Subscription of up to £15m

Ascent Resources plc

("Ascent" or "the Company")

Subscription for up to 1,875,000,000 Ordinary Shares at 0.8 pence per share

Redemption and Conversion of 2013 Convertible Loan Notes

Conversion of 2014 Convertible Loan Notes

Approval of the Waiver by the Takeover Panel

and

Notice of General Meeting

The Board of Ascent is pleased to announce that it has agreed terms for up to £15 million equity funding by way of a subscription for new Ordinary Shares at a price of 0.8 pence per Ordinary Share by Global Power Sources s.r.l. ("GPS"), the purchaser of Ascent's former Italian Subsidiary, Ascent Resources Italia S.r.l. ("Ascent Italia"), representing a premium of 33.3 per cent. to the closing mid market price of 0.6 pence per Ordinary Share on 15 May 2014 ("the Subscription"). The Subscription will take place in two tranches. The first tranche will result in the payment of £11.7 million to the Company (the "Initial Subscription") and the second tranche will result in the payment of a further £3.3 million to the Company (the "Further Subscription"). The proceeds of the Subscription will be used to help restructure the Company's balance sheet and speed up development of the Petisovci project.

A condition of the Subscription is that up to £7.4 million of the proceeds of the Initial Subscription shall be used to fund an offer by the Company to holders of the 2013 Convertible Loan Notes to repurchase and cancel up to 50 per cent. of the outstanding principal amount of the 2013 Convertible Loan Notes (inclusive of accrued interest thereon) at a price of 300 pence per £1.00 principal of 2013 Convertible Loan Notes. A condition of this offer is that holders of 2013 Convertible Loan Notes must also convert the remaining 50 per cent. of the outstanding principal amount of the 2013 Convertible Loan Notes plus accrued interest thereon held by them into new Ordinary Shares at the conversion price of 0.5 pence per Ordinary Share.

A further condition of the Subscription is that Henderson irrevocably undertakes to convert the 2014 Convertible Loan Notes issued to them in February 2014 into new Ordinary Shares at a price of 0.8 p per Ordinary Share. No interest accrued on the 2014 Convertible Loan Notes will be paid by the Company.

 

Rule 9 Whitewash

Following the Initial Subscription and the issue of the new Ordinary Shares relating to the conversion of the 2013 Convertible Loan Notes and the 2014 Convertible Loan Notes, GPS and Ascent Italia (together, the "Concert Party") would hold approximately 47.9 per cent. of the total voting rights of the Company at that time. Assuming completion of the Further Subscription, this will increase to a maximum of approximately 53.1 per cent. of the total voting rights of the Company at that time. Without a waiver of the obligations under Rule 9 of the Takeover Code, this would oblige the Concert Party to make a general offer to Shareholders under Rule 9 of the Takeover Code. The Takeover Panel has agreed, however, to waive this obligation subject to Independent Shareholder consent.

 

Circular

A circular will be posted to shareholders shortly, the purpose of which is, amongst other things, to provide Shareholders with details of the Subscription and Associated Proposals, to explain the background to the Company's current position, and to explain why the Board considers that the Subscription, Associated Proposals and the Waiver are fair and reasonable and in the best interests of Independent Shareholders generally and the Company as a whole. Extracts from the circular can be found below and a full copy can be found on the Company's website www.ascentresources.com.uk.

 

 

Expected Timetable

Announcement of Subscription and Associated Proposals	16 May 2014
Dispatch of the Circular	19 May 2014
Latest time and date for receipt of Forms of Proxy for the General Meeting	10.30 a.m. on 3 June 2014
General Meeting	10.30 a.m. on 5 June 2014
Latest time and date for acceptance of 2013 Conversion Proposal	3.00 p.m. on 4 June 2014
Expected date of admission to trading on AIM and commencement of dealings in Warranty Shares	8.00 a.m. on 6 June 2014
Expected date of admission to trading on AIM and commencement of dealings in Initial Subscription Shares, 2013 Conversion Shares and 2014 Conversion Shares	8.00 a.m. on 6 June 2014
CREST accounts to be credited with Initial Subscription Shares, 2013 Conversion Shares and 2014 Conversion Shares	6 June 2014
Share certificates dispatched by	20 June 2014

 

Save for the date of despatch of the Circular, each of the times and dates above are subject to change. Any such change will be notified to Shareholders by an announcement on a Regulatory Information Service.

 

Other

Unless otherwise defined, all capitalised terms in this announcement shall have the meaning given to them in the Circular.

Enquiries:

Ascent Resources plc.

Clive Carver / Len Reece

Tel: +44 (0)20 7251 4905

finnCap (Nominated Adviser and Broker)

Charlotte Stranner / Matthew Robinson 

Tel: +44 (0) 20 7220 0500

 

The following has been extracted from the Circular which will be sent to Shareholders today.

 

LETTER FROM THE CHAIRMAN OF THE COMPANY

 

1.          Introduction

 

For some time your Board has been working to secure additional funding to accelerate the development of the Petišovci project. We have also been seeking to address the Company's reliance on short-term debt to fund its operations.

 

I am therefore pleased to report that Ascent has, conditional upon, inter alia, Independent Shareholder approval, agreed terms for up to £7.6 million in new equity funding for the Petišovci project and a further £7.4 million to help restructure the Company's balance sheet. The equity funding has been agreed at 0.8 pence per Ordinary Share, a premium of some 33.3 per cent. to the closing mid-market price of 0.6 pence per Ordinary Share on 15 May 2014.

 

The purpose of this Circular is to set out the background to the Subscription and to convene a shareholder meeting to consider, and if thought fit, approve the Subscription, the Waiver and Associated Proposals.

 

These proposals have been agreed since the notice of Annual General Meeting, originally convened for 30 May 2014, but now postponed to 5 June 2014, was despatched and the proposals for the issues of Ordinary Shares set out in this Circular will, if approved by Shareholders, replace those proposed to be authorised at the Annual General Meeting (other than as regards the Warranty Shares).

 

2.             Development of the Petišovci project

 

The Company's objective is to bring Phase I of the Petišovci project into production with the minimum of expense and delay. This involves bringing its two existing wells Pg-10 and Pg-11A into production and deepening several other existing wells, requiring a new central processing plant to be built and a connection to the national gas grid. This phase of the project would, subject to the negotiation of acceptable terms, also include supplying gas to the adjacent methanol plant when that becomes operational.

Together with the production anticipated under Phase II, it is expected that the Petišovci fields could supply Slovenia's gas requirements for up to 10 years.

In theory much of the expenditure required for Phase I could be funded by project finance. However, in practice, the banks approached by the Board for potential funding required the permitting to be completed before they would advance funding for construction.

In the past 12 months, Slovenia has adopted in full two new EU Directives. Compliance with these and other EU Directives that govern permitting, together with the need to comply with EU public procurement rules mean that it could be another 12 months before the permitting phase for the sale of treated gas to the Slovenian national grid is completed and conventional project finance is obtainable.

The long lead time of items required for the construction phase, the imposition of EU rules on public procurement for equipment and contractors waiting until after the permitting is completed before placing orders for equipment and services may, in the absence of taking any other action, result in revenues from the sale of treated gas being delayed until the end of 2015.

Income from the sale of the Company's untreated gas to the owners of the adjacent methanol plant, which is hoped to commence in Q3 2014, cannot at this stage be guaranteed. While such income would provide an ongoing and important income stream, in the Board's opinion it would not on its own in the short term provide sufficient funding to allow the development of the Petišovci project to progress at a pace likely to optimize the returns for Ascent shareholders or to meet our partners' expectations. Establishing the ability to sell the Company's treated gas to the Slovenian national grid remains our priority.

Therefore Ascent has entered into a conditional agreement, subject to the Subscription Conditions, to raise up to £7.6 million for the development of the Petišovci project by way of the Subscription. The Board believes this will materially speed up the development of Phase I of the Petišovci project and advance the start of Phase II.

Balance sheet restructuring

Approximately 90 per cent. of the funding raised by the Company in the last two years has been achieved by the issue of the 2013 CLNs and the 2014 CLNs. Whilst useful in allowing the Petišovci project to move forward, unless converted, both the 2013 CLNs and the 2014 CLNs represent a potential material drain on the Company's finances. In particular, the 2013 CLNs in issue are due for repayment in January 2015, amounting to a liability of approximately £5 million.

The existence of such debt levels may also restrict the availability of project debt finance once the permitting phase has been completed.

The Board has therefore conditionally agreed, subject to satisfaction of the Subscription Conditions, to a further £7.4 million being injected into the Company by way of the Subscription in order to restructure Ascent's balance sheet and significantly reduce the Company's debt levels.

3.             Terms of the Subscription Agreement

 

Ascent has entered into the Subscription Agreement with GPS, further details of whom are set out in paragraph 5 below, under which, conditional upon satisfaction of the Subscription Conditions, GPS will subscribe up to £15 million for up to 1,875,000,000 new Ordinary Shares at a price of 0.8 pence per Ordinary Share, representing a 33.3 per cent. premium to the closing mid-market price of 0.6 pence per Ordinary Share on 15 May 2014.

Under the Subscription Agreement and subject to the Subscription Conditions, the Subscription will take place in two tranches. The first tranche will result in the payment of £11.7 million to the Company and the issue of the Initial Subscription Shares and will take place immediately following the satisfaction of the Subscription Conditions. The second tranche, comprising the Further Subscription, will result in the payment of a further £3.3 million to the Company, and may occur at any time thereafter at the instigation of GPS subject to the admission of the Further Subscription Shares to trading on AIM becoming effective in accordance with the AIM Rules, provided that the Company shall be entitled to require GPS to make the Further Subscription on 30 days prior written notice once either of the following milestones in the development of the Petišovci project has been satisfied:

A.    (i) the methanol plant located adjacent to the Slovenian Joint Venture's gas wells Pg-10 and Pg-11A having been brought back into production; and (ii) not later than 31 October 2014 the company operating/owning/controlling such methanol plant having entered into a minimum 3 years contract with Ascent Slovenia Limited as Manager of the Slovenian Joint Venture to buy at least 100million/m3 of untreated gas per year at a price determined as at least 85% of the prices quoted in euro per megawatt hour for firm, physical delivery of gas at the notional trading point, the Central European Gas Hub (CEGH)'s Virtual Trading Point (which includes Baumgarten, Austria); and (iii) the Slovenian Joint Venture having commenced production of gas from its gas wells Pg-10 and Pg-11A at at least the rate of 100,000 m3 per day; OR

B.    (i) the Slovenian Joint Venture having obtained not later than 31 December 2014 all necessary governmental, environmental and any other permits/approvals/consents from the  local authorities necessary to construct on its current/new site and bring into operation a gas treatment plant (new CPP and scrubbing unit) which is capable of treating gas at at least the rate of 1 million m3 per day; (ii) the total cost budgeted cost for that plant not exceeding €7 million; and (iii) the Company having secured sufficient funding (loan or equity funding) in order to assist in the financing of the construction of that plant.

