Posting of circular to shareh

RNS Number : 8055Y

Gas Turbine Efficiency PLC

31 December 2010

 



31 December, 2010

Gas Turbine Efficiency PLC

Proposed sale of assets of the aviation business

Circular to shareholders

Further to the announcement made by GTE on 29 December 2010, a circular to shareholders has today been posted, including a notice of a General Meeting of the Company to be held at the offices of Bird & Bird LLP, 90 Fetter Lane, London EC4A 1PT at 11.00 a.m. on 17 January 2011 for the purpose of considering, and if thought fit, passing resolutions to: (1) approve the sale of assets in the aviation business of the Company; (2) provide the Directors with further authority to allot equity securities up to an aggregate nominal amount of £61,224.33; and (3) provide the Directors with authority to issue Ordinary Shares on a non pre-emptive basis to satisfy outstanding C Warrants and to allot equity securities up to an aggregate nominal amount of £20,408.11 on a non pre-emptive basis.

It was announced on 29 December 2010 that under the terms of the existing Loan Notes, GTE is required to apply the proceeds from the Asset Sale in repayment of the Loan Notes and that it was in discussions with Loan Note Holders about retaining the proceeds from the Asset Sale. Generation and Zouk have entered into a new commitment to subscribe for the D Loan Notes. The proceeds from the issue of the D Loan Notes will be used to finance the Group's working capital. Accordingly, the Loan Note Holders have agreed that GTE may retain the proceeds of the Asset Sale (subject to repayment of the D Loan Notes) and to certain amendments to the Loan Notes.

The D Loan Notes constitute US$5,750,000 notes of US$10 each; carrying a fixed interest rate of 20% p.a. and a commitment fee of US$750,000 (which is rolled up into the principal amount of the D Loan Notes).  The D Loan Notes are repayable on 31 January 2011. However, if the Asset Sale proceeds to Completion, the Company will be required to repay the D Loan Notes within three business days from the receipt of the sale proceeds from the Asset Sale. In the event that the Asset Sale does not proceed to Completion, the Loan Notes and the D Loan Notes will become immediately due and repayable by GTE. GTE would not in such circumstances have sufficient cash resources to repay the Loan Notes or D Loan Notes and would need to seek alternative funding. There can be no guarantee that such funding could be obtained on acceptable terms or at all. If no such funding was obtained then the Company would be required to address insolvency issues which could lead to placing the Company into insolvent liquidation. Furthermore, in the event that the Company does not repay the D Loan Notes on the earlier of three business days from receipt of the Asset Sale proceeds or 31 January 2011 the Company will be required to pay a US$5m default fee to the holders of the D Loan Notes payable pro rata to the number of D Loan Notes held by each Loan Note Holder.

GTE is currently in discussions with the Loan Note Holders regarding a possible recapitalisation of some or all of the Loan Notes into equity. Accordingly, the terms of the Loan Notes have been amended to bring their repayment date forward from 18 December 2012 to 15 February 2011. If, however, GTE and the Noteholders reach an agreement on a proposed recapitalisation of the Loan Notes on or before 15 February 2011, the Loan Notes will not become repayable until 15 March 2011. In the event GTE reaches agreement with the Loan Noteholders on a recapitalisation, GTE will have until 15 March 2011 to effect such recapitalisation (including obtaining necessary Shareholder approval). If GTE cannot reach agreement with the Loan Note Holders by 15 February 2011 the Loan Notes will become immediately due and repayable on 15 February 2011. In the event agreement is reached with the Loan Note Holders by 15 February 2011 and such recapitalisation is not implemented by 15 March 2011, then the Loan Notes will become immediately due and repayable on 15 March 2011. In either case GTE will not have sufficient cash to repay the Loan Notes. In such a case, the Company would have to seek alternative funding. There can be no guarantee that such funding could be obtained on acceptable terms or at all. If no such funding was obtained the Company would be required to address insolvency issues which could lead to placing the Company into insolvent liquidation.

The Loan Notes have also been amended to provide that a waiver consent fee equal to 20% of the principal amount of the Loan Notes will become payable to the Loan Notes Holders if the recapitalisation of the Loan Notes is not effected by 15 March 2010 (in which case such Loan Notes become immediately repayable) or there is a change of control of the Company prior to such recapitalisation being effected. Furthermore, in the event that there is a change of control of the Company prior to effecting a recapitalisation of the Loan Notes then additional interest of 10% p.a. will be payable by GTE on the Loan Notes from 31 December 2010 until such payment is made. The Loan Note Holders have also agreed to defer accrued interest due and payable on the Loan Notes due to be paid on 31 December 2010 until 31 January 2011.

