with £1,346,000 due for repayment on 14 February 2017 and the remaining £1,860,000 due for repayment on 20 September 2017. Following the transactions announced on 26 October 2016, 5 January 2017 and today, the Group has loan notes amounting to £1,860,000 outstanding and due for repayment on 20 September 2022.

BMN Commercial is a company owned by the family of Paul Bell, who is interested in 62 per cent. of the issued share capital of the Company.

Under the AIM Rules, BMN Commercial is deemed to be a related party. Accordingly, the independent directors of the Company consider, having consulted with the Company's nominated adviser, Allenby Capital Limited, that the terms of the purchase of the Loan Notes from BMN Commercial are fair and reasonable so far as the shareholders of Kellan are concerned. 

Richard Ward, Executive Chairman, commented, "We are delighted to have secured agreement to purchase the Loan Notes. As a result, the Company will be in a stronger financial position, improving its balance sheet and reducing its ongoing financing costs." 

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