Trafalgar Prop Regulatory News (TRAF)

6 September 2017

Trafalgar New Homes plc

(the "Company")

Director loans

Speldhurst loans

Trafalgar New Homes plc (AIM: TRAF), the residential property developer operating in southeast England, provides further details on its site in Speldhurst, Tunbridge Wells, Kent (the "Speldhurst Site"). The Speldhurst Site was acquired with the benefit of planning permission for the demolition of the existing property and the erection of a substantial new build detached house on the site, the building of which is progressing and scheduled for completion in October 2017. 

The Speldhurst Site is held on trust for the benefit of Combe Bank Homes Limited ("CBH"), a subsidiary of the Company, by Alex Johnson, a director of the Company. The Speldhurst Site was acquired by Mr Johnson on 17 June 2016 and a declaration of trust was entered into on the same date for CBH to be the beneficial owner of the Speldhurst Site (the "Declaration of Trust"). The Speldhurst Site was acquired for £670,000, plus costs of purchase, which was funded by a loan of £221,000 from Lloyds Bank in the name of Mr Johnson and the balance was paid by CBH in cash.

In addition, Lloyds Bank has provided a loan facility of up to a further £614,000 to Mr Johnson for development of the Speldhurst Site (the "Facility"), of which £300,455 has been drawn to date and made available to CBH by Mr Johnson. The Facility can only be drawn against quantity surveyor certificates of work carried out on the site and further drawings under the Facility are expected to be made in future for the benefit of CBH (up to the available balance of £313,545).

The Lloyds Bank loans are repayable on 31 January 2018 and attract interest at an annual rate of 5.2% over the official bank rate of The Bank of England from time to time, which is paid monthly by CBH. Chris Johnson, the father of Alex Johnson and Chief Executive of the Company, has provided a personal guarantee to Lloyds Bank in respect of its loan to Alex Johnson.

As a result of the Declaration of Trust, Mr Johnson has not and will not receive any benefit or gain from the Speldhurst Site nor from the Lloyds Bank loan. CBH has accepted responsibility for the repayment of the loan and interest payments on it on the same terms as Mr Johnson has with Lloyds Bank. However, the effect of the arrangement is that Mr Johnson has loaned to CBH £551,455 to date and expects to loan to CBH up to a further £283,545 (in line with the remaining availability under his Lloyds Bank facilities).

The trust and loan arrangements between CBH and Alex Johnson in respect of the Speldhurst Site are related party transactions under the AIM Rules for Companies. Accordingly, the directors independent of the transactions consider, having consulted with Allenby Capital Limited, the Company's Nominated Adviser, that these arrangements are fair and reasonable insofar as the Company's shareholders are concerned. 

Working capital loan

On 27 June 2013, CBH entered into a loan agreement with Chris Johnson, Chief Executive of the Company, for working capital purposes ("CBH Loan"). Under the terms of the CBH Loan, Mr Johnson is entitled to receive interest of 5% per annum, payable annually in arrears. On 6 September 2017, Mr Johnson agreed to waive interest due on the CBH Loan for the year ended 31 March 2017, which would have totalled £106,096. The CBH Loan will continue to accrue interest for the year ending 31 March 2018. The outstanding balance on the CBH Loan, which currently stands at £2,188,802, was repayable by 31 March 2017, but Mr Johnson has today agreed to extend the repayment date of the CBH Loan until 31 August 2018. CBH will make repayments on the CBH Loan periodically, depending on its working capital requirements, and Mr Johnson has confirmed he will continue to support the Company's working capital requirements as needed.

The extension of the repayment date and waiver of interest payments on the CBH Loan is a related party transaction under the AIM Rules for Companies. Accordingly, the directors independent of the transaction consider, having consulted with Allenby Capital Limited, the Company's Nominated Adviser, that the amendments to the CBH Loan are fair and reasonable insofar as the Company's shareholders are concerned. 

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