Further details of the Subscription Agreement are set out in paragraph 8.12 of Part IV of this document.

Completion of the Initial Subscription by GPS will also satisfy and discharge all of GPS' outstanding obligations to subscribe for Ordinary Shares under the Subscription and Warranty Resolution Agreement. Further details of the Subscription and Warranty Resolution Agreement are set out in paragraph 8.5 of Part IV of the Circular sent to shareholders.

4.             Associated Proposals

 

2013 CLN Proposal

 

A condition of the Subscription Agreement is that up to £7.4 million of the proceeds of the Initial Subscription shall be used to fund an offer by the Company to holders of 2013 CLNs to repurchase and cancel up to 50 per cent. of the outstanding principal amount of the 2013 CLNs (inclusive of accrued interest thereon) at a price of 300 pence per £1.00 principal of 2013 CLNs.

A condition of this offer is that holders of 2013 CLNs must also convert the remaining 50 per cent. of the outstanding principal amount of the 2013 CLNs plus accrued interest thereon held by them into new Ordinary Shares at the conversion price of 0.5 pence per Ordinary Share.

Henderson, Len Reece and Clive Carver have all irrevocably undertaken to accept the 2013 CLN Proposal, representing 96.4 per cent. in principal amount of the total 2013 CLNs in issue.

Details of the terms and conditions of the 2013 CLN Proposal can be found in Appendix I to this document.

2014 Conversion

 

A further condition of the Subscription Agreement is that Henderson irrevocably undertakes to convert the 2014 CLNs into new Ordinary Shares at a price of 0.8 p per Ordinary Share. No interest accrued on the 2014 CLNs will be paid by the Company. Henderson has therefore, in return for certain undertakings from the Company and GPS, irrevocably undertaken to each of the Company and GPS, inter alia:

 

a)     immediately following the Initial Subscription, to enter into the 2014 Conversion; and

 

b)     immediately following the Initial Subscription, to tender 50 per cent. of the 2013 CLNs owned by Henderson for repurchase by the Company and to convert the remaining 50 per cent. of the 2013 CLNs owned by Henderson, in each case in accordance with the 2013 CLN Proposal.

 

Further details of the Henderson Irrevocable Undertaking can be found in paragraph 8.13 of Part IV.

 

5.             GPS

 

GPS was incorporated on 23 June 2013 as a financial holding company duly organised and existing under the laws of Italy. GPS was incorporated originally to acquire Ascent Italia from Ascent pursuant to the Ascent Italia SPA. Ascent Italia is now a subsidiary of GPS. GPS's strategy is to create a balanced portfolio of energy assets ranging from oil and gas to renewable energy. Since its incorporation, acquisitions made by GPS have ranged from hydroelectric plants, wind farms and biomass plants.

 

GPS and Ascent Italia together currently hold 300,126,793 Ordinary Shares in aggregate, representing 20.7 per cent. of the Existing Share Capital. A further 7,000,000 Ordinary Shares are, following the Company's Annual General Meeting to be held at 11.00 a.m. on 5 June 2014, due to be issued to GPS under the terms of the Subscription and Warranty Resolution Agreement, further details of which are set out in paragraph 8.5 of Part IV of this document.

Together GPS and Ascent Italia form a concert party for the purposes of the Takeover Code. The interests of the Concert Party in the share capital of Ascent following the Subscription and Associated Proposals, and associated implications for existing Shareholders are set out in paragraph 7 below.

Further information on the Concert Party is set out in paragraph 1 of Part III.

On 14 February 2014, GPS entered into a joint venture agreement with WRS, a newly incorporated asset management company, and subsequently entered into a replacement agreement on 14 February 2014  (together, the "Joint Venture Agreement"), under which WRS undertook to provide, directly or indirectly, GPS with up to EURO 90 million in order to provide GPS with the necessary financial resources to acquire ordinary shares in Ascent and to finance the first phase of development of the Petisovci project. In exchange for providing the funding, GPS is to provide a return to WRS based on the outcome of its investment in and loans to the Company. The provision of such funding by WRS to GPS is not a loan, there is no time limit on the funding arrangement and nor is there any right for WRS to call for repayment of the funding or the disposal of any interest held by GPS in, or loan to, the Company.

WRS will not have an interest in, or security over, the Ordinary Shares held by GPS or any loans advanced by GPS to the Company, and it will have no rights to direct or control any action or decision on the part of GPS (with regard to the Company or otherwise).

Neither WRS nor its ultimate owners nor any persons having control of WRS holds (and GPS understand that no such person intends to acquire any interest in) any shares of either GPS or the Company.

 

6.             Current Trading and Prospects

 

The Company released its audited accounts for the year ended 31 December 2013 on 10 April 2014. In those accounts we stated that the Company has two principal opportunities for generating value. The first is to bring the Petišovci field into production and tie into the Slovenian national grid. The second is to sell untreated gas produced at the Petišovci field to the adjacent methanol plant.

Provided either of these two outcomes occur with the minimum of delay, the prospects for the Company to achieve significant revenues in the foreseeable future look encouraging.

