Early CLN Conversion; Related Party Transactions

Inside Information

This announcement contains inside information for the purposes of the UK Market Abuse Regulations ('UK MAR'). Upon publication of this announcement, this inside information (as defined in UK MAR) is now considered to be in the public domain. The person responsible for arranging the release of this announcement on behalf of the Company is Mr Don Goulding, Executive Chairman.

4 June 2026

Distil PLC

("Distil" or the "Company")

Agreement for early Conversion of the Ardgowan Convertible Loan Note; Related Party Transactions

Distil plc (AIM: DIS), owner of premium drinks brands Blackwoods Gin and Vodka, RedLeg Spiced Rum and Blavod Black Vodka, announces it has entered into an agreement ("Early Conversion Agreement") with Ardgowan Distillery Company Limited ("Ardgowan") which provides, subject to fulfilment of certain conditions, for the early conversion ("Conversion") of the £3 million Convertible Loan Note ("CLN") held by Distil. In addition, Distil has agreed the terms of an agreement ("Supplemental Agreement") which amends the existing shareholders' agreement with Ardgowan and its other shareholders, and which becomes binding upon Distil upon Conversion.

Background

In July 2021, the Company announced a proposed investment of £3 million 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 ("escrow deposit");

(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.

As notified in June 2025, Ardgowan raised 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) ("Virgin Money") to fund completion of phase one of the Ardgowan Distillery project (opening of the distillery), and to lay down whisky stocks.  In addition, the 10% stock pledge in the original CLN Agreement (as summarised in points (v) and (vi) above) held by Distil was subordinated to Virgin Money's senior security.  As Virgin Money required its RCF to rank ahead of Distil's CLN, an inter-creditor agreement ("ICA") was entered into by Distil, Ardgowan, Virgin Money and others. To compensate Distil, the CLN Agreement was also varied to increase the coupon on the CLN from 5% to 6.5% and to increase Distil's shareholding on conversion from 9.09% to 10.5% of Ardgowan's enlarged issued share capital.

As announced on 24 March 2026, due to some production issues caused by snagging problems with new equipment and new power connections, liquid production at Ardgowan was behind schedule which resulted in a delay to Ardgowan being able to draw down on the Virgin Money facility. Most of these issues, including power, have now been resolved satisfactorily and a double shift has been implemented to catch up with forecast production forecasts over the coming months.

Over recent weeks Ardgowan's board, working together with its shareholders, convertible loan note holders and lenders, has sought to recapitalise Ardgowan's balance sheet by agreeing a range of measures with these parties.

Ardgowan has confirmed that CLN holders who held circa £11 million of convertible loan notes ("CLNs") (including accrued and rolled up interest to maturity) have agreed to convert these CLNs into Ardgowan equity. Once converted, this will have the effect of reducing Ardgowan's annual interest bill, as well as materially reducing its indebtedness.

Early Conversion Agreement

Distil has, on 3 June 2026, entered into the Early Conversion Agreement with Ardgowan whereby it has agreed, subject to satisfaction of the conditions (set out below), to exercise conversion of its £3 million CLN into 10.5% of Ardgowan's equity.

As a result, Distil will receive an immediate payment of £30,000, representing interest due under the Distil CLN for April and May 2026.

In addition, Distil will receive a subsequent payment of £395,000, comprising the £195,000 escrow deposit (to be "topped up" to this number by Ardgowan in the event of any shortfall) held under the original CLN Agreement and a further £200,000. This is payable at the point of Conversion, which has a long stop date of 30 June 2026 (unless extended by agreement).

If Conversion has not occurred by 13 June 2026 Distil will also (on Conversion) receive additional interest accrued under the CLN in the period from 1 June 2026 to the date of Conversion.

Distil will also receive a waiver of rent to take effect from Conversion, until such time as the amount of rent waived equals £170,000. This rent is in respect of the Blackwoods' visitor centre which is located at Ardgowan. Distil currently pays rent of c£46,000 per annum, which increases annually in line with RPI.

A further announcement will be made once Conversion has taken place.

The conditions precedent for Conversion are:

1.      Prior conversion of all other convertible loans and the waiver or other satisfaction of all other debt instruments issued by Ardgowan.

2.     Written consent to the Conversion and the other terms of the Early Conversion  Agreement received from Nationwide Building Society (trading as Virgin Money).

