Manx Financial Regulatory News (MFX)

22 Dec 2009 08:00

FOR IMMEDIATE RELEASE

22 December 2009

Manx Financial Group PLC (the 'Company')

Proposed Re-registration under the Isle of Man Companies Act 2006 (as amended)

and

Conversion into Ordinary Shares of no par value

Introduction

The Company has posted a Circular to provide Shareholders with details of the Board's proposals to a) re-register the Company as a company governed by the Act of 2006 instead of, as is presently the case, a company governed by the Companies Acts 1931-2004; b) convert Existing Shares into New Shares; c) adopt the New Memorandum; and d) adopt New Articles of Association.

In order to implement the Proposals, it will be necessary to convene an EGM at which Shareholders are being asked to give their approval by passing the necessary Resolutions. 

Background and Reasons for the Proposals

As highlighted in the 2009 Interim Report, the Company has enjoyed improved financial performance despite the global economic uncertainty. The Board believes that the re-branding of the bank division and the successful implementation of the new banking system together with the introduction of new customer focused products such as the Wealth range should also improve performance.

The Board believes that a successful implementation of its business plan will likely require additional capital being injected into the Group or a reorganization of its existing financing or a combination of both. This belief derives from the fact that the Bank is required to maintain a Risk Asset Ratio of 16.0% which effectively ties up a significant portion of the Group's capital and means that it is not available to be used for growing the Group's businesses.

The Company cannot issue further Existing Shares at less than their nominal value (25p) without Shareholder approval and the sanction of the Court; this is a significant constraint on considering any proposals to issue further share capital. It is not realistic at this stage to consider issuing further shares at £0.25p or more as the closing mid market price of the Existing Shares was £0.0975 as at 15 December 2009, being the latest practical date prior to the posting of the Circular.

The Board believes that it would be in the best interest of the Company if the Company had greater flexibility to issue shares without having to get Shareholder and Court approval each time it wanted to do so and has confirmed that they, and their associates, intend to vote in favour of the Resolutions in respect of the holdings of 21,853,501 Existing Shares representing an aggregate of approximately 34.5% of the issued Existing Shares. 

As part of the Proposals, it is proposed the Existing Shares be converted to New Shares (which have no par value). This would remove the current restriction faced by the Company that it cannot issue further shares at a price less than their nominal share value without Shareholder and Court approval.

As a measure to protect Shareholders against excessive dilution, it is also proposed to include in the New Articles a provision that the Company will not, in any calendar year, issue or allot on a non-preemptive basis such number of shares as is (either through one issue or through separate smaller issues) equal to (an aggregate of) 20 per cent or more of the total number of shares in issue at the beginning of the relevant calendar year without having first passed a special resolution authorising the Board to do so on a non-preemptive basis.

If the Re-registration proceeds, it will be possible for the Company, being at that stage subject to the provisions of the Act, to issue shares with no par value thereby enabling the Company to raise capital at such price as is considered appropriate by the Board taking into account prevailing market conditions.

Effects of the Proposals

The Re-registration of the Company would not create a new legal entity and the Act specifically provides that Re-registration does not prejudice or affect the continuity of the Company. Instead, the Company would be subject to the provisions of the Act in place of the 1931-2004 Acts. 

No new share certificates for the New Shares will be despatched to Shareholders if the Proposals are implemented. The share certificates previously issued in respect of Existing Shares will remain effective even though the New Shares will have no nominal value attached to them as appears in existing share certificates

Application will be made for the New Shares arising on the Re-registration to be admitted to trading on AIM. It is expected that such admission will become effective and dealings for normal settlement in the New Shares will commence on 18 January 2010. 

Future Intentions

If the Proposals are implemented, the Board intends to consider how best to raise additional working capital for the Group.

Whilst no proposal has been finalised at this stage, the Company intends to enter into negotiations with Burnbrae with a view to re-financing the existing loan of £500,000 made to the Bank by way of a subordinated loan note dated 23 December 2008. If terms can be agreed, the Company would propose to replace that loan by an increased loan direct to the Company, the latter of which may be converted to New Shares on a ratio to be negotiated and agreed

In the event that any transaction is entered into with Burnbrae it will likely qualify as a related party transaction for the purposes of the AIM Rules as Burnbrae is interested in 18.92% of the Company's issued share capital and is owned by a trust of which Mr James Mellon a beneficiary. The Company will make a further announcement about this if required in due course.

Extraordinary General Meeting

In order for the Proposals to become effective they require approval of the Shareholders and accordingly an EGM is to be held at 11:00am on Thursday 14 January 2010 at the Claremont Hotel, Douglas, Isle of Man. 

Both the Resolutions are special resolutions and require 75% of the voting rights cast at the EGM to be cast in favour of the Resolutions for them to be passed.

A copy of the Circular is available on the Company's website: www.mfg.im 

DEFINITIONS

In this announcement, the following expressions have the following meanings, unless the context requires otherwise: