Rights Issue

RNS Number : 3093M

Workspace Group PLC

27 January 2009

 

THIS ANNOUNCEMENT, INCLUDING THE APPENDICES (TOGETHER, THE 'ANNOUNCEMENT'), IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

Workspace Group PLC

('Workspace' or the 'Company')

Rights Issue to raise £87.2 million

27 January 2009

Workspace today announces a Rights Issue to raise £87.2 million.

Tony Hales, Chairman of Workspace said: 'This transaction ensures that the Company has secured financing with maturities extending to November 2012. In the context of the current financial climate, where the perceived outlook for property values has been gloomy, obtaining capital and bank financing has been very tough. We can now focus all of our efforts on the operational performance and cash generation of the business in this challenging economic environment.'

Highlights:

• 5 for 1 Rights Issue to raise £87.2 million (before expenses), fully underwritten

• The fundraising will allow the Group to reduce its level of indebtedness and thereby strengthen its balance sheet

• The fundraising will reduce the level of risk associated with the Group's debt facilities by enabling the removal or amendment of certain of the Group's financial covenants and allowing Workspace to extend the maturity of its August 2010 bank facility until November 2012 

N M Rothschild & Sons Limited ('Rothschild') and Panmure Gordon (UK) Limited ('Panmure Gordon') are acting as joint sponsors and financial advisers to the Company with respect to the Rights Issue. 

Panmure Gordon and Investec Bank plc ('Investec') are acting as joint brokers to the Company with respect to the Rights Issue. The Rights Issue is fully underwritten by Rothschild, Panmure Gordon and Investec. 

This summary should be read in conjunction with the full text of this Announcement. 

  Contacts:

Workspace Group PLC	Tel: [phone]
Tony Hales CBE, Chairman
Harry Platt, Chief Executive
Graham Clemett, Finance Director
N M Rothschild & Sons Limited	Tel: [phone]
Alex Midgen
Panmure Gordon (UK) Limited	Tel: [phone]
Tim Linacre
Stuart Gledhill
Callum Stewart
Investec Bank plc	Tel: [phone]
Keith Anderson
Henry Reast
City Profile	Tel: [phone]
Jonathan Gillen
Simon Courtenay

General:

This Announcement is not for distribution, directly or indirectly, in or into the United States, Australia, Canada, Japan, the Republic of South Africa or any jurisdiction into which the same would be unlawful. 

This Announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire shares in the capital of the Company in the United States, Australia, Canada, Japan, the Republic of South Africa or any jurisdiction in which such an offer or solicitation is unlawful and should not be relied upon in connection with any decision to acquire any securities in the capital of the Company. 

The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares and the Provisional Allotment Letters have not been nor will be registered under the US Securities Act or under the securities legislation of any State or other jurisdiction of the United States and may not be offered, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, in, into or within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any State or other jurisdiction of the United States.

This Announcement is for information only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice in any jurisdiction.

The distribution of this Announcement and the offering of the Nil Paid Rights, the Fully Paid Rights or the New Ordinary Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by the Company or any of Rothschild, Panmure Gordon or Investec that would permit an offering of such shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and each of Rothschild, Panmure Gordon and Investec to inform themselves about, and to observe, any such restrictions. 

The Company, Rothschild, Panmure Gordon and Investec and their respective affiliates, will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements.

This Announcement is intended for distribution and is directed at: (i) in the United Kingdom: (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act (Financial Promotion) Order 2005 (the 'Order'); or (b) high net worth entities falling within Article 49(2) of the Order; or (ii) outside the United Kingdom, any person to whom it may otherwise be lawfully distributed.

This Announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any Ordinary Shares referred to in this Announcement in connection with Rights Issue except on the basis of information to be contained in the Prospectus which is expected to be published by the end of January 2009 by the Company in connection with the proposed Rights Issue. Copies of the Prospectus will, following publication, be available from the Company's registered office.

This Announcement has been issued by and is the sole responsibility of the Company. No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by any of Rothschild, Panmure Gordon or Investec or by any of their affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed. 

N M Rothschild & Sons Limited, which is regulated in the United Kingdom by the FSA, is acting solely for the Company in relation to the Rights Issue and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to customers of N M Rothschild & Sons Limited or for providing advice in relation to the Rights Issue or any other matters referred to in this Announcement.

