Circular and Notice of General Meeting

RNS Number : 9720O

UK Coal PLC

18 October 2012

 



18 October 2012

UK COAL PLC

Circular to Shareholders and Notice of General Meeting
to implement the Restructuring

UK Coal plc ("UK Coal") announces that it has today posted a circular and a Notice of General Meeting to Shareholders which contains details of a proposed transfer of listing category on the Official List from premium to standard (the "Proposed Transfer") as a key step to implement the proposed Restructuring of the Company's business.  The Company also intends to change its name to "Coalfield Resources plc" following implementation of the Restructuring to reflect the new emphasis of its business.

The General Meeting will be on held on 5 November 2012 at Harworth Park, Blyth Road, Harworth, Doncaster DN11 8DB starting at 11 a.m.

Copies of the circular will be submitted to the National Storage Mechanism and will shortly be made available for viewing online at the following website address: www.hemscott.com/nsm.do.

Capitalised terms used but not defined herein shall have the meanings ascribed to them in the circular.

Background to and reasons for the Proposed Transfer

The Company, as a premium listed company, is currently subject to the "super-equivalent" provisions of the Listing Rules. Consequently it is required to seek prior shareholder approval in connection with class one transactions under Listing Rule 10. As a standard listed company, these restrictions would not apply to the Company. After careful consideration and analysis of the various listing regimes available to the Company, the Board has concluded that the Proposed Transfer will enable the Restructuring to be implemented in a shorter timeframe, with more certainty, with greater flexibility and at a significantly lower expense as the requirement to produce a class 1 circular and obtain prior shareholder approval would not apply.  Further, the Company considers that a standard listing will be more appropriate going forward as it will better align the Company's regulatory responsibilities (and the associated costs) with the Company's size.

Under the Listing Rules, the Proposed Transfer requires the Company first to obtain the approval of not less than 75 per cent. of Shareholders, voting in person or by proxy, at a general meeting.  The Peel Group, together with three other major shareholders, support the Proposed Transfer and have irrevocably undertaken to vote in favour of the resolutions at the General Meeting, in respect of a total of 138,861,938 Ordinary Shares (representing approximately 46.4 per cent. of the ordinary share capital of the Company in issue on 17 October 2012, being the last practicable date prior to posting of this document).

If the resolution to approve the Proposed Transfer is passed, it is anticipated that the date of transfer will be 4 December 2012.  As a result of the financing pressures and the operational risks faced by the Company and the need to secure further support from key stakeholders, the Directors believe that the Company will need to implement the Restructuring shortly after the transfer to a standard listing takes effect (but by no later than 31 December 2012) for it to continue to trade as a going concern for the foreseeable future.

If the resolution to approve the Proposed Transfer is not passed at the General Meeting the Company would retain its premium listing and this will make it considerably more costly and difficult (and potentially impossible) to implement the Restructuring within the required timescale.  If the Restructuring is not completed, the Company's current expectation is that the covenants of the Group's bank facilities will be breached at the December 2012 test date causing the terms of the Group's bank facilities to be breached which, in the event that a waiver of these covenants cannot be obtained, would result in the bank facilities becoming repayable in the first quarter of 2013. In the event of a covenant breach at the December 2012 test date, the Company would need to obtain a waiver of the relevant covenant from its banks to avoid the bank facilities becoming repayable and there can be no guarantee that such a waiver would be forthcoming unless the Restructuring has been completed.  If the Group becomes insolvent or enters into administration or a similar process, secured creditors of the Group will be able to enforce their security over the Group's property assets, leaving Shareholders and unsecured creditors with little or no prospect of recovering their investments and/or debt in the Group.

Accordingly, the Board considers that the Proposed Transfer and the Restructuring are in the best interests of the Company and its Shareholders as a whole and the Board has unanimously recommended in the circular that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own holdings.

Description of the Restructuring

As previously announced, agreements in principle have been reached with the Pension Trustees and with the Company's key stakeholders which are expected to result, once the Restructuring is implemented, in approximately £80 million of financial support to the Group over the period to the end of 2015.  The Board believes that, if the Restructuring is successfully completed, the Company will have adequate resources to continue in operational existence for the foreseeable future.  The terms of the Restructuring mean that Shareholders' principal economic interest in the Company following the Restructuring will be a 24.9% stake in the long term development potential of the Property Division's assets.  Further detail regarding the terms of the Restructuring are set out in the circular.

Since the Company's interim results on 10 August 2012, the coal price has continued to decline.  Coupled with variations in the coal production profile, this has altered the long term prospects of the Mining Division.  As a consequence, and in order to provide adequate headroom for the Mining Division, the Company has requested an increase in the Property Division's bank loan facilities to £60 million, which will allow an additional £10 million loan to be made by Propco to the Mining Division, providing the Mining Division with an additional £10 million of headroom following completion of the Restructuring.  The other principal change is that instead of Shareholders' interest in the Property Division being held by a new listed holding company, for legal, cost and timing reasons we have had to leave this interest in the existing company, UK Coal plc.

The Restructuring is a complex process and will require the approval of a number of parties and formal legal and regulatory clearances.  The description of the Restructuring included in the circular reflects the ongoing discussions of the Company with its stakeholders and regulators. No legally binding documentation has been executed with the Company's stakeholders. If the Company fails to reach legally binding agreements with its stakeholders, and, therefore, the Restructuring is not implemented by 31 December 2012, the Company may no longer be able to trade as a going concern and this would likely result in the appointment of receivers, liquidators or administrators as early as the first quarter of 2013.

Expected timetable of principal events

Posting of circular and notice of General Meeting	18 October 2012
Latest time and date for receipt of Forms of Proxy for use at General Meeting	11 a.m. on 3 November 2012
General Meeting	11 a.m. on 5 November 2012
Expected date upon which the transfer of listing category will become effective	4 December 2012
Expected time to implement the Restructuring	between 4 - 31 December 2012

Enquiries:

Analysts and investors
Jonson Cox	Chairman, UK Coal	Tel: [phone]
David Brocksom	Group Finance Director, UK Coal	Tel: [phone]
Media
Anthony Cardew / Emma Crawshaw	Cardew Group	Tel: [phone]

 

END

 

 

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