The terms of the Warrants have also been amended. The exercise price of the Warrants currently £0.10 per Ordinary Share has been amended so that in the event a recapitalisation of the Loan Notes is not effected (as described above) or there is a change of control of the Company prior to effecting such recapitalisation, the exercise price will be reduced to £0.002 per Ordinary Share.

The D Loan Notes and the amendments to the Loan Notes are conditional upon certain conditions being satisfied.  The Company will issue a separate announcement confirming when such conditions have been satisfied.

The D Loan Notes entered into with Generation and Zouk constitute a related party transaction under the AIM Rules due to the fact that Generation and the Zouk are each substantial Shareholders.  The proposed amendments to the A, B and C Loan Notes also constitute a related party transaction with Generation and Zouk for the same reason.

The Directors consider, having consulted with Matrix (GTE's Nominated Adviser), that the terms of the D Loan Notes are fair and reasonable insofar as the Shareholders are concerned. In coming to their opinion, the Directors have had regard to a number of factors including the current financial position and existing funding of the Group.

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Generation and Zouk, who together hold 31,395,681 Ordinary Shares, representing approximately 30.77% of the Ordinary Shares in issue.

Directors' intentions

The Directors unanimously recommend that Shareholders vote in favour of all of the Resolutions at the General Meeting, as they themselves intend to do in relation to their own entire registered holdings of 442,663 Ordinary Shares representing, in aggregate, 0.43% of the Ordinary Shares in issue.

A copy of the circular is available on the Company's website.

For further information please contact:

Gas Turbine Efficiency plc

John Grant, Executive Chairman              Tel: [phone]

Matrix Corporate Capital LLP

Stephen Mischler                                   Tel: [phone]

Financial Dynamics

Jon Simmons, Nina Delangle                  Tel: [phone]

"Assets"                       certain assets of the Sellers related to the development, manufacture, use or service of water wash systems for washing combustion turbine engines or related to the use of such water wash systems for washing combustion turbine engines to enhance their performance for aviation purposes, which include, inter alia, tangible and intangible property owned by the Sellers, inventories, governmental authorisations, related patents (including pending patent applications), proprietary technology and know-how and claims of the Sellers against third parties for warranty obligations

"Asset Sale"                the sale of the Assets on the terms set forth in the Asset Purchase Agreement

"C Warrants"               Warrants to subscribe for Ordinary Shares at the price of 10 pence per Ordinary Share to be issued to certain holders of C Notes

"Company" or "GTE"    Gas Turbine Efficiency plc

"Completion"              completion of the Asset Sale

"D Loan Note"            the US$5.75m principal amount of the Series D Loan Notes constituted by an amended and restated loan note instrument dated 31 December 2010

"General Meeting"      the general meeting of the Company, to be held at the offices of Bird & Bird LLP, 90 Fetter Lane, London EC4A 1PT at 11.00 a.m. on 17 January 2011, notice of which is set out at the end of this document

"Generation"               Generation IM Climate Solutions Fund, LLP

"Group"                       together the Company and its subsidiary undertakings

"Loan Notes"               the US$18,125,000 principal amount of loan notes of the Company outstanding at the date of this document (excluding the D Loan Notes)

"Loan Note Holders"    holders for the time being of Loan Notes

"Matrix"                        Matrix Corporate Capital LLP, the Company's Nominated Adviser

"Ordinary Shares"        the ordinary shares of 0.2 pence each in the share capital of the Company

"Sellers"                       Gas Turbine Efficiency AB and Gas Turbine Efficiency Sweden AB

"Shareholders"             holders of Ordinary Shares from time to time

"P&W"                          Pratt & Whitney Line Maintenance Services, Inc.

"Resolutions"                the resolutions referred to in the notice of the General Meeting

"Warrants"                  the C Warrants and Warrants to subscribe at the price of 10 pence per Ordinary Share
                                    for an aggregate of 30,925,000 Ordinary Shares issued in conjunction with the Loan Notes

"Warrants Holders"      Generation, Zouk and other holders of Warrants

"Zouk"                          Cleantech Europe 1(A) LP and Cleantech Europe 1(B) LP, being funds managed by Zouk Ventures Limited

 

END

 

 

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