Panmure Gordon (UK) Limited, which is regulated in the United Kingdom by the FSA, is acting solely for the Company in relation to the Rights Issue and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Panmure Gordon (UK) Limited or for providing advice in relation to the Rights Issue or any other matters referred to in this Announcement.

Investec Bank plc, which is regulated in the United Kingdom by the FSA, is acting solely for the Company in relation to the Rights Issue and nobody else and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Investec Bank plc or for providing advice in relation to the Rights Issue or any other matters referred to in this Announcement.

The Prospectus is expected to be published by the end of January 2009. The Prospectus will give further details of the Rights Issue and will contain a notice of the General Meeting, which is expected to be held in mid February 2009. The Prospectus will give further details of the Nil Paid Rights and the Fully Paid Rights to be offered pursuant to the Rights Issue and the Company's business. 

This Announcement contains forward-looking statements which reflect the Group's or, as appropriate, the Directors' current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Company's products and services). These statements include forward-looking statements both with respect to the Group and the sectors and industries in which the Group operates. Statements which include the words 'expects', 'intends', 'plans', 'believes', 'projects', 'anticipates', 'will', 'targets', 'aims', 'may', 'would', 'could', 'continue' and similar statements of a future or forward-looking nature identify forward-looking statements.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Group's actual results to differ materially from those indicated in these statements. Any forward-looking statements in this Announcement reflect the Group's current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity.

These forward-looking statements speak only as of the date of this Announcement. Subject to any obligations under the Prospectus Rules, the Disclosure and Transparency Rules or the Listing Rules and save as required by law, the Company undertakes no obligation to update publicly or to review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting for and on behalf of the Company are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Any indication in this Announcement of the price at which the Ordinary Shares of the Company have been bought or sold in the past cannot be relied upon as a guide to future performance. No statement in this Announcement is intended to be a profit forecast. 

  Workspace Group PLC

('Workspace' or the 'Company')

Rights Issue to raise £87.2 million

Workspace today announces a Rights Issue to raise £87.2 million. Workspace provides over 5 million square feet of primarily freehold property to approximately 4,000 customers primarily in the London region. 

INTRODUCTION 

The Company today announces that it is proposing to raise £87.2 million (before expenses) by way of the Rights Issue. Under the Rights Issue, which is described further below, New Ordinary Shares will be offered by way of rights at 10 pence per New Ordinary Share to all Qualifying Shareholders on the basis of five New Ordinary Shares for every one existing Ordinary Shares held at the close of business on the Record Date. 

The Issue Price represents a 69.2 per cent. discount to the closing middle market price of an existing Ordinary Share of 32.5 pence on 26 January 2009 (being the latest practicable day prior to the publication of this Announcement). The purpose of this Announcement is to provide details of the Rights Issue and to explain why the Directors consider the Rights Issue and the resolutions to be proposed at the General Meeting to be in the best interests of the Company and Shareholders as a whole. A prospectus in connection with the Rights Issue is expected to be published by the end of January 2009.

Workspace continues to maintain a stable rent roll with good demand for space but, like many other property companies, has been adversely affected by declining values of property assets and uncertainty in the wider UK economy. In the current market environment it is appropriate for the Group to reduce its level of indebtedness and thereby strengthen its balance sheet. The Board believes that the funds raised from the Rights Issue will significantly improve the financial position and future prospects of Workspace. 

The Rights Issue is conditional, inter alia, upon Shareholders approving the Rights Issue Resolution. The notice of the General Meeting will be set out in the Prospectus.

THE BUSINESS

Workspace provides accommodation on flexible leases through a recognised brand to SMEs primarily located in the London region within the M25. Its customers are typically owner-managed, service based, businesses employing between 5 and 10 people. The Group's property portfolio is highly diversified in many respects; its properties vary in age and in the type and style of accommodation offered, from light industrial to business centres (including studios, workshops and a small number of serviced offices). Its customer base is also highly diversified across a number of sectors reflecting the diversity of the London economy and includes creative industries, business and professional services, community, health and education, charities, voluntary and professional organisations.

