Amendment to the CULS and Capital Reorganisation
4 June 2009
Corero PLC
("Corero" or the "Company")
Proposed amendment to the terms of the existing 8 per cent convertible
unsecured redeemable loan stock 2011 ("CULS") and capital reorganisation
Corero today announces a proposal to amend the terms of the CULS to extend the
redemption date, enhance the conversion rights and reschedule the annual coupon
payable by the Company for the remainder of the life of the CULS. This is
designed to improve the Company's liquidity and debt maturity profile. In
addition, the Company also announces a Capital Reorganisation.
A circular has been sent to the Company's shareholders and to the holders of
CULS to convene an Extraordinary General Meeting and CULS Meeting to consider
and, if thought fit, approve the resolutions required to effect the Proposed
Amendments of the CULS and the Capital Reorganisation (the "Circular"). In
addition, the Company's annual report and accounts for the year ended 31
December 2008 have also been posted to shareholders and both documents are
available from the Company's registered office, 3rd Floor, 3 London Wall
Buildings, London Wall, London EC2M 5SY and to download from the Company's
website www.corero.com.
Background to and reasons for the Proposed Amendments
As set out in the Company's trading statement dated 20 January 2009 and the
Chairman's Statement in the preliminary results announcement dated 26 March
2009, the Company's Business Systems division's major application, Resource,
requires additional investment in order to maintain its competitive position
and to take advantage of future market opportunities. As a first step towards
accumulating the necessary capital the Directors propose to amend the terms of
the CULS as set out below, which will assist working capital by effectively
reducing the annual coupon until 2012, as more fully described below. The
Directors believe that this measure will provide the required additional
investment to start the Resource development. The effect on cash flow for the
next three years following the implementation of the proposed amendments to the
terms of the CULS, will make an additional £480,000 of capital available to the
Company over that period. The Board will finalise the cost of the Resource
development over the next few months and intends to finance additional
requirements from working capital or an additional short term loan in which the
directors intend to participate. As part of the change to the terms of the
CULS, the final redemption date will be deferred to 2015 which will relieve the
Company of the burden of repaying £4,000,000 in 2011. This is critical both to
enable the Resource development to go ahead and to strengthen the Company's
position in commercial negotiations with current and potential customers.
Proposed amendments to the terms of the CULS
The principal amendments to the terms of the CULS are as follows:
1. The deferment of the redemption date of the CULS from 31 October 2011 to 30
June 2015.
2. The rescheduling, with effect from and including 1 January 2009, of the
annual 8 per cent. interest payable on the CULS. It is proposed that for the
three year period from 1 January 2009 to 31 December 2011 (the "First Interest
Period"), the CULS will continue to bear interest on the principal outstanding
sum at the rate of 8 per cent. per annum but only 50 per cent. of such interest
will be paid (the "Paid Interest"). Payment of the remaining 50 per cent. of
such interest (the "Deferred Interest") will be deferred and paid on the third
anniversary of the date on which such Deferred Interest accrued (each date on
which such Deferred Interest accrued being an "Accrual Date"). During the three
and a half year period from 1 January 2012 to 30 June 2015 (the "Second
Interest period") the CULS will continue to bear interest on the principal
outstanding sum at the rate of 8 per cent. per annum and such interest payments
will be made on the relevant interest payment date in the Second Interest
Period (i.e. not deferred). As a result, notwithstanding that the CULS continue
to bear interest on the principal outstanding sum at the rate of 8 per cent.
per annum, a CULS holder who holds CULS for the entire remaining life of the
CULS will receive such payments by the Company as if the CULS bore interest at
4 per cent. per annum during the First Interest Period and 12 per cent. per
annum during the Second Interest Period (save that the final payment of
Deferred Interest shall be made on 31 December 2014, such that the final
payment on 30 June 2015 will represent only the interest for the six month
period at 8 per cent. per annum, and will not include any additional deferred
interest).
Please note that the effect of the proposed amendments is to defer the payment
of 50 per cent. of the interest payable on the CULS in respect of the current
interest period ending on 30 June 2009, with the deferred interest payable on
30 June 2012.
Deferred Interest will be paid on the third anniversary of the relevant Accrual
Date to the CULS holder who was on the register on the relevant Accrual Date.
Accordingly, any transferee of any CULS will not receive any Deferred Interest
which accrued prior to the date of transfer.
No additional interest will be paid on the Deferred Interest.
