Notice of General Meeting - Proposed Placing an...

Notice of General Meeting - Proposed Placing and Debt Conversion

28 September 2012

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

Blavod Wines and Spirits PLC
("Blavod" or the "Company")

Proposed Placing of 160,000,000 Placing Shares at 0.75 pence per share
Proposed Debt Conversion
Proposed Capital Reorganisation
and Notice of General Meeting

The Board of Blavod Wines & Spirits plc (AIM:BES), owner of premium drinks brands including Blavod Black Vodka, Blackwoods Gin and RedLeg Rum, are pleased to announce that the Company has conditionally raised £1.2m (gross) following the conditional Placing of 160,000,000 New Ordinary Shares at a price of 0.75 pence per ordinary share to provide for the continued development of the Group's existing product line, marketing and for working capital.  The Company has also conditionally converted £400,000 of debt (together with accrued, unpaid interest totalling £37,580) owed by the Company under the Loan Note Instrument into, in aggregate, 58,344,000 New Ordinary Shares. Upon Admission, the proceeds available for the Company, pursuant to the Placing, net of commission and expenses will be approximately £1.1 million.

Both the Placing and the Debt Conversion are conditional, inter alia, upon the Company obtaining approval from its Shareholders to grant the Board authority to allot the Placing Shares and Debt Conversion Shares and to disapply statutory pre-emption rights which would otherwise apply to the allotment of such shares.  The Placing and Debt Conversion are also conditional upon Admission.

The proposed Placing Price is less than the nominal value of the Existing Ordinary Shares. The Company is not permitted under the Act to issue new shares at less than their nominal value, so in order to raise additional funds, the Company needs to reorganise its share capital to reduce the nominal value of its ordinary shares.

Notice of General Meeting

A General Meeting will be held at 11.00 am on 16 October 2012 at the offices of Maclay Murray & Spens LLP, 12th floor, One London Wall, London EC2Y 5AB. The Placing and Debt Conversion are conditional, inter alia, upon the passing of all of the Resolutions at the General Meeting.

A circular, providing Shareholders with information about the background to and the reasons for the Placing, outlining the terms of the subscription, (the "Circular") and containing a notice of a General Meeting will be sent to Shareholders today. Extracts from the Circular are set out below and will be made available on the Company's website, www.blavodwinesandspirits.com.

Other than where stated, capitalised terms used in this notice shall have the same meaning as ascribed to them in the Circular.

Shareholders should be aware that if any of the Resolutions are not approved at the General Meeting, the Placing will not proceed and the Company will not have sufficient working capital to fund its operations. Furthermore, in the absence of immediate alternative additional funding, the Company could become insolvent imminently, potentially leading to the total loss of shareholder value.

Don Goulding, Executive Chairman of the Company, commented: "As was stated in our financial results published on the 6th of September, the Company is now making strong progress having reduced group costs and increased sales and margins on its owned branded portfolio and it now has a very strong platform from which to achieve further growth through increasing sales and developing new products

The funding announced today will go some way towards us accelerating this growth and we are very pleased that a number of our existing shareholders as well as several new institutions have given us their full support to achieve this."

Broker Appointment

The Board is also pleased to announce the appointment of Simple Investments as joint broker to the Company with immediate effect.

For further information please contact:

Blavod Wines and Spirits plc
Don Goulding Executive Chairman
+44 20 7352 2096
N+1 Brewin (NOMAD & Joint Broker)
Richard Lindley
+44 113 241 0181
Simple Investments (Joint Broker)
Nick Emerson
Renato Rufus
+44 (0) 1483 413 500
Cadogan PR
Alex Walters
+44 20 7839 9260
+44 7771 713608

Introduction
The Company today announced the conditional Placing of 160,000,000 New Ordinary Shares at a price of 0.75p per share and the conditional conversion of £400,000 of debt (together with accrued, unpaid interest totalling £37,580) owed by the Company under the Loan Note Instrument into, in aggregate, 58,344,000 New Ordinary Shares. Upon Admission, the proceeds available for the Company, pursuant to the Placing, net of commission and expenses will be approximately £1.1 million.

Both the Placing and the Debt Conversion are conditional, inter alia, upon the Company obtaining approval from its Shareholders to grant the Board authority to allot the Placing Shares and Debt Conversion Shares and to disapply statutory pre-emption rights which would otherwise apply to the allotment of such shares. The Placing and Debt Conversion are also conditional upon Admission.

The proposed Placing Price is less than the nominal value of the Existing Ordinary Shares. The Company is not permitted under the Act to issue new shares at less than their nominal value, so in order to raise additional funds, the Company needs to reorganise its share capital to reduce the nominal value of its ordinary shares.