CURRENT TRADING AND OUTLOOK

Workspace's unaudited key performance indicators for the 3 months ended 31 December 2008 and its latest property valuation as at 31 December 2008 are as follows:

•    like-for-like⁽¹⁾ rent roll as at 31 December 2008 was £46.1 million compared to £46.9 million as at 30 September 2008, with like-for-like occupancy at 85.2 per cent. as at 31 December 2008 compared to 87.6 per cent. as at 30 September 2008;

•    other⁽²⁾ rent roll as at 31 December 2008 was £6.4 million compared to £6.1 million as at 30 September 2008, with other occupancy at 63.8 per cent. as at 31 December 2008, compared to 67.7 per cent. as at 30 September 2008 (space available for letting increased during the quarter with the opening of two new buildings (Wharf Road and Q West);

•    total rent roll as at 31 December 2008 was £52.5 million which is a reduction of 1 per cent. (£0.6 million) compared to 30 September 2008 but up 2.7 per cent. (£1.4 million) compared to 31 December 2007;

•    total occupancy as at 31 December 2008 was 81.3 per cent. compared to 84.1 per cent. as at 30 September 2008 (due to new space coming on line from the opening of the two new buildings (Wharf Road and Q West) for letting in the quarter which reduced overall occupancy by some 1 per cent.);

•    average rent per square foot as at 31 December 2008 increased to £12.58 from £12.43 as at 30 September 2008 and £11.80 as at 31 December 2007;

•    the reduction in like-for-like occupancy and the increase in average rent per square foot for the three month period to 31 December 2008 reflects some change in the mix of units occupied, with more lettings of higher value, small unit size space);

•    enquiries remain high with a consistent level of conversions being achieved, with the average number of monthly enquiries for the 3 months ended 31 December 2008 being 814 and the average number of monthly conversions for the same period being 85; and

•    the Group's property valuation as at 31 December 2008 was £740.3 million, down 15 per cent. since 30 September 2008. 

Set against the background of an economic downturn and falling property values, the Board believes that 2009 will be challenging for both Workspace and its customers. However, the Group is monitoring closely its existing and prospective customers and their demand for space, responding quickly where necessary with a view to ensuring that the Group maintains high enquiry and conversion rates, good occupancy levels and strong operational cashflows.

In the medium term the Board believes that London will retain its long term importance and attraction for both occupiers and investors, which the Board believes offers the Group continued prospects for growth.

The value of the Group's property portfolio has declined by 15 per cent. in the three months to 31 December 2008. The value of the Group's property portfolio has declined 25.5 per cent. in the 9 months to 31 December 2008 and is likely to decline further during 2009.

⁽¹⁾  like-for-like’ are those properties that have been held throughout the previous 12 months and have not been subject to a significant refurbishment programme in the previous 24 months.

 

⁽²⁾  ‘other’ properties are those that are not within the ‘like-for-like’ category.

BACKGROUND TO AND REASONS FOR THE RIGHTS ISSUE

The Group continues to maintain a stable rent roll and good demand for space but, like many other property companies, has been adversely affected by declining values of property assets and uncertainty in the wider UK economy. In the current market environment it is appropriate for the Group to reduce its level of indebtedness and thereby strengthen its balance sheet. The Board intends to do this through a Rights Issue.

Workspace's operational performance remains resilient, with rent roll stable, and enquiry levels and conversion rates running at consistent levels since mid-2008. However, between 30 September 2008 and 31 December 2008 the value of the Group's property portfolio has reduced by 15 per cent. from £871.0 million to £740.3 million, in addition to a reduction of £122.2 million in the six months ended 30 September 2008. This represents an overall decline over the 9 months ended 31 December 2008 of 25.5 per cent.

Workspace has been working with its main lending banks to extend the loan repayment date of certain of its debt facilities and amend certain financial covenants to enable the Group to withstand further declines in property values. Details of these amendments (some of which are conditional upon the Rights Issue proceeding) are set out below.

The Board believes that, through a combination of the fundraising under the Rights Issue and the amendments to the RBS Facility Agreement and the GE Facility Agreement, the increase in the headroom on the Group's remaining valuation related banking covenants will put the Group in a stronger position to withstand any potential further valuation declines, and the amendments ensure that the final repayment dates under the Group's banking facilities will be the same (being 16 November 2012).

