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Distil PLC

24 June 2025

Variation to the terms of the Ardgowan Convertible Loan Note Agreement

Distil plc (AIM: DIS), owner of premium drinks brands Blackwoods Gin and Vodka, RedLeg Spiced Rum and Blavod Black Vodka, announces it has varied the terms of the Convertible Loan Note Agreement (as announced on 20 July 2021) with Ardgowan Distillery Company Limited ("Ardgowan") by entering into a deed of variation ("Deed of Variation").

Background

In July 2021, the Company announced a proposed investment of £3 million (with an option for a further £2 million - which was ultimately not exercised) in Ardgowan by way of a Convertible Loan Note Agreement ("CLN Agreement").

The principal terms of the CLN Agreement were:

(i)         Term:10 years from date of investment (which ended up being made in January 2022);

(ii)        Coupon: 5% per annum;

(iii)       Conversion terms: At Distil's discretion at any time during the term of the CLN at a pre-new money valuation of £30 million. (The £3 million outstanding under the CLN equated to approximately 9.09% of Ardgowan's fully diluted issued share capital);

(iv)      Security #1:   The lower of (a) £250,000 and (b) an amount equal to the total interest payable on the CLN by Ardgowan during the then current 'year' (being each period of 12 months from the date of signature of the CLN Agreement) of the CLN term, is deposited and maintained in a GBP denominated bank account in the Company's name;

(v)      Security #2:   Ardgowan pledges 10% of its annual production of malt whisky (or other product at the discretion of Distil) to Distil during the term of the CLN;

(vi)       Security #3: Ardgowan grants to Distil a floating charge over 10% of its annual production of malt whisky (or other product at the discretion of Distil) until the above pledge takes effect; and

(vii)     Change of control:   Distil can require early repayment or conversion of the Loan if a change of control event occurs.

Update regarding Ardgowan

The initial stage of construction at the Ardgowan site is near completion, with whisky production testing also having begun, a pivotal moment in the journey of what will become a landmark for whisky enthusiasts.

The development's scale and ambitions have grown since its initial fundraising, and as previously communicated, Ardgowan has invested £28 million into the project to date, increasing its production capabilities to be able to produce 2 million litres of whisky annually in the future.

The eco-friendly distillery is designed with state-of-the-art technologies, including heat recovery, water conservation, and carbon capture initiatives to reduce its carbon footprint significantly, with a goal to eventually achieve carbon neutrality.

The distillery has also invested into bespoke sherry casks developed for ultra-long aging. Dubbed 'infinity cask', they were unveiled at Ardgowan's Open Day on 20 June 2025. 

Variation to the CLN Agreement by way of Deed of Variation

Ardgowan is in the process of raising debt finance of £5 million (with a further £5 million facility via stock lending of up to 60% of rolling stock value) through a secured revolving credit facility ("RCF") with Clydesdale Bank (t/a Virgin Money) to fund completion of phase one of the Ardgowan Distillery project (opening of the distillery), and to lay down whisky stocks.  

The Virgin Money RCF will rank ahead of Distil's Convertible Loan Note, and this has been effected by Ardgowan, Distil and Virgin Money and other parties entering into an inter-creditor agreement ("ICA") on 23 June 2025.

In addition, the 10% stock pledge in the original CLN Agreement (as summarised in points (v) and (vi) above) held by Distil will be subordinated to Virgin Money's senior security.  

Under the Terms of the CLN Agreement, Ardgowan requires Distil's signed agreement to the ICA and consent to the Virgin Money RCF.

To compensate Distil for the subordination of the CLN, the following changes have been made to the CLN Agreement:

(i)         Coupon: the fixed rate coupon on the CLN (currently 5%) increases by 1.5% to 6.5% for the duration of the CLN (ending January 2032). This increases the interest receivable by Distil by £45,000 per annum (to £195,000 per annum) for around 6 years and 7 months amounting to a cumulative additional c. £0.3 million over the duration (assuming conversion does not take place prior to January 2032);

(ii)         Conversion terms: the percentage equity share in Ardgowan on conversion increases by c. 1.4% from 9.09% to 10.5%, representing a 15.5% equity conversion premium. This equates to additional equity value for Distil of £465,000 at the pre-new money valuation of £30 million; and

(iii)        Assignment: The terms of the CLN will be amended to enable Distil to assign/sell part or all of the CLN to a third party at its sole discretion, subject to certain protections (e.g. removal of existing consent rights) being included in favour of Ardgowan.

Related Party Transaction

Roland Grain has held the position of director of the Company within the past 12 months and is also a Substantial Shareholder. He is also CEO and majority shareholder of Ardgowan. For these reasons both he and Ardgowan are treated as related parties of the Company and the above arrangements with Ardgowan constitute related party transactions for the purposes of Rule 13 of the AIM Rules for Companies.

Having consulted with SPARK Advisory Partners, the Company's nominated adviser, the Directors consider that the terms of the arrangements with Ardgowan are fair and reasonable insofar as Shareholders are concerned.

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