3. The enhancement of the conversion rights from four Existing Ordinary Shares
for every £1 nominal of CULS to 12.5 Existing Ordinary Shares for every £1
nominal of CULS, which equates to a conversion price, prior to the Capital
Reorganisation, of 8p. Following the Capital Reorganisation, the enhanced
conversion rights will be adjusted to 0.4167 New Ordinary Shares for every £1
nominal of CULS, resulting in an effective conversion price of 240p per New
Ordinary Share. As the CULS Resolution is subject to and conditional upon
approval of the EGM Resolutions, the proposed amendments to the CULS, as set
out in the notice of the CULS Meeting, reflect the enhanced conversion rights
as adjusted by the Capital Reorganisation.
Any fractions arising from the conversion of the CULS will be aggregated and
allotted to a trustee who will sell the shares for the benefit of the relevant
CULS holder. However, if the net proceeds of such sale amount to less than £2
in respect of any one holding, the net proceeds will be retained by the
Company.
4. The reduction of the price of an Existing Ordinary Share at which the
Company has the right to compel CULS holders to convert their CULS into
Ordinary Shares from £1 to 32p. Following the Capital Reorganisation, this
price will be adjusted to £9.60. As the CULS Resolution is subject to and
conditional upon approval of the EGM Resolutions, the proposed amendments to
the CULS, as set out in the notice of the CULS Meeting, reflect the price as
adjusted by the Capital Reorganisation.
Takeover Code matters
Foresight Technology VCT plc, New City Investment Managers Limited and AXA
Framlington Group Limited have each undertaken not to convert any number of
CULS to the extent that to do so would create any obligation on it (or in the
case of Foresight Technology VCT plc, any party with whom it is considered to
be acting in concert) to make an offer for the Company under Rule 9 of the
Takeover Code.
Capital Reorganisation
The current mid-market share price is below the present nominal, or par, value
of the Existing Ordinary Shares. Company law prohibits a company from issuing
shares at a discount to the nominal value of its shares. The Proposed
Amendments to the CULS would result in the new conversion price of the CULS
being below the current nominal value of a Corero Existing Ordinary Share. As a
result, in order that the Proposed Amendments to the CULS may be made, it is
necessary to reduce the nominal value of the Company's authorised and issued
Existing Ordinary Shares. Accordingly, the Directors propose to carry out the
Capital Reorganisation on the following basis:
(a) every 30 Existing Ordinary Shares in issue at the Capital Reorganisation
Record Time will be consolidated into one new ordinary share of £3 in the
capital of the Company;
(b) each new ordinary share of £3 will be subdivided into and reclassified as
one New Ordinary Share of 1p and one Deferred Share of £2.99; and
(c) each of the authorised and unissued Existing Ordinary Shares will be
subdivided into and reclassified as 10 New Ordinary Shares.
Any fractions arising from the Capital Reorganisation will be aggregated and
sold for the benefit of the Company.
The rights attaching to the New Ordinary Shares will, apart from the change in
nominal value, be identical in all respects to those of the Existing Ordinary
Shares. The Capital Reorganisation will not affect the voting rights of holders
of Existing Ordinary Shares. Nevertheless, certain amendments to the Company's
articles of association are required to effect the Capital Reorganisation, to
refer to the change in nominal value of the Ordinary Shares, and to reflect the
rights of the Deferred Shares (which are referred to below).
Application will be made for admission of the New Ordinary Shares to trading on
AIM. It is expected that the dealing and settlement in CREST in the Existing
Ordinary Shares will continue until the close of business on 29 June 2009.
Subject to the necessary approval at the EGM, Admission of the New Ordinary
Shares is expected to occur at 8.00 a.m. on 30 June 2009.
Existing share certificates will cease to be valid following the Capital
Reorganisation and new share certificates will be issued on 7 July 2009.
Shareholders who hold their Existing Ordinary Shares in uncertificated form
will have their CREST accounts credited with the New Ordinary Shares on 30 June
2009 or as soon as practicable after Admission.
The Deferred Shares are required to be created for technical reasons in order
to maintain the aggregate nominal value of the Company's share capital after
the Capital Reorganisation and will effectively be valueless. The Deferred
Shares will have no voting or dividend rights and, on a return of capital, will
have the right to receive the amount paid up thereon after the holders of the
New Ordinary Shares have received, in aggregate, the amount paid up thereon
plus £10,000,000 per New Ordinary Share. The Deferred Shares will not be
transferable (save with the consent of the Directors) and no share certificates
will be issued in respect of them. The Company may, at any time, transfer the
Deferred Shares to any other person or buy back the Deferred Shares, for an
aggregate payment of 1p.