Furthermore, the Board believes that, with a strengthened balance sheet, Workspace should have the potential to take advantage of market conditions to make selective acquisitions when opportunities arise.

AMENDMENTS TO DEBT FACILITIES 

The Group has entered into the RBS Facility Agreement, the RBS Facility Amendment Agreement and the GE Facility Amendment Agreement.

The RBS Facility Agreement is a new facility agreement on similar terms to those of the NatWest Facility Agreement (such agreement having refinanced and replaced the NatWest Facility Agreement). The final loan repayment date of 16 November 2012 remains unchanged from that previously set out in the NatWest Facility Agreement. All the conditions to the RBS Facility Agreement have been satisfied. Subject to the satisfaction of certain conditions, the RBS Facility Amendment Agreement amends the valuation related covenants set out in the RBS Facility Agreement.

The RBS Facility Amendment Agreement is conditional upon the Rights Issue proceeding and £65 million (after expenses) being raised. The options for the Group to elect to extend the final loan repayment date under the GE Facility Amendment Agreement (referred to below) are conditional upon the Rights Issue proceeding and the repayment of £50 million from the proceeds of the Rights Issue, in order to reduce the total commitment amount outstanding from £270 million to £220 million. Otherwise, the terms of the GE Facility Amendment Agreement are now in force.

The terms of the RBS Facility Amendment Agreement provide, inter alia, that:

•    the Group's interest cover ratio will remain the same at 150 per cent.;

•    the borrower's interest cover ratio will remain the same at 125 per cent.;

•    the Group's gearing and minimum net worth covenants will not apply until 1 January 2012 (with the first test date thereafter being as at 31 March 2012);

•    the current loan-to-value covenant will be increased from 62.5 per cent. to 75 per cent. (this is in line with the loan-to-value covenant under the GE Facility Amendment Agreement) until 31 December 2011; 

•    the short term revolving facility will be reduced from £50.0 million to £30.0 million; and

•    the interest rate payable will be increased from LIBOR plus 0.95 per cent. on the term and revolving facilities and LIBOR plus 1.35 per cent. on the short term revolving facility to LIBOR plus 2.75 per cent. on all outstanding loan facilities.

The terms of the RBS Facility Amendment Agreement also provide, inter alia, that as from 1 January 2012 the loan-to-value covenant will reduce to 70 per cent., the minimum net worth covenant will return to a level of £250 million and the gearing covenant will return to a level of 150 per cent.

Further details of the RBS Facility Amendment Agreement will be set out in the Prospectus.

The terms of the GE Facility Amendment Agreement provide, inter alia, that:

•    Workspace may, at its sole election, extend the loan repayment date of the GE Facility Agreement by 17 months from 1 August 2010 to 31 December 2011 and then for a further period from 1 January 2012 to 16 November 2012 so that the final loan repayment date under this facility, should Workspace so elect, will be in line with the final loan repayment date under the RBS Facility Agreement (subject in each case to there being no event of default under the GE Facility Amendment Agreement prior to such election being made);

•    the facility will be reduced from £270 million to £220 million by the pre-payment of £50 million;

•    the Group's interest cover ratio will remain the same at 150 per cent.;

•    the borrower's interest cover ratio will remain the same at 130 per cent.;

•    the Group's gearing and net worth covenants are removed entirely;

•    the loan-to-value covenant will remain the same at 75 per cent.; and

•    the interest rate payable is increased from LIBOR plus 0.94 per cent. to (i) LIBOR plus 2 per cent from 27 January 2009 to 31 July 2010; (ii) LIBOR plus 3 per cent. from 1 August 2010 to 31 December 2011 (if Workspace elects to extend the loan repayment date); and (iii) LIBOR plus 4 per cent. from 1 January 2012 to 16 November 2012 (if Workspace elects to extend the loan repayment date).

Further details of the GE Facility Amendment Agreement will be set out in the Prospectus.

