Unsecured Convertible Loan Agreement

RNS Number : 9894I

Manx Financial Group PLC

01 August 2012

 



FOR IMMEDIATE RELEASE

1 August 2012

Manx Financial Group PLC (the "Group")

Unsecured Convertible Loan Agreement

In line with the Group's business plan which anticipates significantly increased commercial and retail lending, the Group has started the process of securing additional regulatory capital to support this expected new business. The plan requires the Group's banking subsidiary - Conister Bank Limited ("the Bank") - to return to profitability in the second half of 2012 and the Group itself to become profitable during 2013. Whilst the Group, unlike many of its competitors, has access to ample liquidity through the Bank's balance sheet, this cash surplus cannot be deployed to fund the Bank's ICAAP projections. Therefore, due to this anticipated growth in lending combined with the loss for the 12 months ended 31 December 2011, the Group now finds itself in a position where it requires immediate additional regulatory capital to support this increase.

Thus the Group's directors have taken guidance as to the most suitable method of introducing the new regulatory capital required. As a result, the Group has negotiated an unsecured convertible loan note ("Loan") with the Group's principal shareholder, with the commitment of receiving further capital from other parties in the near future on the same terms.

Burnbrae Limited, wholly owned by a trust of which Jim Mellon, the Group's Chairman, is a life tenant will subscribe a total of £1.7 million to this Loan, of which £1.2 million will be additional capital; the remainder consolidating the £500,000 unsecured loan noted in the Group's 2011 Accounts. The Loan will be for a period of five years and have a coupon of 7%. The conversion will be at 4 pence. The Loan will include one warrant for every £0.06 of principal loan sum advanced at an exercise price of 6 pence with a five year term. A further announcement will be made in due course once the documentation is formalised and funds received from the other parties.

AIM Rules

The entering into of the Loan is a Related Party Transaction under the AIM Rules due to the interests of James Mellon in the transaction as set out above. As a result of the Group's past financial performance and anticipated future developments, the requirement for additional regulatory capital has become more immediate. The Group has considered the funding alternatives available, including formal share issues and possible share offers to Shareholders; however, it has concluded that none of these are practical in terms of either time or cost. Accordingly, the directors of the Group, with the exception of Jim Mellon and Denham Eke, consider, having consulted the Group's Nominated Adviser, that the terms of the transaction are fair and reasonable insofar as the Group's shareholders are concerned.

For further information, please contact:

Manx Financial Group PLC

Denham Eke / Douglas Grant

Tel [phone]

Beaumont Cornish Limited

Roland Cornish

Tel [phone]

Britton Financial PR

Tim Blackstone

Tel [phone]

Additional Information

The principal terms of the Loan are as follows:-

Repayment Date:	5 years after drawdown and no later than 31 July 2017
Interest Rate:	7 per cent. payable in arrears on 31 March, 30 June, 30 September and 31 December
Conversion Rate:	4 pence  (adjustable in such manner as will be determined by the Group's auditors for such corporate actions as share subdivisions and consolidations)
Conversion Period:	From first day after the settlement date until the sixth day prior to the maturity date
Other:	One warrant for every £0.06 of principal loan sum advanced at an exercise price of 6 pence with a five year term The lender undertakes to only convert or exercise such as to remain below 30 per cent. of the Group's issued share capital or otherwise as to not trigger a Rule 9 takeover threshold and to comply with the Group subsidiary banking licence regulatory obligations
Transferability:	Can be transferred on fourteen days written notice by mutual agreement between the Lender and the Group

 

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