7.          Rule 9 Whitewash

 

The Takeover Code governs, inter alia, transactions which may result in a change of control of a public company to which the Takeover Code applies. Under Rule 9 of the Takeover Code, any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested or in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining shareholders of the relevant public company to acquire their shares.

 

Similarly, Rule 9 of the Takeover Code also provides that when any person, together with persons acting in concert with him, is interested in shares which, in aggregate, carry more than 30 per cent. of the voting rights of such company, but does not hold shares carrying 50 per cent. or more of such voting rights, a general offer will normally be required if any further interest in shares is acquired by any such person.

 

Rule 9 of the Takeover Code further provides, among other things, that where any person who, together with persons acting in concert with him, holds over 50 per cent. of the voting rights of a company, and acquires further shares carrying voting rights, then he will not generally be required to make a general offer to the other shareholders to acquire the balance of their shares.

 

An offer under Rule 9 must be in cash and must be at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company in question during the 12 months prior to the announcement of the offer.

 

Potential interests in Ordinary Shares of the Concert Party following the Subscription and Associated Proposals

 

Following theInitial Subscription and the issue of the Warranty Shares, the 2013 Conversion Shares and the 2014 Conversion Shares (assuming only Henderson, Clive Carver and Len Reece accept the 2013 CLN Proposal), and assuming no disposals of Ordinary Shares by the Concert Party and no further issues of Ordinary Shares by the Company in the meantime, the interests in Ordinary Shares of the Concert Party and the percentage of the voting rights in the Company attributable to such interests, assuming no other party subscribes for Ordinary Shares under Options or warrants, will be 1,769,626,793 Ordinary Shares, representing approximately 47.9 per cent. of the total voting rights of the Company at that time. Assuming completion of the Further Subscription, this will increase to a maximum of 2,182,126,793 Ordinary Shares, representing approximately 53.1 per cent. of the total voting rights of the Company at that time. This, without a waiver of the obligations under Rule 9 of the Takeover Code, would oblige the Concert Party to make a general offer to Shareholders under Rule 9 of the Takeover Code. The Takeover Panel has agreed, however, to waive the obligation on the Concert Party to make a general offer that would otherwise arise as a result of the Subscription and the Further Subscription taking the Concert Party's holding to more than 30 per cent. of Ordinary Shares subject to approval on a poll by the Independent Shareholders of the Whitewash Resolution as set out in the Notice.

 

The Waiver described in the Whitewash Resolution, which is conditional upon the passing of Resolution 1, applies only in respect of increases in the percentage interest of the Concert Party over the Concert Party's current interest in Ordinary Shares together with the Warranty Shares (together 307,126,793 Ordinary Shares) resulting from the Initial Subscription and the Further Subscription and not in respect of other increases in the Concert Party's interests in Ordinary Shares. The Concert Party, Henderson and holders of 2013 Convertible Loan Notes are not allowed to vote on the Whitewash Resolution.

 

Unless the Whitewash has been approved by Independent Shareholders or unless the Concert Party makes a successful takeover offer as required by the Takeover Code, the Concert Party will not be able to subscribe for new Ordinary Shares to the extent that as a result of such subscription, the Concert Party would hold 30 per cent. or more of the total voting rights of the Company.

 

Shareholders should be aware that if the Resolutions are passed and the Concert Party subscribes for the maximum number of new Ordinary Shares under the Subscription Agreement, the members of the Concert Party will have a direct interest in more than 50 per cent. of the voting rights of the Company, and will be able to increase their aggregate interest in the Company without incurring any obligation under Rule 9 of the Takeover Code to make a general offer to all Shareholders to acquire their shares in the Company, although individual members of the Concert Party will not be able to increase their percentage interest in shares through or between a Rule 9 threshold without the consent of the Takeover Panel.

 

The intentions of the Concert Party

 

The members of the Concert Party have confirmed to the Company that they intend to work with the Board for the benefit of all Shareholders. In particular GPS has confirmed that it will take a leading role in assisting the Company in funding Phases I and II of the Petišovci project and will seek to grow the Company both organically and by acquisition within the broader European energy sector.

As detailed below, the Concert Party will have the right to appoint two directors to the Board in the case of a board comprising five directors, and three directors in the case of a board comprising seven directors. The Concert Party has confirmed to Ascent that it wishes to maintain Ascent's AIM listing.

In addition, the Directors' intentions regarding the continuance of the Company's business and its intentions regarding the continued employment of its employees and those of its subsidiaries will not be altered following the Subscription and Associated Proposals.

 

8.          Relationship Agreement

In the event that the Concert Party comes to hold 50 per cent. or more of the total issued shares of the Company it will be free to acquire further shares in the Company without incurring any obligation under Rule 9 of the Takeover Code, although individual members of the Concert Party will not be able to increase their percentage interest in shares through or between a Rule 9 threshold without the consent of the Takeover Panel.

 

Accordingly GPS, Ascent Italia, Henderson and the Company have entered into a relationship agreement, effective conditional upon completion of the Initial Subscription, which will govern the relationship between the parties.

The principal purpose of the Relationship Agreement is to ensure that all transactions and relationships between the Company, GPS and Ascent Italia are at arm's length and on a normal commercial basis.

The Relationship Agreement will terminate upon GPS and Ascent Italia, together with their respective associates, ceasing between them to be entitled to exercise, or control the exercise of, in aggregate, 20 per cent. or more of the voting rights in the Company.