PRINCIPAL TERMS OF THE RIGHTS ISSUE 

The Company is proposing to raise proceeds of £87.2 million (before expenses) by way of a rights issue of 871,764,035 New Ordinary Shares. The Rights Issue is fully underwritten by Rothschild, Panmure Gordon and Investec. Subject to the fulfilment of the conditions of the Sponsor, Rights Issue and Underwriting Agreement, the New Ordinary Shares will be offered by way of rights at 10 pence per New Ordinary Share, payable in full on acceptance by Qualifying Shareholders, on the basis of:

5 New Ordinary Shares for every 1 existing Ordinary Share

held on the Record Date (and so in proportion for any other number of existing Ordinary Shares then held) and otherwise on the terms and conditions as set out in the Prospectus and, in the case of Qualifying non-CREST Shareholders, the Provisional Allotment Letters. 

Holdings of existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. 

The Issue Price of 10 pence per New Ordinary Share under the Rights Issue represents a 69.2 per cent. discount to the closing middle market price of 32.5 pence per Ordinary Share on Monday, 26 January 2009 (being the latest practicable day prior to the publication of this Announcement).

The Rights Issue is conditional, inter alia, upon:

•    the passing, without amendment, of the Rights Issue Resolution;

•    Admission becoming effective by no later than a time to be specified on the Business Day immediately after the date of the General Meeting (the date of which will be set out in the Prospectus) or such later time and date as may be agreed by the Company and the Joint Sponsors; and

•    the Sponsor, Rights Issue and Underwriting Agreement having become unconditional in all respects, and not having been terminated, in accordance with its terms.

Details of the Sponsor, Rights Issue and Underwriting Agreement will be set out in the Prospectus.

Each New Ordinary Share issued under the Rights Issue will rank pari passu in all respects with the Ordinary Shares in issue at the date of this announcement, save that the New Ordinary Shares will not rank for the interim dividend expected to be paid on Friday, 6 February 2009 to those Shareholders on the register as at Friday, 9 January 2009.

Application will be made to the UK Listing Authority and to the London Stock Exchange for the New Ordinary Shares issued under the Rights Issue to be admitted to the Official List and to trading on the main market of the London Stock Exchange. It is expected that Admission will occur, and that dealings in the New Ordinary Shares issued under the Rights Issue, nil paid, will commence on the London Stock Exchange, shortly after the date of the General Meeting.

USE OF PROCEEDS

As described above, the Group has entered into the GE Facility Amendment Agreement. The options for the Group to extend the final loan repayment date under the GE Facility Amendment Agreement are conditional upon the Rights Issue proceeding and the repayment of £50 million from the proceeds of the Rights Issue, in order to reduce the total commitment amount outstanding from £270 million to £220 million.

The Company intends to use the proceeds of the Rights Issue to: (a) repay £50 million to reduce the total commitment outstanding under the GE Facility Amendment Agreement; (b) make additional repayments of debt drawn under the short term revolving loan facility and/or revolving loan facility under the RBS Facility Agreement (these facilities (as amended) will still remain fully available); (c) pay fees of £4.65 million in aggregate to its lending banks in relation to the waiver/removal of certain covenants in accordance with the GE Facility Amendment Agreement and RBS Facility Amendment Agreement; and (d) make provision for a fee of £3.76 million for the first extension of the GE Facility Amendment Agreement due in August 2010. The Company may also choose to use approximately £10 million of the proceeds from the Rights Issue to unwind certain of the Group's existing interest rate hedging instruments to take advantage of lower interest rates available in the current market environment. Funds raised may also be used to make selective acquisitions when opportunities arise. However, the Directors do not intend to make any material acquisitions or undertake any material capital expenditure until the commercial property market has stabilised.

SCRIP DIVIDENDS

The Board has taken note of the choice offered to shareholders of many listed companies to elect to receive all or part of their dividend in shares instead of cash. The Board believes that the option to receive new Ordinary Shares instead of a cash dividend will enable Shareholders to increase their shareholdings in the Company without incurring dealing costs and, to the extent that Shareholders choose to receive new Ordinary Shares, the Company will benefit from the retention of cash which would otherwise be paid out as dividends. Accordingly, the Board is seeking authority in accordance with the Articles to offer Shareholders scrip dividends in the form of fully paid Ordinary Shares in the Company as an alternative to receiving dividends in cash. The payment of a scrip dividend will not be proposed by the Board without consideration of the tax implications for the Company, particularly in light of its REIT status and the requirement to pay UK profits from its qualifying rental businesses by way of a PID.

