Trafalgar Prop Regulatory News (TRAF)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

25 June 2020

TRAFALGAR PROPERTY GROUP PLC

("Trafalgar" or the "Company")

£750,000 Conditional Placing and Subscription

Debt Conversion and Issue of Convertible Loan Notes

Notice of General Meeting

Highlights 

· Proposed £750,000 placing and subscription at 0.08p per share (the "Placing");

· Net proceeds will allow the part repayment of existing indebtedness and position the Company to take advantage of new opportunities;

· The Placing and Subscription Shares will represent approximately 65.78 per cent of the issued share capital of the Company, as enlarged by the issue of the Placing and Subscription Shares;

· Issuance of new Convertible Loan Notes ("CLNs"), convertible at 0.2p per share, 2.5 times the Placing Price;

· Conversion and part repayment of debt to convertible loan notes;

· Placing and Subscription is conditional, inter alia, on the approval of shareholders at a general meeting of the Company to be held on 13 July 2020 (the "GM") of resolutions to, inter alia, effect a Share Reorganisation;

· Warrants over ordinary shares will be issued on the basis of one for every Placing and Subscription Share and upon conversion of the CLN, exercisable at 0.2p for 2 years, conditional, inter alia, on all resolutions being passed at the General Meeting

Paul Treadaway, Chief Executive Officer of Trafalgar, said: "The funds raised and the substantial readjustment in the PLC's debt profile, further strengthens our financial position as we have a stronger balance sheet and far better placed to ensure that Trafalgar can take advantage of the increasing opportunities that we see ahead. I'm pleased that in this extremely challenging time our existing investors, as well as new investors, have shown their support for this fundraise, our strategy and our future. "  

1. Introduction

The Company announces that it is posting a circular to shareholders today containing details of a conditional placing and subscription with investors and Directors, to raise £750,000 before expenses through the issue of 937,500,000 New Ordinary Shares at the Issue Price (the "Placing and Subscription Shares").

The purpose of the circular is to provide details of the Placing and Subscription, to explain the background to and the reasons for the Placing and Subscription and why the Directors recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. As the Issue Price is below the nominal value of the Company's Existing Ordinary Shares, the Company needs to effect the Share Reorganisation to facilitate the Placing and Subscription, and further details of the Share Reorganisation are set out in paragraph 5 below. In addition, the Company has agreed to convert £600,000 of its intercompany debt into a CLN, and further details of the CLN are set out in paragraph 4 below.

The Proposals are each conditional, inter alia, on the passing of the Resolutions by Shareholders at the General Meeting, notice of which is set out at the end of the circular. If the Resolutions are passed, admission of the Placing and Subscription Shares to trading on AIM is expected to occur at 8.00 a.m. on 14 July 2020.

2. Background to and reasons for the Placing and Subscription

The Directors believe that it is prudent for the Company to seek further capital at this time to fund the Group's business. The use of proceeds of the Placing and Subscription are set out in paragraph 6 below.

The Directors believe the Placing and Subscription to be the most appropriate way to provide the capital necessary to meet the Company's future requirements. As at 23 June 2020, the Company held cash and cash equivalents of approximately £114,338 (unaudited), and all bank debt is held within its subsidiaries, there is therefore is no bank debt at the PLC level.

3. Details of the Placing and Subscription

3.1. Placing and Subscription

Peterhouse has conditionally raised £750,000 before expenses through the Placing and Subscription. All Placees and the Subscriber will receive a one for one warrant exercisable at 0.2p until the second anniversary of issue. Application will be made to the London Stock Exchange for the New Ordinary Shares, including the Placing Shares and the Subscription Shares, to be admitted to trading on AIM and it is expected that Admission will become effective and that dealings in the New Ordinary Shares, will commence on AIM at 8.00 a.m. on 14 July 2020. Assuming no options or warrants are exercised prior to Admission, the Placing and Subscription Shares will represent approximately 65.78 per cent of the ordinary share capital of the Company in issue immediately following Admission.

Conditional on the Resolutions being approved by Shareholders at the General Meeting, the Company has agreed to issue Peterhouse Capital Limited a warrant which is exercisable over 3 per cent. of the Company's issued share capital from time to time. This warrant will be exercisable at the Issue Price until the second anniversary of issue.

3.2. General

All Placing and Subscription Shares will be issued credited as fully paid and will rank pari passu in all respects with the Ordinary Shares in issue from time to time, including the right to receive all dividends and other distributions declared on or after the date on which they are issued.

For details as to the expected date and times by which certain events (e.g. Admission, the crediting of CREST accounts and the dispatch of share certificates) are expected to happen in relation to the Placing and Subscription Shares and the Share Reorganisation, please refer to the information on page 4 (Expected Timetable of Principal Events) of the circular.

4. The CLN

The Company has an intercompany debt of £758,000 which is owed to TNH. To clear this outstanding debt, the Company has entered into an agreement under which, conditional upon the passing of the resolutions at the General Meeting and completion of the Placing and Subscription, TNH has agreed with the Company to write off £600,000 of this debt in consideration for the Company agreeing to issue a convertible loan note for £600,000 to Mr Johnson, in consideration for which Mr Johnson agrees to write off £600,000 of his outstanding loans to TNH.

The CLN is convertible into 300,000,000 New Ordinary Shares at 0.2p per ordinary share for a period of two years and, upon conversion a one for one warrant will be issued exercisable at 0.2p until the second anniversary of issue. The CLN is unsecured with nil coupon and can be converted at any time by Mr Johnson, subject to his entire holding being less than 29.99 per cent. Should Mr Johnson convert the entire CLN, his holding would increase to 28.22 per cent. of the Fully Enlarged Share Capital.

