Proposed Issue of £550,000 Bonds
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR")
1 February 2017
Vela Technologies plc
("Vela", the "Company" or the "Group")
Proposed Issue of £550,000 Bonds
Proposed Investment in Portr Limited
Introduction
Further to the announcement released by the Company on 11 January 2017, the Board of Vela (AIM: VELA), the investing company focused on early-stage and pre-IPO disruptive technology investments, announces that UK Bond Network Limited ("UK Bond Network"), as agent for the Company, is today launching the issue of secured bonds to raise £550,000 for the Company (the "Bond Issue") using its designated online auction platform.
The net proceeds from the Bond Issue will be used by the Company to provide funding for a further follow-on investment of £150,000 (the "Portr Investment") in Portr Limited ("Portr"), the owner of AirPortr, the airline integrated passenger facilitation and baggage transportation service. The balance of funds raised under the Bond Issue will be used by the Company for working capital and to enable the Company to take advantage of further investment opportunities as and when they arise.
Highlights of the Bond Issue
· Vela intends to issue secured bonds (the "Bonds") to raise up to £550,000, arranged by UK Bond Network.
· Vela has already received indications of interest from investors to subscribe for approximately £250,000 of the Bonds and UK Bond Network has arranged underwriting for the remaining £300,000.
· The Bonds will have a coupon of 10% and a term of three years with full repayment in cash of the principal amount of the Bond due at maturity.
· The Bonds may be repaid at the option of Vela: (i) after the first anniversary of the issue of the Bond, together with all accrued (but unpaid) interest on the amount prepaid; or (ii) prior to the first anniversary of issue, together with the interest that would have accrued up to the first anniversary had the Bond not been prepaid.
· The Bonds will not be convertible into ordinary shares in the capital of the Company ("Ordinary Shares").
· On completion of the Bond Issue, the Bonds will be secured in favour of a security trustee appointed by Vela by way of an all-assets debenture on Vela and a fixed charge over the shares that Vela owns in Portr. Based on the issue price of shares in the current Portr fundraising, Vela's existing shareholding in Portr is valued at £1.179 million and, upon completion of the further proposed investment of £150,000 in Portr, will be valued at £1.289 million, amounting to 2.3 times the Bonds' redemption value.
· Further protection for bondholders will be provided through a personal guarantee being given by Scott Fletcher, an existing shareholder in Vela and the Chairman of UK Bond Network. As consideration for the provision of the personal guarantee, Scott Fletcher will receive a fee of £40,000 from the Company which will be satisfied by Vela transferring 3,780 shares that it currently holds in Portr (the "Guarantee Shares") to Scott Fletcher.
· The Bond Issue will be conditional upon the passing of a resolution by the shareholders of Portr to disapply rights of pre-emption on transfers of shares to enable the Guarantee Shares to be transferred to Scott Fletcher and for security over the shares that Vela own in Portr to be provided to the security trustee appointed by Vela in relation to the Bond Issue.
Proposed investment of £150,000 in Portr
On 11 January 2017 the Company announced that it had entered into a subscription agreement with Portr whereby it had agreed to invest £100,000 in Portr funded from the Company's existing cash resources. This investment completed on 13 January 2017.
Upon completion of the Bond Issue, Vela intends to invest a further £150,000 into Portr, which will be funded from the net proceeds of the Bond Issue.
Portr has already secured £2.536 million, including Vela's participation, as part of a larger fundraising. The fundraising is being undertaken by Portr in order to scale up operations to support sustained growth in demand for its innovative off-airport bag check-in solution (which was recently integrated and launched with British Airways) and for the development of new facilitation technologies to expedite the passenger experience and improve airline and airport operations, which Portr plans to commercialise in 2017. Vela has been informed by Portr that the company is also in early stage discussions with potential new investors in connection with a larger follow-on funding round later in 2017 to further accelerate growth and rollout plans.
Portr, with a track record in developing innovative solutions, deep knowledge and experience of the airport and airline environment, combines smart process design and leading edge technology to create products that give travellers freedom, time and peace of mind.
Portr has developed a universal platform which integrates airlines, airports, governments and transportation companies to aggregate and distribute data to facilitate flows of passengers and baggage between global cities.
As at the date of this announcement Vela has an interest in 111,441 shares in Portr, equivalent to 3.9 per cent. of Portr's current issued share capital. To date, Vela has invested a total of approximately £350,000 in cash in Portr (including the recent £100,000 investment). Following completion of the additional £150,000 investment into Portr, and the transfer of the Guarantee Shares to Scott Fletcher, Vela will be interested in 121,839 shares in Portr equivalent to 4.27 per cent. of Portr's enlarged issued share capital.
Based on filings at Companies House, for the year ended 26 December 2015, Portr generated a loss of £2,022,427 and as at 26 December 2015 had net assets of £819,467.
Update on Vela's investment portfolio
In the Company's interim results for the six month period ended 30 September 2016, released on 23 December 2016, the investment portfolio had a fair value of £1.90 million (unaudited) with investments being held on the balance sheet either at cost, market value or the latest valuation based on a significant financial event. Using the same valuation methodology applied as at the last balance sheet date of 30 September 2016, which is also consistent with the valuation methodology applied in the audited financial statements for the year ended 31 March 2016, the investment portfolio has an estimated fair value of £2.96 million (unaudited) as at 31 January 2017.
The increase in fair value of the investment portfolio since 30 September 2016 can be attributed primarily to: (i) an increase in the market value of Vela's stake in TSX Venture Exchange listed BTL Group Ltd which is currently valued at c. £890,000 based on the closing mid-market BTL share price of 31 January 2017; (ii) the additional investments made by the Company in THEVIBE Ltd (£200,000) and Portr (£100,000), which are both being held at cost; and (iii) the further potential investment of £150,000 in Portr which has been included in the current estimated fair value of the investment portfolio on the basis that the underwriting of the Bond Issue covers the Portr Investment.