Further details of the Relationship Agreement can be found in paragraph 8.15 of Part IV.

9.             Changes to the Board

 

Under the terms of the Relationship Agreement, GPS will have the right (inter alia) to nominate one executive director and one non-executive director to the Board in the case of a board comprising five directors. In the case of a board comprising seven directors, GPS will have the right to nominate a third director as an executive or non-executive director at its discretion. In addition, the Relationship Agreement provides that the Board shall at all times include at least 2 independent directors. Further details of the Relationship Agreement are set out in paragraph 8.15 of Part IV.

Henderson, under the terms of its subscription for the 2013 CLNs, currently has the right to nominate a director to the board of Ascent. Henderson and Ascent have agreed, under the terms of the Henderson Letter, that Henderson will retain this right, providing that it is entitled to exercise, or control the exercise of, in aggregate 15 per cent. or more of the voting rights in the Company (but excluding, for the avoidance of doubt, any voting rights attaching to Ordinary Shares in which Henderson is interested, or of which Henderson is able to direct the voting, which are not managed by the investment management teams operating under the Volantis Capital name).

10.        Management Incentives

Under the terms of the management incentive arrangements put in place in March 2013, the Subscription constitutes a change of control. Accordingly 112,168,861 Options granted to directors and employees of Ascent with an exercise price of 1 penny per share will vest on completion of the Subscription and Associated Proposals. Clive Carver and Len Reece have agreed with the Company that, upon completion of the Subscription and Associated Proposals, notwithstanding the vesting of their Options, they will not exercise any Options until the date that the Options would otherwise have vested under the rules of the Incentive Scheme. None of the holders of the Options referred to above hold Ordinary Shares.

Additionally, the 81,144 2013 CLNs held by Clive Carver and Len Reece will be free from restrictions to sell and as such, will be eligible for the 2013 CLN Proposal which each of them has irrevocably undertaken to accept.

11.        Related Party Transaction

 

The acceptance of the 2013 CLN Proposal by Clive Carver and Len Reece, as directors of the Company, and the acceptance of the 2014 CLN Conversion and the 2013 CLN Proposal by Henderson, as a substantial shareholder of the Company, constitute related party transactions for the purposes of AIM Rule 13.

 

Furthermore, GPS is a substantial shareholder in Ascent. Therefore the Subscription also constitutes a related party transaction for the purposes of AIM Rule 13.

 

The Independent Directors, having consulted with the Company's nominated adviser, finnCap Limited, consider that the terms of the 2013 CLN Proposal, the 2014 CLN Conversion and the Subscription are fair and reasonable insofar as the Company's shareholders are concerned.

 

12.        Irrevocable undertakings

 

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Shareholders who in aggregate have a beneficial interest in respect of 119,632,444 Ordinary Shares representing approximately 8.24 per cent. of the Existing Issued Share Capital of the Company. This includes irrevocable undertakings to vote in favour of the Resolutions received from the Independent Directors, who between them hold in aggregate 269,500 Ordinary Shares representing approximately 0.02 per cent. of the Existing Issued Share Capital.

In addition, as stated above, the Company has received the Henderson Irrevocable Undertaking under which Henderson has agreed to accept the 2013 CLN Proposal and the 2014 CLN Conversion. Henderson currently hold 4,693,917 2013 CLNs and all of the issued 2014 CLNs (being £2 million in nominal value). Len Reece and Clive Carver have also irrevocably undertaken to accept the 2013 CLN Proposal in relation to the 2013 CLNs held by them, being 17,500 and 63,644 respectively.

 

13.        Further information

 

Your attention is drawn to the additional information set out in Part IV of this document.

 

14.        Settlement and dealings

Application will be made to the London Stock Exchange for the Initial Subscription Shares, the 2013 Conversion Shares and the 2014 Conversion Shares to be admitted to trading on AIM. It is expected that such Admission will become effective in accordance with Rule 6 of the AIM Rules and that dealings will commence at 8.00 a.m. on 6 June 2014.

 

15.        General Meeting

 

Set out at the end of this document is a notice convening a General Meeting of the Company to be held at 10.30 a.m. on 5 June 2014 at the offices of finnCap, 60 New Broad Street, London, EC2M 1JJ, at which the Resolutions will be proposed:

 

The Company is proposing that Shareholders pass the Resolutions in order to:

 

(a)          approve the waiver granted by the Takeover Panel of the Concert Party's obligation to make a general offer to Shareholders for the entire issued and to be issued share capital of the Company pursuant to Rule 9 of the Takeover Code as a result of the allotment and issue of, equity securities to the Concert Party pursuant to the terms of the Subscription (this resolution requires voting on a poll by Independent Shareholders only);

 

(b)          grant authorityto the Directors under section551 of the Act, to allot relevant securities:

(i)     in order to complete the Subscription and the Associated Proposals; and

 

(ii)    in addition to (i) above, up to a maximum aggregate nominal value of £1,060,102.77

 

(c)          empower the Directors, pursuant to section570 of the Act, to dis-apply the statutory pre-emption rights in relation to the allotment of equity securities:

 

(i)     as required in order to complete the Subscription and Associated Proposals;

 

(ii)    arising from the exercise of any outstanding Options; and

 

(iii)   other than pursuant to (i) and (ii) above, up to an aggregate nominal value of £1,060,102.77.