Background to, and reasons for, the Proposals

The Company reported in its annual report for the year ended 31 March 2012 that it has continued to concentrate its efforts on developing premium brands, expanding into new markets and controlling costs. During the current financial year, the Directors believe that the Group has accelerated its efforts to achieve growth by, inter alia, restructuring the management team and consolidating its brand portfolio, further details of which are set out below.

Over recent months, the Company has been in discussions with a number of potential sources for funding. The Board subsequently received several offers of funding from existing Shareholders and, after due and careful deliberation, concluded that such offers were in the best interests of the Company and the

9

Shareholders as a whole. The principal objectives of the Placing are to provide for the continued development of the Group's existing product line and for working capital.
 
 

The Placing and the Debt Conversion are conditional, inter alia, upon the passing of the Resolutions at the General Meeting.

Shareholders should be aware that if any of the Resolutions are not approved at the General Meeting, the Placing will not proceed and the Company will not have sufficient working capital to fund its operations. Furthermore, in the absence of immediate alternative additional funding, the Company could become insolvent imminently, potentially leading to the total loss of shareholder value.

Trading Update

The Company made the following trading update on 6 September 2012:

"The changes made by the Board between October 2011 and April 2012 have had a positive effect on the performance of the Group as can be seen by the improved performance of both owned and agency brands.

Several management changes were made, as well as improvements to enable faster processing of orders and the installation of systems to improve the level of management information. At the same time the portfolio of agency brands was reduced with a focus on fewer more profitable brands which simplified the business considerably and lessened the working capital requirements of the Group. As a result, those agency brands which were retained grew by 50 per cent. A greater focus was also placed on developing high quality UK accounts, reducing the Group's credit risk. At the same time, the Group has improved both its debt collection and stock management.

In the period, we have achieved significant success with our owned Blavod brands, such as Blackwood's Gin and third party owned brands such as Bruichladdich Malt Whisky, in becoming more widely available through new listings in a number of UK pub chains and the major multiples. We also achieved a successful launch of our own brand drink RedLeg Spiced Rum, which has rapidly become popular as a result of a number of original and innovative marketing initiatives.

RedLeg was one of the best selling spirits at three music festivals this summer in the South of England, and was successfully cross marketed with a newly launched soft drinks brand in bars. Other innovative marketing initiatives have included RedLeg sponsored "jamming" nights which have been sold out and the production of a RedLeg Cocktail book for bar staff.

The Group has also successfully focused on improving the performance in export markets and these included rationalising stock levels in the USA and Spain and opening new markets in four territories in Asia. Sales in continental Europe have increased by 25 per cent. year on year following the agreement signed with Waldemar Behn GmbH last year."

The Placing

The Company has conditionally raised, in aggregate, £1,200,000 (before expenses) by means of the Placing. The intended use of the monies raised is set out below.

The Placing Shares will rank in full for all dividends and otherwise, pari passu with the Ordinary Shares from the date of Admission. The Subscription Agreements confirming the agreement of certain investors to subscribe for the Placing Shares pursuant to the Placing have been issued and returned to the Company.

The Placing Shares will represent approximately 52.27 per cent. of the Enlarged Share Capital following Admission. The Enlarged Share Capital following Admission will be 306,102,508 Ordinary Shares. It is expected that the Placing Shares will be admitted to trading on AIM on 19 October 2012. The Placing is conditional, inter alia, upon:

  • the approval of all of the Resolutions at the General Meeting; 

  • the Debt Conversion; and 

  • Admission. 

The Debt Conversion
On 8 October 2006, the Company issued Loan Notes in order to raise £400,000. The Loan Notes are repayable in full on 30 September 2014, including any accrued but unpaid interest.

In accordance with the terms of the Loan Note Instrument, the interest on the Loan Notes accrues from day to day on the principal amount at the rate of 6 per cent. per annum (less income tax at the applicable rate) and is payable by equal half-yearly instalments in arrears on 31 March and 30 September in each year. If the Company fails to make any payment of interest or principal when due, default interest of 10 per cent. per annum compounded by six monthly rests accrues on the amount of any unpaid interest or principal from (and including) the due date until the date on which the overdue monies are remitted to the holders of the Loan Notes. In the case of non-payment of principal, the default interest accrues instead of, and not in addition to, the interest at the rate of 6 per cent. per annum.

Given the Board's continued objective to develop the Company's working capital and to strengthen the balance sheet, the Company has entered into conditional Debt Conversion Agreements dated on or around 27 September 2012 under which holders of the Loan Notes will convert a total of £400,000 of Loan Notes (together with accrued interest totalling £37,580) into 58,344,000 New Ordinary Shares, fully paid, at the Placing Price.