In considering whether to enter the Early Conversion Agreement the Distil Board has taken account of a wide range of factors. These include:

-  that from Conversion Distil will forego the coupon of £195k per annum for the period through to January 2032 to which it was previously entitled as a CLN holder;

- that an equity shareholding in Ardgowan is riskier than holding the CLN (notwithstanding the Distil CLN is subordinated to Virgin Money's RCF, and the actual security foregone by Conversion may not fully cover the value of Distil's CLN currently or in the future);

- that there is the possibility of further dilution to Distil's 10.5% shareholding between now and 2032 if Ardgowan were to issue more shares.

However, the Distil Board also has taken account of the following:

-     Ardgowan (post Conversion) will have a stronger balance sheet, relieved of c£14m (including accrued and rolled up interest to maturity) of CLNs and c£0.6m of annual interest cost.

-     Conversion of all CLNs will improve Ardgowan's gearing and financial position, which will be in Distil's interest as a resultant 10.5% shareholder.

-     Ardgowan should be in a stronger position to attract investment/funding given the removal of CLNs with anti-dilution provisions.

-     As set out in Distil's RNS of 24 March 2026, Distil is facing challenges which have necessitated a funding requirement for Distil. Entering the Early Conversion Agreement ameliorates this requirement by a material amount and increases Distil's cash runway.

Supplemental Agreement

A Supplemental Agreement, which amends the existing (2021) shareholders' agreement (which predates Distil subscribing for its CLN) has been agreed by Ardgowan and a number of Ardgowan's current principal shareholders, including Grain GmbH. It is expected that the Supplemental Agreement (as well as amended Articles of Association of Ardgowan) will be signed/adopted by Ardgowan and those shareholders in the near future. Upon Conversion of Distil's CLN, Distil will become a party to this amended shareholders' agreement and hold its shares in Ardgowan subject to the newly adopted Articles of Association.

This agreement is intended to, inter alia, recognise the changes that have occurred since 2021, including the conversion of the CLNs, and to remove anti-dilution rights held by founder shareholders.

The Supplemental Agreement is in agreed form, and under the Early Conversion Agreement, Distil has agreed its terms and will be bound by the Supplemental Agreement once Conversion has occurred. The Supplemental Agreement updates the original shareholders' agreement and contains normal terms for a document of this type, although provisions are contained in the document (including a waiver of pre-emption rights) which mean that there is no guarantee that Distil will participate in any future equity raise by Ardgowan, which may therefore result in dilution of Distil's shareholding in Ardgowan. The agreement reflects an amended shareholder structure - which contained different share classes - so that from signing the Supplemental Agreement and adoption of the new Articles of Association there is only one class of ordinary share in issue in Ardgowan. Certain reserved matters can only be effected with the agreement of shareholders holding not less than  55% of Ardgowan's share capital (previously 65% in the original shareholders' agreement). Grain GmbH will remain a majority shareholder of Ardgowan post Conversion, with in excess of this level of shareholding.

In addition, the Supplemental Agreement removes various anti-dilution provisions previously held by founder shareholders.

Under the Supplemental Agreement, subject to having a shareholding of at least 10% in Ardgowan, Distil retains the right to appoint a director to the Ardgowan board, and that (subject to having a 5% shareholding) it will retain observer status at Ardgowan board meetings.

Related Party Transactions

Roland Grain is the CEO and majority shareholder of Ardgowan. In addition, up until 10 December 2025 Grain GmbH (in which Roland Grain has an interest) was a Substantial Shareholder in Distil. For this reason, Roland Grain, Grain GmbH 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 (1) the Early Conversion Agreement and (2) the Supplemental Agreement with Ardgowan are fair and reasonable insofar as Shareholders are concerned.

Ardgowan Performance Update

Ardgowan Distillery faced challenges in terms of production last year which delayed the pace at which whisky stocks have been laid down. However, they have since been making strong progress, with the stills running double-shifts to make up ground. In May, works were completed to connect the distillery to permanent power, meaning the distillery is no longer reliant on a generator.

Progress has also been made in other areas, with general site improvements being made during the downtime required to switch power supply, making for an improved visitor experience in time for the key tourist season. 

In addition, April saw Ardgowan Distillery release a range of six new Single Cask Scotch Whiskies under its Clydebuilt range, strengthening its extensive product portfolio.  The company has also made good progress over the last 12 months, achieving strong turnover growth, which has provided an important revenue stream for the business.

Blackwoods Brand Home Update

Having opened to the public in February 2026, the Blackwoods Brand Home, located on the Ardgowan estate, has been welcoming guests for tours, tastings, and cocktails, and has achieved a 5* rating on Google. The team has made strong connections within the Scottish tourism industry to raise the profile of the experience. Over the coming months, the Brand Home will also launch Blackwoods' Gin School, allowing guests to distil and label their own gin.  

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