EFFECT OF THE RIGHTS ISSUE

Upon completion of the Rights Issue, the New Ordinary Shares will represent 83.3 per cent. of the Company's enlarged issued ordinary share capital and the existing Ordinary Shares will represent 16.7 per cent. of the Company's enlarged issued ordinary share capital.

Qualifying Shareholders who do not take up any of their entitlements to New Ordinary Shares under the Rights Issue will suffer an immediate dilution of approximately 83.3 per cent. to their interests in the Company as a result of the issue of the New Ordinary Shares pursuant to the Rights Issue. Even if a Qualifying Shareholder elects to sell his or her unexercised Nil Paid Rights, the consideration he or she receives may not be sufficient to compensate him or her fully for the dilution of his or her percentage ownership of the Company's share capital that may be caused as a result of the Rights Issue.

IMPORTANCE OF THE RIGHTS ISSUE

The Group's business continues to perform well at an operational level, as demonstrated by its unaudited key performance indicators for the three months ended 31 December 2008. As at 30 September 2008, the Group was in compliance with all of the covenants under its existing debt facilities with significant headroom on its interest cover covenants. However, the Board believes that it is necessary to amend the terms of the Group's existing debt facilities in order to enable the Group to ensure ongoing compliance with certain of its valuation related covenants in those facilities against the background of potential further declines in property values.

The Board believes that, through a combination of the fundraising under the Rights Issue and the amendments to the RBS Facility Agreement and the GE Facility Agreement, the Group will be placed in a stronger position to withstand further declines in property valuation whilst remaining within its valuation related banking covenants.

However, if the Rights Issue does not proceed the conditions to the RBS Facility Amendment Agreement will not be satisfied and the amendments will not become effective and the final loan repayment date under the GE Facility Amendment Agreement will not be capable of being extended. Furthermore, the current valuation related covenants under the RBS Facility Agreement will continue to apply to the Group and there will be a material risk that the Group will breach one or more of these covenants (these being the Group gearing, net worth and loan-to-value covenants). 

In these circumstances, the Board would be required to pursue an alternative course of action in order to comply with its banking covenants for at least the next 12 months and would also need to seek to extend the final loan repayment date under the GE Facility Agreement. The Company would be required to: (a) renegotiate the terms of the existing debt facilities; and/or (b) obtain a sufficient amount of alternative funding from other sources; and/or (c) find alternative ways of reducing its debt levels such as by accelerating planned disposals of properties.

In the current economic and financial environment there can be no assurance that the Board will be able to successfully renegotiate the existing debt facilities, or to obtain a sufficient level of alternative funding, prior to a breach of covenant under the existing debt facilities.

Accordingly, it will be very important that Shareholders vote in favour of the Rights Issue Resolution in order that the Rights Issue can proceed and the existing debt facilities can be amended. If not, the Directors believe that there is a material risk of the Group breaching certain of its valuation related banking covenants in the next six months, which could be extremely harmful to the Group and to the interests of Shareholders.

GENERAL MEETING 

At the General Meeting, Shareholders will be asked to:

• approve the Scrip Dividend Resolution to provide Directors with the authority to offer Shareholders scrip dividends in the form of fully paid Ordinary Shares in the Company as an alternative to receiving dividends in cash; 

• approve the Rights Issue Resolution to enable the Directors to effect the Rights Issue and issue the New Ordinary Shares; and

•    approve a general authority for the Directors to allot shares up to an amount equal to, when aggregated with the existing authority, one-third of the enlarged issued share capital (subject always to pre-emption rights, where applicable).

The Rights Issue Resolution will be proposed to authorise the Directors to:

• increase the authorised share capital of the Company in connection with the Rights Issue; and

• allot relevant securities pursuant to section 80 of the Companies Act 1985 in connection with the Rights Issue, such authority to expire at the conclusion of the next annual general meeting of the Company or, if earlier, 15 months after the date of the resolution (save that the Company may before such expiry make any offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities pursuant to any such offer or agreement as if such authority had not expired).

The notice of the General Meeting will be set out in the Prospectus.

