Trading Update

RNS Number : 7832O

Gas Turbine Efficiency PLC

05 July 2010

 



Gas Turbine Efficiency plc

Trading Update

and

Extension of, and amendments to, the terms of the 2009 Loan Notes  

Gas Turbine Efficiency plc ("GTE" or the "Group"), a leading provider of proprietary cleantech systems for enhancing the performance of aviation and industrial gas turbines, is pleased to announce a trading update and that it has secured additional financing.

Trading Update

As announced during April, Group trading has improved on the corresponding period in 2009 and has continued to be in line with management expectations.  In December 2009, GTE raised US$10m through the issue of 9.5% Subordinated Unsecured Loan Notes 2012 of US$10 each (the "2009 Loan Notes").  The proceeds from the issue have been used to finance the Group's working capital and development funding programmes over the last six months.

GTE continues to explore alternatives to raise equity finance with a number of strategic investors.  In order to pursue these alternatives completely as well as to continue to support its ongoing growth and development, GTE has decided in consultation with certain major shareholders to extend the 2009 Loan Notes.  This demonstrates the strong ongoing support of current investors and GTE's commitment to pursue financing alternatives involving existing investors alongside third party alternatives.

Extension of the 2009 Loan Notes

The 2009 Loan Notes consist of two tranches of Notes; the A Notes and the B Notes.  It has been agreed to extend the 2009 Loan Notes by the issue of up to US$10m C Notes of US$10 each ("C Notes"). 

Generation IM Climate Solutions Fund, L.P. ("Generation IM"), Cleantech Europe 1 (A) LP and Cleantech Europe 1 (B) LP (being funds advised by Zouk Ventures Ltd. (the "Zouk Funds")) and certain other shareholders, together with a new investor, Afikim Investments Limited, (together the "Investors") have entered into a new commitment to subscribe for up to US$10m of C Notes.  The proceeds from the issue of the C Notes will be used to finance the Group's working capital and development funding programmes.

The C Notes, will carry a fixed rate of interest of 9.5% per annum, payable quarterly in arrears, on the initial US$4,500,000 drawn down and a fixed rate of interest of 15% per annum, payable quarterly in arrears, on any amount drawn down over and above the initial US$4,500,000 drawn down. The C Notes will be repayable (along with the A Notes and B Notes) on 18 December 2012. Any Notes may be redeemed in whole or in part at any time by GTE without penalty.

All Notes will become automatically redeemable by GTE upon the issue of shares or other securities convertible into shares by any member of the Group to a third party for cash or cash equivalents prior to the repayments of any financial indebtedness of the Group. In addition, provided that the Investors hold at least 25% (in aggregate) of the ordinary issued share capital of the Company, the Investors shall, in consultation with the Chairman and the Nominations Committee, have the right to appoint (and remove and re-appoint as necessary): (i) one director to the board of the Company if the aggregate amount outstanding under the C Notes is equal to or less than US$4,500,000; and (ii) two directors to the board of the Company if the aggregate amount outstanding under the C Notes is more than US$4,500,000 or upon the occurrence of an equity fundraising.

In addition, GTE has agreed to continue the discussions that it has had with potential strategic investors and to look at financing options that will enable the 2009 Loan Notes to be repaid and to provide the operational and commercial flexibility to position GTE properly for the future

Each C Note has warrants attached to it (the "Warrants"): For the initial US$4,500,000 drawn down under the C Notes each C Note issued has Warrants over 15 Ordinary Shares attached and for every amount drawn down over and above the initial US$4,500,000 drawn down under the C Notes, each C Note issued has Warrants over 25 Ordinary Shares attached. Each Warrant will entitle the holder to subscribe for one new Ordinary Share at any time to up to the fifth anniversary of the issue of that Warrant.  The exercise price of the Warrants is 10p per share. 

Neither the C Notes nor the Warrants (or any of them) will be listed on any stock exchange.

Amendment to the 2009 Loan Notes

GTE has amended the existing A Notes and B Notes, so that all Notes are secured over the shares held by GTE in the operating companies in the US and Sweden.

In addition, GTE has also amended the warrants issued with the A Notes and B Notes, so that the exercise price is 10p per share, in line with the Warrants.

Related Party Transaction

The following parties, each being deemed a Related Party under the AIM Rules, have subscribed for C Notes, as follows:

Name	Ordinary Shares held	Percentage of issued share capital	C Notes subscribed today	Warrants issued today	Aggregate maximum amount of C Notes to be subscribed	Aggregate maximum amount of Warrants to be issued
Generation IM	21,080, 000	20.7%	$1,562,500	2,343,750	$6,400,000	13,120,000
Zouk Funds	10,315,681	10.2%	$162,500	243,750	$500,000	1,025,000

The issue of the C Notes and the amendments to the A Notes and B Notes and the warrants issued with them each constitute a related party transaction under the AIM Rules due to the fact that Generation IM and the Zouk Funds are each substantial shareholders in GTE. The directors of GTE consider, having consulted with Matrix Corporate Capital LLP ("Matrix") (GTE's Nominated Adviser), that the terms of the issue of the C Notes (including the issue of the Warrants attached to them), and the amendments to the A Notes and B Notes and the warrants issued with them, are fair and reasonable insofar as the shareholders of GTE are concerned.  In coming to their opinion, Matrix has had regard to a number of factors including the current financial position and existing funding of the Group.

Application of the Takeover Code

Following the appointment of Harry Zike to the board of directors, the Company's central management and control is considered to be outside of the United Kingdom, so the Takeover Code no longer applies to the Company.

Steve Zwolinski, Chief Executive Officer of GTE, today commented:

"We are pleased to have finalised this additional funding from new and existing shareholders.  This funding provides us with the operational and commercial flexibility to continue the development of GTE as demand from our global customer base increases."

For further information, please contact:

Gas Turbine Efficiency plc		Steven Zwolinski (Chief Executive Officer)	[phone]
	Matrix Corporate Capital LLP	Nick Ellis   Louis Castro	[phone]
	Financial Dynamics	Jon Simmons   Susanne Yule	[phone]

About GTE (AIM: GTE)

GTE designs, manufactures and supplies proprietary cleantech energy saving and performance enhancing systems to the aviation, industrial and combustion industries. GTE's extensive portfolio of patented cleantech solutions save fuel, reduce emissions, increase availability, and extend turbine and parts life.

The Group also provides solutions for burning a wider variety and quality of primary and alternative fuels. Specific products and services developed by our world-class technology team include compressor cleaning and power augmentation systems; fuels management systems; combustion design, repair, upgrade and monitoring; and fluid and control auxiliaries. The Group's systems and associated services are provided to turbine end users and OEMs including General Electric, Pratt & Whitney, Rolls Royce, Caterpillar-Solar and Siemens from operation centres in Europe and the USA.

 

END

 

 

TSTLLFVTDIIFIII