Financing Arrangements

RNS Number : 5215E

Mavinwood PLC

22 December 2009

 



Mavinwood plc ("Mavinwood" or the "Company")

Financing Arrangements

The Company announced on 30 September 2009 that the Company's facility agreement with Lloyds TSB plc ("Lloyds") had been amended such that a minimum equity injection was required by 31 December 2009 of an amount equal to: 

• the existing subordinated working capital facilities of £5.1 million entered into with Geraldton  (including rolled-up interest) plus 

• the previously announced fee of £0.9 million payable to Geraldton in connection with their equity underwriting commitment.

It has been agreed with Lloyds that this subordinated working capital facility will remain in place until such time there is an equity injection to replace it. 

The Company announced on 29 July 2009 that Geraldton Services, Inc ("Geraldton") had committed to invest an additional sum of up to £4 million before 31 January 2009 if the ratio of net debt to EBITDA on 31 December 2009 as tested under the Company's facility agreement with Lloyds TSB plc exceeded an agreed level. This was reiterated in the Company's announcement on 30 September 2009 when Geraldton provided the subordinated working capital facilities to the Company referred to above.

Mavinwood announces that Geraldton has now entered into a further loan agreement with Geraldton pursuant to which Geraldton will provide an additional £4 million in the form of subordinated working capital facilities at a coupon of 10%. As with the existing Geraldton facilities this facility is due to be repaid on 1 August 2012 with interest to be compounded annually and paid on the date of repayment of the loan. Mavinwood has agreed to grant a second charge in respect of the £4 million Geraldton facility ranking behind Lloyds' existing security and subject to Lloyds' approval. The provision of this facility ensures compliance with year-end covenants under the terms of the Company's facility agreement with Lloyds and reflects Geraldton's long-term commitment to the Company. The previous variation in arrangements with Geraldton, including Geraldton's obligation to provide a further £4 million investment, were related party transactions and were addressed in the Company's announcements on 29 July 2009 and 30 September 2009.

As part of these arrangements, the Company has agreed with Lloyds that £3 million of the £9 million Revolving Credit Facility which forms part of the £19.5 million Lloyds facility will be cancelled and that the overdraft facility will be increased by £1 million, resulting in an overall reduction in the total facility (including the overdraft facility) by £2 million to £17.5 million. It has further been agreed between Lloyds and the Company that certain operating costs related to trading in 2009 will be excluded from covenant calculations. The £4 million investment will be used to pay down bank debt.

It remains the Company's intention that all or part of the Geraldton subordinated working capital facilities will be converted into equity in due course. The Board is looking at ways to achieve this without incurring excessive costs.

Current trading

The document storage businesses, Restore and Wansdyke, are performing in line with management expectations. The document scanning business, Document Control Services, continues to operate in a difficult market although trading is improving and the outlook for 2010 is encouraging. Peter Cox, the national provider of damp and water proofing and timber preservation services, has continued to experience difficult trading conditions and it is anticipated that it will report an operating loss for the current financial year. Management focus is on returning it to former levels of profitability. Ansa Building Services has ceased to operate and closure costs will be taken in 2009 although there will be related cash costs in 2010.

Costs across the operating businesses and at head office have been sharply reduced. All of the costs relating to the previous difficulties of the group are expected to be accounted for in the current year, but there are ongoing cash liabilities in respect of vacant properties. The Company continues to enjoy the ongoing support of Geraldton, its majority shareholder, as reflected in the new financing arrangements. All four of the Company's operating businesses have strong market positions and are expected to show improved performance in 2010. 

Enquiries

Mavinwood plc 

Charles Skinner, Chief Executive                                    07966 234075 

Collins Stewart 

Adrian Hadden                                                             020 7523 8350 

Threadneedle Communications

John Coles                                                                  020 7653 9848

 

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