SGI.L Regulatory News (SGI)

16 September 2021  

THE STANLEY GIBBONS GROUP PLC

(the "Company" or the "Group")

Update re Subsidiary and New York Property

The Company's wholly owned subsidiary Mallett Inc (Mallett), has been involved in a legal dispute regarding a leasehold property in New York which it sub-let as described in the Company's final results announced on 10 August 2021. In April 2020 Mallett's tenant ceased paying the rent, which in turn meant that Mallett was unable to pay the landlord. In August 2021 Mallett reached a settlement agreement with the tenant which terminated their tenancy. Mallett Inc has been unable to negotiate a settlement with the landlord for the outstanding rental arrears and has been unable to negotiate early termination of the lease. On the advice of its attorneys, the Directors of Mallett have agreed to enter Mallett into a Chapter 11 process in the United States. The Chapter 11 bankruptcy filing will allow Mallett to promptly liquidate its assets in the order of priority required by the US federal Bankruptcy Code, with timing and amount paid to creditors approved by the New York Bankruptcy Court before distributions are made. 

Mallett is a cross guarantor of the Group's finance facilities with Phoenix S.G. Limited ("Phoenix"), the Group's 58.09% majority shareholder and principal lender. As a result of Mallett Inc entering Chapter 11 proceedings in the United States, the Group is in technical default of its loan facility. As a result of this the loan facility would become immediately due if called by Phoenix. The Group's Directors requested and have received from Phoenix S.G. Limited a signed letter of intent stating their intention not to call in the loans and to continue to support the Group. This letter is consistent with the support that Phoenix have offered throughout their involvement as lender to the Group but is not a waiver of the default and the loan facility is payable on demand.

At 31 August 2021 the carrying value of right of use asset in the Group's balance sheet for the New York leasehold property is £2.6m whereas the total carrying value of the lease liability is £4.3m. The Mallett balance sheet at 31 August 2021 has approximately £2.5m of net assets. Under the Chapter 11 process, these assets will be divided between the creditors of Mallett according to the creditors share of the liabilities. Other than the landlord, Mallett's other creditors are mainly amounts owed to other Group companies. The Chapter 11 process will apply the US federal Bankruptcy Code to creditors which will limit some of the liabilities. The Directors have been advised by the Mallett attorneys that no claim from this process can be attached back to other Group companies and the Directors are hopeful that on conclusion of this process some of the assets will be distributed to Group companies.

The Company will update shareholders on any material developments in the Chapter 11 process as and when they occur.

Graham Shircore CEO said:

"It was always our hope that we could reach a negotiated settlement with all parties in connection with the New York lease. Unfortunately, this has not been possible with regard to one of the parties concerned. Therefore, in order to protect the Group's remaining assets and minimise the future liabilities the decision to place Mallett Inc in to Chapter 11 has been taken.

Phoenix continue to show their support for the business and we hope that the Chapter 11 process in the United States can be concluded as swiftly as possible and in a manner which is optimal for all creditors which include a number of other Group companies.".

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019.