 

The above authorities and powers will be in addition to those granted at the Annual General Meeting, and will enable the Directors to complete the Subscription and Associated Proposals and will expire at the conclusion of the annual general meeting of the Company to be held in 2015.

 

The reasons for the Whitewash Resolution are set out at paragraph 2 of this Part I. The Company does not have sufficient authority to issue the Initial Subscription Shares, Further Subscription Shares, 2013 Conversion Shares and 2014 Conversion Shares, assuming that the Whitewash Resolution is passed, and so Resolutions 2 and 3 are therefore proposed to increase the authority of the Board to make such issues. The Resolutions also increase the general authority of the Board to allot shares free of pre-emption rights in order to allow the Company to raise additional funds through the issue of Ordinary Shares during the period up to the date of the Company's annual general meeting in 2015.

 

If the Resolutions are passed by the requisite majorities at the General Meeting, the Directors have confirmed that resolutions 6, 7 and 8 set out in the notice of the Annual General Meeting, originally convened for 30 May 2014, but now postponed to 5 June 2014, will not be proposed at the Annual General Meeting (or any adjournment of that meeting).

 

16.        Action to be taken in respect of the General Meeting

 

Please check that you have received the following with this document:

 

•     aForm of Proxy for use in respect of the GeneralMeeting; and

 

•     areply-paid envelope for use in connection with the return of the Form of Proxy (in the UK only).

 

Whether or not you propose to attend the General Meeting in person, you are strongly encouraged to complete, sign and return your Form of Proxy in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received, by post at Computershare Investor Services Plc, Corporate Actions Project, Bridgwater Road, Bristol, BS99 6AH or, during normal business hours only, by hand, at Computershare Investor Services Plc, The Pavilions, Bridgwater Road, Bristol, BS13 8AE by no later than 10.30 a.m. on 3 June 2014 (or, in the case of an adjournmentof the General Meeting, not later than 48 hoursbefore the time fixed for the holding of the adjourned meeting).

 

Alternatively, you can submit your proxies electronically by following the instructions on the website. Electronic proxy appointments must be received by 10.30 a.m. on 3 June 2014 (or, in the case of an adjournment of the General Meeting, not later than 48 hours before the time fixed for the holdingof the adjourned meeting).

 

If you hold your shares in the Company in uncertificatedform (that is, in CREST) you may vote using theCREST Proxy Voting service in accordance with the procedures set out in the CREST Manual (please also refer to the accompanying notes to the Notice of the General Meeting set out at the end of this document). Proxies submittedvia CREST must be received by the Company's agent (ID3RA50) by no later than 10.30 a.m. on 3 June 2014 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting).

 

This will enable your vote to be counted at the GeneralMeeting in the event of your absence.The completion and return of the Form of Proxy or the use of the CREST Proxy Voting service will not prevent you from attending and voting at the General Meeting, or any adjournment thereof.

 

17.        Independence

 

With the exception of Clive Carver and Len Reece, who as holders of 2013 Convertible Loan Notes are not deemed to be independent, all of the Directors of the Company are deemed to be independent for the purposes of making a recommendation on the terms of the Subscription and Associated Proposals. Furthermore, GPS and Ascent Italia, as members of the Concert Party which are subject to the Whitewash will not be allowed to vote on the Whitewash Resolution at the General Meeting. In addition, Henderson and the holders of 2013 Convertible Loan Notes, as beneficiaries of the Subscription and the Associated Proposals, will also not be allowed to vote on the Whitewash Resolution at the General Meeting.

18.        Recommendation

 

In Petišovci Ascent has an excellent project that should generate significant Shareholder value over the medium term. To maximise the value of this project, the Company requires, in the opinion of the Independent Directors, both additional funding now for Phase I and the restructuring of the Company's balance sheet.

In Phase II of the Petišovci project, after a period of test gas production to monitor reservoir performance, it is intended that the partners will proceed to the full development of the Petišovci field. This will include: the further upgrading and expansion of the processing facility; an enlarged gas export capacity; and modifications to the national grid connection. This will require much greater investment, and it is currently expected that the majority of this funding will be provided through debt rather than equity.

The Independent Directors firmly believe that Shareholders would be best served by bringing in a new lead Shareholder, which has the ability to procure funding for Phases I and II and to provide funding now to simplify the Company's capital structure and balance sheet issues.

Should Shareholders not approve the Subscription, the Associated Proposals and the Waiver, the Directors believe that the Company is unlikely to realise the significant potential of the Petišovci project and may need to refinance the 2013 CLNs and other debt commitments from a position of relative weakness.

The Independent Directors, having been so advised by finnCap, believe the Subscription, the Associated Proposals and the Waiver are fair and reasonable and in the best interests of Independent Shareholders generally and the Company as a whole. In providing advice to the Independent Directors, finnCap has taken into account the Independent Directors' commercial assessments. Accordingly, the Independent Directors recommend that Shareholders vote in favour of the Resolutions to approve the Subscription and Associated Proposals and that Independent Shareholders vote in favour of the Waiver.

 

The Independent Directors intend to vote in favour of the Resolutions in respect of their aggregate shareholdings of 269,500 Ordinary Shares representing approximately 0.02 per cent. of the Company's Existing Issued Share Capital.

 

Yours faithfully,

 

 

Clive Carver

Chairman

 

 

DEFINITIONS

 

The following definitions apply throughout this document unless the context otherwiserequires:

 

"2013 CLNs" or "2013 Convertible Loan Notes"	the 9% convertible loan notes of £1 each, convertible into 200 Ordinary Shares and repayable on 31 January 2015, of which 4,951,907 have been issued and which include the Incentive Loan Notes
"2013 CLN Proposal"	the offer by the Company to all holders of 2013 CLNs to acquire 50 per cent. of the principal amount outstanding of the 2013 CLNs held by them (inclusive of all accrued interest thereon) at a price of £3.00 per £1.00 in nominal value of 2013 CLNs held and the conversion of the remaining 50 per cent. of the outstanding principal amount of the 2013 CLNs (together with accrued interest) held by them into 200 new Ordinary Shares per £1.00 principal of 2013 CLNs (or accrued interest thereon)
"2013 Conversion Shares"	up to 544,734,432 new Ordinary Shares arising from the conversion of 2013 CLNs pursuant to the 2013 CLN Proposal
"2013 Convertible Loan Note Instrument"	the convertible loan note instrument dated 23 December 2012 pursuant to which the 2013 Convertible Loan Notes are constituted, the principal terms of which are summarised in paragraph 8.9 of Part IV of this document
"2014 CLNs" or "2014 Convertible Loan Notes"	the 9% convertible loan notes of £1 each, convertible into 100 Ordinary Shares and repayable on 31 January 2015, of which £2m have been issued
"2014 CLN Conversion"	the conversion by Henderson of the 2014 CLNs into 125 new Ordinary Shares per £1.00 principal of 2014 CLNs (which amount shall discharge the Company in respect of any accrued interest thereon)
"2014 Conversion Shares"	the 249,999,875 new Ordinary Shares arising from the 2014 CLN Conversion
"2014 Convertible Loan Note Instrument"	the convertible loan note instrument dated 4 February 2014 pursuant to which the 2014 Convertible Loan Notes are constituted, the principal terms of which are summarised in paragraph 8.6 of Part IV of this document
"Act"	the Companies Act 2006, as amended from time to time
''Admission''	admission of the Initial Subscription Shares, the 2014 Conversion Shares and the 2013 Conversion Shares to trading on AIM becoming effective in accordance with the AIM Rules
''AIM''	the market of that name operated by the London Stock Exchange
''AIM Rules''	the AIM rules for Companies published by the London Stock Exchange from time to time
"Annual General Meeting"	the 2014 annual general meeting of the Company
"Articles"	the articles of association of the Company (as amended from time to time)
"Ascent Italia"	Ascent Resources Italia S.r.l.
"Ascent Italia SPA"	the sale and purchase agreement dated 19 July 2013 between the Company and GPS in relation to acquisition by GPS of the entire issued share capital of Ascent Italia, the principal terms of which are summarised in paragraph 8.2 of Part IV of this document
''Associated Proposals''	the 2013 CLN Proposal and the 2014 CLN Conversion
''Computershare''	Computershare Investor Services PLC
''certificated form'' or ''in certificated form''	an ordinary share recorded on a company's share register as being held in certificated form (namely, not in CREST)
"Circular"	this document containing information about the Subscription, Associated Proposals and General Meeting
''Closing Price''	the closing middle market quotation of a share as derived from the AIM Appendix to the Daily Official List of the London Stock Exchange
''Company'' or ''Ascent''	Ascent Resources plc
"Concert Party"	together, GPS and Ascent Italia
"CPP"	central processing plant
''CREST''	the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which Euroclear is the operator (as defined in those regulations)
" CREST Manual"	the rules governing the operation of CREST, consisting of the CREST Reference Manual, Crest International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline rules, CREST Courier and Sorting Services Manual, Daily Timetable, CREST Application Procedures and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996, as amended) as published by Euroclear
"Darwin"	Darwin Strategic Limited
"Darwin SEDA"	the standby equity distribution agreement made between Darwin and the Company, details of which are set out in paragraph 8.11 of Part IV of this document
''Directors'' or ''Board''	the directors of the Company as at the date of this document, or any duly authorised committee thereof
"DTR"	the Disclosure Rules and Transparency Rules published by the FCA
"Escrow Agent"	the Receiving Agent, in its capacity as escrow agent for the purpose of the 2013 CLN Proposal
''Enlarged Issued Share Capital''	the Ordinary Shares in issue immediately following Admission, comprising the Existing Ordinary Shares, the Initial Subscription Shares, the Warranty Shares, the 2013 Conversion Shares and the 2014 Conversion Shares
''Euroclear''	Euroclear UK & Ireland Limited
"EU"	the European Union
"Existing Ordinary Shares"	the Ordinary Shares in issue at the date of this document
"Existing Issued Share Capital"	1,451,507,909 Ordinary Shares
"FCA"	the UK Financial Conduct Authority
"finnCap"	finnCap Ltd, the Company's nominated adviser and broker
"Form of Proxy"	the form or proxy for use in connection with the General Meeting which accompanies this document
"FSMA"	the Financial Services and Markets Act 2000 (as amended from time to time)
"Further Admission"	admission of the Further Subscription Shares to trading on AIM becoming effective in accordance with the AIM Rules
"Further Enlarged Issued Share Capital"	the Ordinary Shares in issue immediately following the Further Admission, comprising the Enlarged Issued Share Capital and the Further Subscription Shares
