R.e.a.hldgs. Regulatory News (RE.)

16 Feb 2006 07:00

R.E.A.Hldgs PLC15 February 2006 R.E.A. Holdings plc ("REA") Supplementary Prospectus and Proposed Reduction of Capital REA announces that it has published a supplementary prospectus (the"supplementary prospectus") supplemental to the base prospectus (the "baseprospectus") published on 17 August 2005 relating to an issue by REA of up to$30,000,000 of 7.5 per cent dollar notes 2012/14 ("dollar notes"). Currently, $4,972,281 nominal of dollar notes are in issue. As announced on 24January 2006, REA has agreed to issue a further $19,000,000 nominal of dollarnotes pursuant to the terms of an agreement (the "settlement agreement") dated23 January 2006 between REA and certain of its directors and subsidiaries of theone part and Mr M E Zukerman and connected parties of the other part (the "MEZgroup") as consideration for the acquisition by REA of all of the shares inREA's subsidiary, Makassar Investments Limited, owned by the members of the MEZgroup. The supplementary prospectus contains information relating to certainsignificant new factors relating to the information provided in the baseprospectus which have arisen since the date of publication of the baseprospectus. Details of such factors have already been announced in pressannouncements issued by REA save as regards the fact that the directors of REAhave concluded that they should seek shareholder approval for a reduction in thecapital of REA of £6 million in aggregate involving the cancellation of theentire balance of £3,239,666 standing to the credit of REA's capital redemptionreserve and a reduction of £2,760,334 in the amount standing to the credit ofREA's share premium account. This reduction of capital was envisaged in the base prospectus, and the trustdeed constituting the dollar notes contains provisions pursuant to which thetrustee for the holders of the dollar notes has irrevocably consented, on behalfof itself and holders of the dollar notes, to a reduction in the capital of REAof the magnitude that is proposed. However, at the time that the base prospectuswas published, the directors had no immediate plans to propose the reduction ofcapital. That has now changed. The REA group's profits are currently derived almost entirely from the oil palmoperations in Indonesia of REA's subsidiary, PT REA Kaltim Plantations ("REAKaltim"). That subsidiary has substantial local borrowings in Indonesia and thecovenants to which those borrowings are subject impose restrictions on paymentsby REA Kaltim of dividends and of interest on loans made by REA to REA Kaltim.REA's own profits are materially dependent upon receipt of such payments.Moreover, even to the extent that the payment of dividends by REA Kaltim ispermitted by its local bankers, the availability of tax losses brought forwardin REA Kaltim (resulting from accelerated depreciation for tax purposes inrespect of the substantial capital expenditure that has been incurred in theestablishment of REA Kaltim's present operations), would make it, for the timebeing, fiscally disadvantageous for the REA group if REA Kaltim were to paysignificant dividends. REA is permitted by law to pay dividends on its shares only out of its owndistributable reserves. The level of distributable reserves shown by the REAbalance sheet as at 31 December 2004 (being the latest audited balance sheet ofthe company) amounted to just £1.6 million. As the servicing cost of theadditional $19 million of dollar notes to be issued pursuant to the settlementagreement will result in an increase in future charges against REA's ownrevenues, the directors of REA are concerned to ensure that, if there is anerosion in REA's distributable reserves, such a technical limitation should notinhibit the payment of dividends (especially dividends on the preference sharesof REA) which the directors would, from a commercial viewpoint, feel able torecommend. The directors consider that the likelihood of such an occurrencewould be significantly reduced by the release to distributable reserves of £6million in aggregate from the amounts at present standing to the credit of REA'sshare premium account and capital redemption reserve. Accordingly, subject to the placing of the 1,372,000 ordinary shares at 260p pershare that was agreed on 14 February 2006 being duly completed and to theproposals for the issue of an additional 2,828,000 ordinary shares at 260p pershare pursuant to a further placing and open offer (such placing and proposalsfor a further placing and open offer being as announced on 14 February 2006),REA intends that the circular to be sent to shareholders in connection with theproposed issue of the 2,828,000 additional ordinary shares should includeproposals for a reduction in the capital of REA to the extent described above.The proposed reduction would be conditional upon the further placing and openoffer of the 2,828,000 ordinary shares becoming unconditional and upon thepassing of resolutions of warrant holders and shareholders necessary to effectthe reduction. The proposed reduction of capital would further be conditionalupon confirmation by the High Court. A copy of the supplementary prospectus has been submitted to the UK ListingAuthority, and will shortly be available for inspection at the UK ListingAuthority's Document Viewing Facility, which is situated at: Financial Services Authority,25 The North Colonnade,Canary Wharf,London,E14 5HS Telephone: 020 7676 1000 A copy of the supplementary prospectus may also be inspected at the offices ofREA at 3rd Floor, 40-42 Osnaburgh Street, London NW1 3ND and in electronic formon the website maintained by REA at www.rea.co.uk. A copy of the base prospectusis similarly available for inspection. This information is provided by RNS The company news service from the London Stock Exchange