For immediate release 31 July 2017
Manx Financial Group PLC
Maintaining and Increasing Regulatory Capital for Conister Bank Limited:
Renewal of Unsecured Loan Notes on Improved Terms
Assignment and Limited Extension of Warrants
Continuing the Group's business plan to increase commercial and retail lending both in the Isle of Man and the United Kingdom through its subsidiary - Conister Bank Limited (the "Bank"), the Group is in the process of maintaining and securing additional Tier-1 Capital to support the expected new business. Whilst the Group, unlike many of its competitors, has access to ample liquidity through the Bank's balance sheet, this cash surplus, representing customers' deposits, cannot be deployed to fund the Bank's regulatory Internal Capital Adequacy Assessment Process projections.
Thus, in the context of the existing convertible loans of £1.2 million from Burnbrae Limited ("Burnbrae") and £0.5 million from Jim Mellon ("Existing Loans") which expire on 31 July 2017, the Group's Independent Directors ("INDs") - excluding Jim Mellon and Denham Eke by reason of their interest in and/or connection with Burnbrae, have considered the most suitable method of preserving the regulatory capital required, which included reviewing third-party funding options and the practicality of a rights issue. In considering the advantages and disadvantages of all available options, including the issues of cost and the provision of onerous security, the INDs have negotiated the renewal of two unsecured convertible loan notes ("Loans") with the Group's executive Chairman - Jim Mellon, on terms better for the Group than the terms of the Existing Loans. Jim Mellon and Denham Eke recused themselves from the INDs' deliberations and decision. Jim Mellon indirectly wholly owns and is Chairman of Burnbrae and Denham Eke is Managing Director.
Following negotiations with the INDs, Jim Mellon and Burnbrae have agreed to continue to provide loans on similar terms for a total of £1.7 million, of which £1.2 million will be from Burnbrae and the remaining £0.5 million from Jim Mellon himself. These unsecured loans will be for a period of five years and have interest of 5.0% (previously 7.0% for the Existing Loans) paid quarterly. The loans will be convertible at the discretion of the Group at a price of 7.5 pence per share (previously 4.0 pence for the Existing Loans).
In connection with the warrants granted in conjunction with the Existing Loans, Burnbrae is in the process of concluding an assignment of the rights, benefits and obligations pertaining to a portion of its warrants (issued on 31 July 2012) to third-parties on the understanding that these will be exercised on or before 31 July 2017, thus providing new funds to the Group which are intended to be used to further increase the Bank's Tier-1 capital. It has further been agreed with the INDs that any warrants remaining belonging to Jim Mellon and/or Burnbrae will have their exercise period extended to 24 October 2017 on the basis of an exercise price of 7.5 pence per share (previously 6.0 pence) ("Warrant Extension") so as to provide the opportunity of further funding for the Group. A further announcement will be made in due course once the documentation is formalised and funds received from the other parties.
The Group also announces that, in accordance with the terms of the Warrant Deed issued to Southern Rock Insurance Company Limited ("SRICL") on 24th October 2012, the rights, benefits and obligations pertaining to the 8,333,333 Warrants available under the Warrant Deed have been assigned to ICS Risk Solutions Limited ("ICS"). SRICL and ICS are related by virtue of a common ultimate beneficial ownership.
AIM Rules
The entering into of the Loans by the Company and the Warrant Extension are Related Party Transactions under the AIM Rules due to the interests of Jim Mellon and Denham Eke in the transaction as set out above. As a result of the Group's anticipated future developments, the requirement for maintaining and increasing regulatory capital has become more immediate. The INDs have considered the third-party funding alternatives available. However, they have concluded that none of these are practical in terms of either cost or the provision of security. Accordingly, the INDs (being the Directors with the exception of Jim Mellon and Denham Eke), consider, having consulted the Group's Nominated Adviser, that the terms of the transaction are fair and reasonable insofar as the Group's shareholders are concerned.
For further information, please contact:
Manx Financial Group PLC
Denham Eke, Chief Executive
Tel: +44 (0) 1624 694694
Beaumont Cornish Limited
Roland Cornish/James Biddle
Tel: +44 (0) 20 7628 3396
Britton Financial PR
Tim Blackstone
Tel: +44 (0) 7957 140416