The balance of this intercompany debt, being £158,000, will be paid in cash from the Placing and Subscription Proceeds to TNH, who will pay this directly to Mr Johnson. Following these steps, Mr Johnson will still be owed approximately £1,415,000 by Trafalgar New Homes Limited.

5. Share Reorganisation

5.1. General

The nominal value of the Existing Ordinary Shares is currently 0.1p per share. As a matter of English law, the Company is unable to issue the Placing and Subscription Shares at an issue price which is below their nominal value. It is therefore proposed to sub-divide the entire existing share capital, consisting of 487,690,380 Ordinary Shares of 0.1p nominal value each, into 487,690,380 Ordinary Shares of 0.01p nominal value each and 487,690,380 Deferred Shares of 0.09p nominal value each, thus enabling the Company to lawfully implement the Placing and the Subscription at the Issue Price. The Deferred Shares would be consolidated into 48,769,038 New Deferred Shares of 0.9p and will rank pari passu with the Existing Deferred Shares.

Each New Ordinary Share resulting from the Share Reorganisation will have the same rights (including voting and dividend rights and rights on a return of capital) as each Existing Ordinary Share except that they will have a nominal value of 0.01 pence each.

The New Deferred Shares will, as their name suggests, have very limited rights which are deferred to the Ordinary Shares and will effectively carry no value as a result. Accordingly, the holders of the New Deferred Shares will not be entitled to receive notice of, attend or vote at general meetings of the Company, nor be entitled to receive any dividends or any payment on a return of capital until at least £100,000 has been paid on each Ordinary Share. No application will be made for the New Deferred Shares to be admitted to trading on AIM.

The Company will also be given power to arrange for all the New Deferred Shares to be transferred to a custodian or to be purchased for nominal consideration only without the prior sanction of the holders of the Deferred Shares. No share certificates for the New Deferred Shares will be issued.

No new certificates for the Existing Ordinary Shares will be dispatched if the Share Reorganisation becomes effective.

A request will be made to the London Stock Exchange to reflect on AIM the sub-division of the Existing Ordinary Shares into New Ordinary Shares of 0.01 pence each. Each Existing Ordinary Share standing to the credit of a CREST account will be subdivided into one New Ordinary Share of 0.01 pence each and one Deferred Share of 0.9 pence each at 6.00 p.m. on 13 July 2020.

Following the Share Reorganisation, the ISIN code for the Ordinary Shares will remain unchanged.

The Directors intend to seek a share consolidation at the next Annual General Meeting to reduce the overall number of ordinary shares in issue.

5.2. Taxation

Any person who is in any doubt as to his tax position or who is subject to tax in a jurisdiction other than the United Kingdom is strongly recommended to consult his professional tax adviser immediately.

6. Use of Proceeds

The Company is raising funds for working capital, to pay the balance of the loan outstanding with TNH and seeking other acquisition opportunities.

7. Shareholder Approval

For the Proposals to proceed, Shareholder approval is required to:

(a) effect the Share Reorganisation; and

(b) give the Directors the authority to allot the Placing and Subscription Shares and to dis-apply statutory pre-emption rights in respect thereof, and to provide headroom up to an aggregate nominal amount of £500,000 for future share issues including upon any conversion of the CLN and/or warrants.

In order to obtain the necessary Shareholder approval, a General Meeting of the Company is to be held at which the Resolutions will be proposed. Further information regarding the General Meeting is set out in paragraph 9 below.

The Directors believe the Placing and Subscription to be the most appropriate way to provide the capital necessary to meet the Company's future requirements. Should the Placing and Subscription not proceed for any reason, the Company would need to find alternative funding and face future uncertainty. The Directors urge Shareholders to vote in favour of the Resolutions set out in the Notice.

8. Related Party Transaction

Paul Treadaway, who is a Director, will subscribe for 81,250,000 Subscription Shares and be given a one for one warrant as part of his subscription. In addition, Christopher Johnson, who is a substantial shareholder, has agreed to convert £600,000 of his outstanding loan with TNH into £600,000 CLNs convertible at 0.2p and a one for one warrant exercisable at 0.2p until the second anniversary of issue. The Subscription and the issue of the CLN, which are conditional on the passing of the Resolutions and Admission, constitute related party transactions under Rule 13 of the AIM Rules for Companies. The Independent Directors, being Norman Lott and James Dubois consider, having consulted with SPARK, the Company's Nominated Adviser, that the terms of Subscription and the issue of the CLN are fair and reasonable insofar as the Company's Shareholders are concerned.

Following the issue of the Placing and Subscription Shares, Paul Treadaway's holding will increase to 187,734,658 New Ordinary Shares which represents approximately 13.13 per cent of the Enlarged Issued Share Capital.

9. General Meeting

A notice convening the General Meeting to be held at the offices of Peterhouse Capital Limited, 3rd Floor, 80 Cheapside, London EC2V 6EE at 9.00 a.m. on 13 July 2020 is set out at the end of the circular. Due to current restrictions on public gatherings, it will not be possible for shareholders to attend the General Meeting in person unless both the coronavirus (COVID-19) situation and the applicable guidance have changed by the date of the meeting. The Company will provide any status update on its website at www.trafalgarproperty.group, but Shareholders should assume that they will not be permitted entry if they turn up at the General Meeting.

10. Recommendation

The Directors consider that the Proposals will promote the success of the Company for the benefit of its members as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favour of the Resolutions at the General Meeting as they intend to do in respect of their own beneficial holdings of 110,984,658 Ordinary Shares representing approximately 22.76 per cent. of the Existing Ordinary Shares in issue as at the last practicable date before publication of the circular.

Enquiries:

GLOSSARY

The following definitions apply throughout this document unless the context otherwise requires: