Westminster Group Regulatory News (WSG)

30 Jun 2009 07:00



30th June 2009

Westminster Group Plc: 

Issue of £1.2 million Convertible Loan Notes

Notice of General Meeting

Westminster Group Plc ('Westminster', the 'Company' or the 'Group'), the AIM listed supplier of system solutions and products to the security, defence, fire protection and safety markets worldwide, today announces that it has raised £1.2m by the issue of Convertible Loan Notes. A letter from the Chairman of the Company, together with a notice convening a General Meeting at 11.00am on 23rd July 2009 at Westminster House, Blacklocks Hill, Banbury, Oxon, OX17 2BS, to approve the conversion rights of the Loan Notes and to grant authorities to facilitate further investment will be posted to shareholders tomorrow.

Reasons for the issue:

Increasing activity is leading to a need for greater resources to support large-scale major projects

In particular, increased cash resources are needed to complement existing bank facilities to meet Bid, Advance Payment and Performance Bond requirements

To exploit further the acquisition opportunities in Westminster's chosen sectors of security, defence, safety and fire

Additional balance sheet strength to meet the requirements of growing the business

Commenting on the capital raising, Peter Fowler, Chief Executive of Westminster said:

"The commitment of this investment endorses Westminster's approach and underlines the confidence that the investors have in the Company's future.

"Listing on AIM was a strategic step which has facilitated the substantial growth of the business to date."

Contacts:

About Westminster:

Westminster Group plc is a leader in the supply of system solutions and products to the security, defence, fire protection and safety markets worldwide.

Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, close protection and risk assessment services. These can range from product only assignments, such as the supply of specialised scanners, to the design and implementation of an integrated system solution such as a border detection and surveillance system. The majority of its customer base, by value, comprises governments and government agencies, non governmental organisations and blue chip commercial organisations.

Westminster is listed on the AIM of the London Stock Exchange Plc.

Background to and reasons for the fundraising:

The Board of Westminster has decided to seek an increase in the capital available for the Company. As demonstrated from the Group's results for the year ended 31 December 2008, Westminster is experiencing rapid organic growth. It is continuing to submit bids for major contracts with the intention that these will turn into substantial contracts, thereby maintaining the growth momentum of the business.

A key element of the capital requirement of the business is the need to provide customers with guarantees supported by a major bank.  These guarantees can be for bid bonds, which are required to show that a bidder is serious in their intent to bid for the contract; for advance payment bonds, which are used to secure the receipt of money from customers prior to delivery of goods; and performance bonds, which are required to ensure that the contract is completed as prescribed.

It has become more difficult to meet the increased working capital requirements of the business from bank facilities alone. The pace of organic growth has meant that the Company is now having to deposit substantial amounts of cash with its bank in order to enable it to issue guarantees to Westminster's customers.

When looking at Westminster's quote bank, it has become apparent that the proportion of its business requiring such bonds is increasing, not least because of the increasing amount of work undertaken with governments, who tend to require bonds.

The Board has therefore decided that for the benefit of all shareholders it should raise more capital in order to sustain the rapid growth of the business, even though the climate for raising additional capital is not at its most propitious.

The Board has also been mindful that it would be in the interests of all shareholders if it were able to broaden the scope of the Group's activities through prudent acquisitions.  It is conscious that a smoother flow of revenue would make the Group more attractive to potential investors, provided that such acquisitions were in accordance with the strategy of the Group and could be seen to be beneficial to all shareholders.  In order to undertake such acquisitions, whether using cash or shares in the Company, the Company needs to have sufficient cash resources to pay any costs associated with the acquisitions.  This is a further reason for increasing the capital of the Company.

The Board is mindful that that most important reason for this fund raising is to secure the organic growth of our existing business.  Only if funds are raised beyond the level necessary to sustain that growth will acquisitions be considered.

For these purposes, the Company has raised £1,200,000 by way of an issue of Convertible Loan Notes and is seeking shareholder authorities to facilitate further investment. 

The Directors are therefore convening a Meeting to be held at 11.00 a.m. on 23 July 2009 to seek Shareholders' approval of the Resolutions to allow this course of action.

Information on the Loan Notes:

As stated above the Company has issued Loan Notes with an aggregate principal amount of £1,200,000.

The right of the Loan Notes to be converted into Ordinary Shares is conditional upon the Resolutions being passed at the forthcoming Meeting. A summary of the key terms applying to the Loan Notes is as follows:

Penalty Redemption Premium

– If the Resolutions are not passed by 30 September 2009, then the coupon rises to 14% and on redemption or purchase of the Loan Notes the Company shall in addition pay a Redemption Premium equal to 150%;

Board observer status

– The lead investor will be paid a monitoring fee of £25,000 p.a. They will have the right to appoint a director if there is or is likely to be an event of default (as defined in the Instrument);

Security

–  There will be debenture secured against all the assets of the Company and its subsidiaries, which is subordinated to the Debenture held by HSBC

Directors' support and irrevocable undertakings:

The Directors consider that the Resolutions to be put before shareholders at the EGM are in the best interests of the Company and the Shareholders as a whole and are most likely to promote the success of the Company for the benefit of the Shareholders as a whole.

The Company has received in aggregate irrevocable undertakings to vote in favour of the Resolutions in respect of 11,467,696 Ordinary Shares, representing approximately 76.88 per cent. of the Ordinary Shares.

Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the Meeting as they intend to do in respect of their beneficial shareholdings, which in aggregate amount to 7,425,564 Ordinary Shares, representing approximately 49.78 per cent. of the Ordinary Shares.