Information on the Bond Issue
The Company is proposing to raise £550,000 pursuant to the Bond Issue. Of this amount, Vela has received indications of interest from investors to subscribe for approximately £250,000 of the Bonds and UK Bond Network has procured that the balance of £300,000 of the Bonds has been underwritten. Certain existing shareholders of Vela have indicated their interest in subscribing for the Bonds.
To fund the proposed additional Portr Investment, Vela intends to use £150,000 of the net proceeds of the Bond Issue. The balance of the net proceeds from the Bond Issue will be used for working capital and to enable the Company to take advantage of further investment opportunities as and when they arise.
The Bond auction process will be carried out by UK Bond Network, as agent of the Company, using its designated online auction platform.
High Net Worth Individuals and Sophisticated, Professional and Institutional Investors (in each case as defined in FSMA and regulations under FSMA) will be the only investors eligible to participate in the Bond Issue ("Eligible Investors"). These Eligible Investors will be required to self-certify, in accordance with the procedure required under FSMA, as being an investor falling into one of these categories before participating. Eligible Investors who wish to participate will need to register as a member of UK Bond Network's platform (www.ukbondnetwork.com).
In relation to the Bond Issue, there will be a pre-auction period, commencing today, for Eligible Investors to review the offering, followed by a live auction period commencing on 8 February 2017.
The Bond will pay a coupon of 10% and may be repaid: (i) after one year together with all accrued (but unpaid) interest on the amount prepaid; (ii) before its first anniversary, together with the interest that would have accrued up to the first anniversary had the Bonds not been prepaid.
The Bond will be secured by an all assets debenture on Vela, a fixed charge over the shares that Vela owns in Portr and a personal guarantee from Scott Fletcher, an existing shareholder in Vela and the chairman of UK Bond Network. The personal guarantee from Scott Fletcher will guarantee the payment obligations of Vela in respect of the Bonds to a maximum guaranteed amount of £575,000. Scott Fletcher is interested in 63,944,656 Ordinary Shares representing 8.86 per cent. of the issued share capital of Vela.
In consideration of Scott Fletcher entering into the personal guarantee, the Company has entered into an agreement with Scott Fletcher to pay him a fee of £40,000 which will be satisfied by the Company transferring to him 3,780 ordinary shares that they currently hold in Portr, such transfer to occur as soon as practicable following completion of the Bond Issue. Based on the price of the current Portr fundraising, the Guarantee Shares have a value of approximately £40,000 and are equal to 16 per cent. of the total number of shares being subscribed for by Vela in the current Portr fundraise. As part of this agreement the Company has agreed that, until the Bonds have been repaid in full, the Company shall not increase the balance of its indebtedness beyond an aggregate amount of £950,000 without having notified Scott Fletcher and receiving his prior written consent.
Timetable for the Bond Issue
The one-week pre-auction for the Bond Issue commences with effect from today, enabling registered investors to review the offer documents. The auction will commence on 8 February 2017 and will remain open for up to 2 weeks. The auction for the Bond Issue may close earlier if the Bond Issue is fully subscribed. Settlement of the Bond Issue will take place the business day following the auction closing.
Terms of the Bond Instrument
The Company will create and authorise the issue of £550,000 unlisted, secured Bonds (in multiples of £1 each) by entering into the Bond Instrument upon completion of the auction. The Bonds will mature and be due for repayment in full on the third anniversary after the issue date, subject to them having not been repaid earlier at the option of the Company.
The full amount of principal under the Bonds, together with any interest accrued on them, may, at the option of the Bondholders' trustee, become immediately due and repayable if an "Event of Default" occurs and is continuing. The Events of Default set out in the conditions to the Bond Instrument will include, among others, late payment of any sum due under the Bonds, or the insolvent liquidation of the Company.
The Bonds accrue interest daily, payable in quarterly instalments by the Company in arrears. The rate at which interest will accrue is 10% per annum.
Each Eligible Investor (or its nominee) who holds a Bond (a "Bondholder") will receive a certificate recording the details of their Bonds. The Bonds are transferable.
The Company gives certain customary warranties to the Bondholders, including as to matters relating to the Company and its business.
Terms of the Bond Placing Agreement
Under the terms of an agreement entered into between the Company and UK Bond Network relating to the Bond Issue (the "Bond Placing Agreement"), for the purpose of procuring Eligible Investors who will subscribe for the Bonds, UK Bond Network has agreed to make available to the Company its website platform, upon which the auction of the Bonds to Eligible Investors is to be conducted.
Under the terms of the Bond Placing Agreement completion of the Bond Issue is conditional, inter alia, upon: (i) the underwriting agreement in relation to the Bond and the Bond Placing Agreement becoming unconditional in all respects; and (ii) passing of a resolution by the shareholders of Portr to disapply rights of pre-emption on transfers of shares to enable the Guarantee Shares to be transferred to Scott Fletcher and for security over the shares that Vela will own in Portr to be provided to the security trustee appointed by Vela in relation to the Bond Issue.
The Bond Placing Agreement incorporates the customary warranties given by the Company under the Bond Instrument, including as to matters relating to the Group and its business. The Bond Placing Agreement also contains customary rights of termination which could enable UK Bond Network to terminate the Bond Placing Agreement in certain limited circumstances.
Antony Laiker, Executive Director of Vela, said:
"This fundraising through UK Bond Network enables our current as well as new investors to support our continued investment strategy by participating in a non-dilutive structure. The launch of Portr's partnership with British Airways in October 2016 was an important milestone, significantly raising the profile and visibility of the AirPortr brand to a wider travel audience."
For further information, please contact:
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