DIRECTORS' INTENTIONS 

Messrs Hales, Cragg, Bywater and Dickinson intend to take up in full their rights to subscribe for New Ordinary Shares under the Rights Issue. As a minimum, Messrs Platt, Clemett and Marples intend to sell sufficient of their Nil Paid Rights entitlement in order to provide sufficient funds to subscribe for New Ordinary Shares under the Rights Issue in respect of the balance of their entitlement. 

RECOMMENDATION 

The Board, which has received financial advice in respect of the Rights Issue from the Joint Sponsors, considers that the Rights Issue and the Rights Issue Resolution are in the best interests of the Company and its Shareholders as a whole, and the Board believes that the Rights Issue will assist in promoting the success of the Company for the benefit of Shareholders as a whole.

Furthermore, the Board believes that the resolution authorising the Board to offer scrip dividends is in the best interests of the Company and its Shareholders as a whole, and the Board believes that such resolution will assist in promoting the success of the Company for the benefit of Shareholders as a whole.

Accordingly, the Board unanimously recommends that Shareholders vote in favour of the resolutions to be proposed at the General Meeting, as they intend to do in respect of their own beneficial holdings amounting to an aggregate of 1.04 million Ordinary Shares, representing 0.6 per cent. of the Company's current issued share capital.

APPENDICES 

Appendix I contains a summary expected timetable for the Rights Issue

Appendix II contains the definitions of certain terms used in this Announcement 

  APPENDIX I - EXPECTED TIMETABLE FOR THE RIGHTS ISSUE

The expected timetable for the Rights Issue is as follows. Please notes that each of the times and dates shown are subject to change by the Company and the Joint Sponsors. All references to time are to London time. 

27 January 2009                                               Announcement

End of January 2009 or early February 2009        Prospectus

Mid-February 2009                                            General Meeting

Mid-February 2009 to first week of March 2009    Subscription period for Rights

Mid-March 2009                                                Closing and settlement of the Rights Issue

  APPENDIX II - DEFINITIONS

In this Announcement, unless the context otherwise requires: 

'Admission' means admission of the New Ordinary Shares, nil paid, issued under the Rights Issue to (i) the Official List and (ii) trading on the main market of the London Stock Exchange becoming effective in accordance with the Listing Rules and the Admission and Disclosure Standards of the London Stock Exchange, respectively;

'Business Day' means a day (excluding Saturdays and Sundays and public holidays in England and Wales) on which banks are generally open for the transaction of normal banking business in the City of London;

'certificated' or 'certificated form' means a share which is not in uncertificated form;  

'Company' means Workspace Group PLC; 

'CREST' means the relevant system (as defined in the Regulations) for the paperless settlement of trades and the holding of securities in uncertificated form operated by Euroclear in accordance with the Regulations; 

'Directors' or 'Board' means the members of board of directors of the Company from time to time;

'Disclosure and Transparency Rules' means the Disclosure and Transparency Rules of the UKLA; 

'Euroclear' means Euroclear UK & Ireland Limited, the operator of CREST; 

'Excluded Territories' means the United States, Australia, Canada, Japan and the Republic of South Africa;

'FSA' means the Financial Services Authority, acting in its capacity as the competent authority for the purposes of Part VI of FSMA;  

'FSMA' means the Financial Services and Markets Act 2000, as amended; 

'Fully Paid Rights' means rights to acquire the New Ordinary Shares under the Rights Issue, fully paid; 

'GE Facility Agreement' means the facility agreement dated 15 July 2002 (as amended and restated) between (inter alios) Workspace Holdings Limited and Bradford & Bingley PLC, as subsequently novated to GE Real Estate; 

'GE Facility Amendment Agreement' means the amendment and restatement agreement to the GE Facility Agreement dated 27 January 2009 between (inter alios) Workspace Holdings Limited and GE Real Estate;

'GE Real Estate' means GE Real Estate Finance Limited;

'General Meeting' means the general meeting of the Company which is expected to be held in mid February 2009 (the notice convening such meeting to be contained in the Prospectus); 

'Group' means the Company, its subsidiaries and subsidiary undertakings and/or (where the context requires) any one or more of them; 

 'Investec' means Investec Bank plc; 

'IPD' means Investment Property Databank;

'Issue Price' means 10 pence per New Ordinary Share;

'Joint Brokers' means Panmure Gordon and Investec; 