"Further Subscription"	the subscription by GPS for the Further Subscription Shares at the Issue Price, subject to the conditions set out in the Subscription Agreement
"Further Subscription Shares"	up to 412,500,000 new Ordinary Shares to be issued pursuant to the Further Subscription
"General Meeting" or	the General Meeting of the Company convened for 10.30 a.m. on 5 June 2014
"GPS"	Global Power Sources S.r.l.
''Group''	the Company and its existing subsidiaries and subsidiary undertakings
''Henderson''	(1)       Henderson Global Investors Limited in its capacity as discretionary investment manager of The Strathclyde Pension Fund and Henderson UK and Irish Smaller Companies Fund; and (2)       Henderson Alternative Investment Advisor Limited in its capacity as discretionary investment manager of The Alphagen Volantis Fund Limited, Henderson UK Small Cap Best Ideas Fund and The Citigroup Pension Plan Investment Committee,   both of 201 Bishopsgate, London EC2M 3AE, or either of them as the context shall require
"Henderson Letter"	the letter dated 16 May 2014 between the Company and Henderson, the principal terms of which are summarised in paragraph 8.14 of Part IV of this document
"Henderson Irrevocable Undertaking"	the agreement dated 16 May 2014 between the Company, GPS and Henderson, the principal terms of which are summarised in paragraph 8.13 of Part IV of this document
"Incentive Loan Notes"	the 63,644 and 17,500 2013 CLNs subscribed by Len Reece and Clive Carver respectively
"Incentive Scheme"	Ascent Resources 2013 Long Term Incentive Plan, as summarised in paragraph 8.16 of Part IV
"Independent Directors"	the directors of the Company excluding Clive Carver and Len Reece
"Independent Shareholders"	the shareholders of the Company excluding Henderson, GPS, Ascent Italia and holders of the 2013 CLNs
"Initial Subscription"	the subscription by GPS for the Initial Subscription Shares at the Issue Price pursuant to the terms of the Subscription Agreement
"Initial Subscription Shares"	the 1,462,500,000 new Ordinary Shares to be issued pursuant to the Initial Subscription
"ISIN"	International Securities Identification Number
"Issue Price"	0.8 pence per Ordinary Share
''London Stock Exchange''	London Stock Exchange plc
"Notice of General Meeting" or "Notice"	the notice of General Meeting set out at the end of this document
"Options"	an option over Ordinary Shares granted by the Company
''Ordinary Shares''	ordinary shares of 0.1 pence each in the capital of the Company
"Phase I"	the bringing on-stream of the Pg-10 and Pg-11a wells, the connection of the gas stream to the local methanol plant, the commissioning of a new CPP and the connection of the gas stream to the Slovenian national grid
"Phase II"	further development of the Petišovci project
''Prospectus Rules''	the Prospectus Rules published by the FCA
"Receiving Agent"	Computershare Investor Services PLC
"Relationship Agreement"	the relationship agreement dated 16 May 2014 between the Company, GPS, Henderson and Ascent Italia, effective conditional upon completion of the Initial Subscription, the principal terms of which are summarised in paragraph 8.15 of Part IV
"Resolutions"	the resolutions set out in the Notice
"RIS"	a regulatory information service approved by the London Stock Exchange for the purposes of the AIM Rules
''Shareholders''	holders of Ordinary Shares from time to time
"Slovenian Joint Venture"	the arrangements created under the agreements referred to in paragraph 8.1 of Part IV of the Circular for the management and operation of the Petišovci project and, where applicable, refers to Ascent Slovenia Limited acting as the manager of the project
''Subscription''	together, the Initial Subscription and the Further Subscription
''Subscription Agreement''	the agreement dated 16 May 2014 between the Company and GPS, the principal terms of which are summarised in paragraph 8.12 of Part IV of this document
"Subscription and Warranty Resolution Agreement"	the agreement dated 18 December 2013 between the Company and GPS pursuant to which, inter alia, GPS agreed to subscribe for Ordinary Shares and to settle a potential warranty claim under the Ascent Italia SPA, further details of which are set out in paragraph 8.5 of Part IV
"Subscription Conditions"	has the meaning set out in paragraph 8.12 of Part IV
"Takeover Code" or the "Code"	The City Code on Takeovers and Mergers issued by the Takeover Panel, as amended from time to time
"Takeover Panel"	the Panel on Takeovers and Mergers
"TTE instruction"	A Transfer to Escrow instruction (as defined by the CREST Manual)
''United Kingdom'' or ''UK''	the United Kingdom of Great Britain and Northern Ireland
''uncertificated'' or ''in        uncertificated form''	an ordinary share recorded on a company's share register as being   held in uncertificated form in CREST and title to which, by virtue of the Uncertificated Securities Regulations 2001, may be transferred by means of CREST
"Waiver"	the waiver by the Takeover Panel of the requirements of Rule 9 of the Takeover Code described in paragraph 7 or of Part I
"Warranty Shares"	the 7,000,000 Ordinary Shares to be issued to GPS under the terms of the Subscription and Warranty Resolution Agreement, following approval by Shareholders of the relevant resolution authorising the issue of such shares at the Company's Annual General Meeting to be held 5 June 2014
"Whitewash"	the approval of the Waiver
"Whitewash Resolution"	Resolution 1 in the Notice
"WRS"	Salomon Werner HAB Privee Limited, formerly known as Salomon Partners WRS Werner Rothschild & CIE Limited

 

 

 

A referenceto £ is to pounds sterling, being the lawful currency of the UK.