It is the Board's intention, at the appropriate time, to effect a repurchase of
the Deferred Shares, to make an application to the High Court for the Deferred
Shares to be cancelled, or for the Company to cancel the Deferred Shares, with
the approval of its Shareholders.
Expected timetable of principal events
Despatch of the Circular 4 June 2009
Latest time and date for receipt of EGM Forms of 10.30 a.m. on 27 June 2009
Proxy
Latest time and date for receipt of CULS Forms of 11.00 a.m. on 27 June 2009
Proxy
EGM 10.30 a.m. on 29 June 2009
(or such later time as the
AGM shall have concluded
or been adjourned)
CULS Meeting 11.00 a.m. on 29 June 2009
(or such later time as the
EGM shall have concluded
or been adjourned)
Capital Reorganisation Record Time 6.00 p.m. on 29 June 2009
(or such later time and
date as the Board (or a
duly authorised committee
of the Board) may
determine)
Capital Reorganisation becomes effective and 30 June 2009
trading of New Ordinary Shares expected to commence
on AIM
CREST account credited with New Ordinary Shares 30 June 2009
Certificates issued in respect of New Ordinary 7 July 2009
Shares
Enquiries:
Corero plc
Peter Waller, Executive Chairman Tel: 07785 228080
Duncan Swallow, Financial Controller Tel: 01923 695136
John East & Partners Limited, a subsidiary of Merchant Securities PLC
John East/Virginia Bull Tel: 020 7628 2200
College Hill Tel: 020 7457 2020
Matthew Smallwood Tel: 020 7457 2047
Definitions
"Admission" the admission of the New Ordinary Shares to
trading on AIM becoming effective in accordance
with Rule 6 of the AIM Rules
"AGM" or "Annual General the annual general meeting of the Company
Meeting" convened for 10.00 a.m. on 29 June 2009, notice
of which is set out in the Company's report and
accounts for the year ended 31 December 2008
"AIM" the AIM Market of the London Stock Exchange plc
"Capital Reorganisation" the proposed reorganisation of the Existing
Ordinary Shares into New Ordinary Shares and
Deferred Shares, as described in the Circular
"Capital Reorganisation 6.00 p.m. on 29 June 2009 (or such later time and
Record Time" date as the Board (or a duly authorised committee
of the Board) may determine)
"Code" or "Takeover Code" The City Code on Takeovers and Mergers
"CREST" the computer-based system established under the
CREST Regulations which enables title to units of
relevant securities (as defined in the CREST
regulations) to be evidenced and transferred
without a written instrument and in respect of
which Euroclear UK & Ireland Limited is the
operator (as defined in the CREST Regulations)
"CULS" or "Convertible the £4,000,000 nominal of 8 per cent. convertible
Unsecured Loan Stock" unsecured redeemable loan stock 2011
"CULS Meeting" the meeting of the holders of CULS convened for
11.00 a.m. on 29 June 2009 (or such later time as
the EGM shall have concluded or been adjourned),
notice of which is set out in the Circular
"CULS Resolution" the resolution set out in the notice of meeting
of the holders of CULS, set out in the Circular
"Deferred Shares" the deferred shares of £2.99 each arising from
the Capital Reorganisation
"Directors" or "Board" the directors of the Company
"EGM" or "Extraordinary the extraordinary general meeting of the Company
General Meeting" convened for 10.30 a.m. on 29 June 2009 (or such
later time as the AGM shall have concluded or
been adjourned), notice of which is set out in
the Circular
"EGM Resolutions" the resolutions set out in the notice of the
Extraordinary General Meeting, set out in the
Circular
"Existing Ordinary Shares" the 45,569,702 existing ordinary shares of 10p
each in the capital of the Company
"Group" the Company and its subsidiary undertakings
"JEP" John East & Partners Limited, which is authorised
and regulated by the Financial Services Authority
and is the Company's nominated adviser and broker
"New Ordinary Shares" the new ordinary shares of 1p each in the capital
of the Company arising from the Capital
Reorganisation
"Ordinary Shares" Existing Ordinary Shares or New Ordinary Shares,
as the context may require
"Proposals" the Proposed Amendments and the Capital
Reorganisation set out in the Circular
"Proposed Amendments" the proposed amendments to the terms of the CULS
as described in the Circular
"Resolutions" the EGM Resolutions and CULS Resolution
"Shareholders" holders of Existing Ordinary Shares or New
Ordinary Shares, as the context may require
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