'Joint Sponsors' means Rothschild and Panmure Gordon; 

'Listing Rules' means the listing rules issued by the UK Listing Authority pursuant to Part VI of FSMA (as amended from time to time); 

'London Stock Exchange' means London Stock Exchange plc; 

'NatWest Facility Agreement' means the term and revolving facility agreement dated 10 June 2006 (as amended and restated) between (inter alios) Workspace 13 Limited and National Westminster Bank plc;

 'New Ordinary Shares' means the new Ordinary Shares to be issued by the Company pursuant to the Rights Issue;

'Nil Paid Rights' means rights to acquire the New Ordinary Shares under the Rights Issue, nil paid;

'Official List' means the Official List maintained by the UK Listing Authority pursuant to Part VI of FSMA;

'Ordinary Shares' means ordinary shares of 10 pence each in the capital of the Company;  

'Panmure Gordon' means Panmure Gordon (UK) Limited;

 'PID' means property income distribution (as defined in the Real Estate Investment Trusts (Financial Statements of Group Real Estate Investment Trusts) Regulation 2006);

'Prospectus' means a prospectus and circular of the Company relating to the Rights Issue which is expected to be dispatched at the end of January 2009, prepared in accordance with the Prospectus Rules and the Listing Rules;

'Prospectus Rules' means the Prospectus Rules of the UK Listing Authority made under Section 73A of FSMA;

'Provisional Allotment Letter' means the renounceable provisional allotment letter to be despatched, subject to the passing of the Rights Issue Resolution at the General Meeting, to Qualifying non-CREST Shareholders (other than those, subject to certain exceptions, with registered addresses in the Excluded Territories) by the Company in respect of the New Ordinary Shares provisionally allotted to them pursuant to the Rights Issue;

'Qualifying CREST Shareholders' means Qualifying Shareholders whose Ordinary Shares on the Company's register of members on the Record Date are in uncertificated form;

'Qualifying non-CREST Shareholders' means Qualifying Shareholders whose Ordinary Shares on the Company's register of members on the Record Date are in certificated form;

'Qualifying Shareholders' means holders of Ordinary Shares on the Company's register of members on the Record Date;

'RBS Facility Agreement' means the refinancing agreement dated 27 January 2009 between (inter alios) Workspace 13 Limited,( as borrower), National Westminster bank plc and The Royal Bank of Scotland plc in relation to the refinancing of the NatWest Facility Agreement;

'RBS Facility Amendment Agreement' means the amendment agreement to the RBS Facility Agreement dated 27 January 2009 between (inter alios) Workspace 13 Limited,( as borrower), National Westminster bank plc and The Royal Bank of Scotland plc in relation to the amendment of certain financial covenants set out in the RBS Facility Agreement;

'Record Date' means the date, which is expected to be 10 February 2009, on which Shareholders are required to be on the register of members of the Company (at the close of business) in order to participate in the Rights Issue;

'Regulations' means the Uncertificated Securities Regulations 2001 (as amended);

'REIT' means real estate investment trust;

'Rights' means rights to the New Ordinary Shares pursuant to the Rights Issue;

'Rights Issue' means the proposed five for one rights issue by the Company to Qualifying Shareholders at 10 pence per existing Ordinary Share;

 'Rights Issue Resolution' means the ordinary resolution to be proposed at the General Meeting to enable the Directors to effect the Rights Issue and issue the New Ordinary Shares; 

'Rothschild' means N M Rothschild & Sons Limited;

'Shareholders' means holders of Ordinary Shares;

'SMEs' means small and medium-sized business enterprises with, typically, a turnover of less than £1 million per annum or staff of fewer than 50;

'UK Listing Authority' or 'UKLA' means the Financial Services Authority acting in its capacity as the competent authority for the purposes of FSMA;

'uncertificated' or 'uncertificated form' means recorded on the relevant register or other record of the share or other security concerned as being held in uncertificated form in CREST, and title to which, by virtue of the Regulations, may be transferred by means of CREST;

'United Kingdom' or 'UK' means the United Kingdom of Great Britain and Ireland;

'United States' or 'US' means the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia; and

'US Securities Act' means the United States Securities Act of 1933, as amended.

 

END

 

 

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