The Debt Conversion will enable the Company to avoid having to make further payments of interest on the Loan Notes and there will be no requirement to repay, in cash, to the holders of the Loan Notes, the value of the Loan Notes on the repayment date (i.e. 30 September 2014).

The Debt Conversion Shares will rank in full for all dividends and otherwise pari passu with the Ordinary Shares from the date of Admission.

The Debt Conversion Shares will represent approximately 19.06 per cent. of the Enlarged Share Capital following Admission. It is expected that the Debt Conversion Shares to be issued pursuant to the Debt Conversion Agreements will be admitted to trading on AIM on 19 October 2012. The Debt Conversion is conditional, inter alia, upon:

  • the approval of all of the Resolutions at the General Meeting; 

  • the Placing; and 

  • Admission. 

On the basis that the Debt Conversion is approved, there will be no outstanding Loan Notes in issue pursuant to the Loan Note Instrument.

Use of Proceeds

The proceeds of the Placing will be used as follows:

Working capital and restructuring £0.78 million
Brand marketing £0.26 million
New brand development £0.10 million
Expenses £0.06 million
Total£1.2 million

Capital Reorganisation
The Placing Price represents a discount to the current 1p nominal value of an Existing Ordinary Share. However, the Act prohibits the issue of shares at a price below their nominal value and, accordingly, a share capital reorganisation will be necessary in order to undertake the Placing and to issue and allot the Debt Conversion Shares pursuant to the Debt Conversion Agreements. It is therefore proposed to reorganise the share capital of the Company by subdividing each issued Existing Ordinary Share into one Ordinary Share of 0.1p and one Deferred Share of 0.9p.

Save for the dilution which will result from the issue of the Placing Shares and the Debt Conversion Shares, the interests of existing Shareholders (both in terms of their economic interest and voting rights) will not be diluted by the implementation of the Capital Reorganisation.

As at the date of this announcement, there are 87,758,508 Existing Ordinary Shares in issue. Resolution 3 will be proposed at the General Meeting for the purpose of the Capital Reorganisation and Resolution 4 will be proposed to approve the adoption of the Articles .

The Ordinary Shares will have the same rights (including voting and dividend rights) as each Existing Ordinary Share has at present. No new share certificates will be issued in respect of the Ordinary Shares and share certificates in respect of Existing Ordinary Shares will be valid and will continue to be accepted as evidence of title for the Ordinary Shares. The ISIN and SEDOL numbers for the Ordinary Shares will be the same as for the Existing Ordinary Shares.

In order to effect the Capital Reorganisation, the Company proposes to adopt the Articles which will consist of the existing articles of association of the Company amended solely to include the rights of the Deferred Shares. These rights will be minimal thereby rendering the Deferred Shares effectively valueless.

The rights attaching to the Deferred Shares can be summarised as follows:

  • they do not entitle holders to receive any dividend or other distribution or to receive notice or speak or vote at general meetings of the Company; 

  • on a return of assets on a winding up, they only entitle the holder to the amounts paid up on such shares after the repayment of £100 million per Ordinary Share; 

  • they are not freely transferable; 

  • the creation and issue of further shares will rank equally or in priority to the Deferred Shares; 

  • the passing of a resolution of the Company to cancel the Deferred Shares or to effect a reduction of capital shall not constitute a modification or abrogation of their rights; and 

  • the Company shall have the right at any time to purchase all of the Deferred Shares for an aggregate consideration of £1.00. 

No application will be made to the London Stock Exchange for the Deferred Shares to be admitted to trading on AIM or any other stock exchange. No share certificates will be issued for any Deferred Shares. There are no immediate plans to purchase or to cancel the Deferred Shares, although the Directors propose to keep the situation under review.

A copy of the revised Articles proposed to be adopted by Resolution 4 will be available for inspection at the General Meeting and will be made available free of charge on the Company's website at www.blavodwinesandspirits.com.

Related Party Transactions and Directors' shareholdings

Don Goulding, who is the Executive Chairman and Mark Quinn, who is a Non-Executive Director of the Company, together with Howard Raymond, who is a Substantial Shareholder, have all agreed to subscribe for Placing Shares pursuant to the Placing as set out below. Don Goulding's and Howard Raymond's agreement to subscribe for Placing Shares constitute related party transactions pursuant to the AIM Rules.

 Holding prior to the Placing and Debt ConversionProposed participation in the PlacingHolding subsequent to the Placing and Debt Conversion
NameNumber of Existing Ordinary Shares currently held% of Existing Ordinary Shares in issueNumber of Placing Shares conditionally subscribed forTotal number of Ordinary SharesPercentage of Enlarged Share Capital

 
Don Goulding - - 10,000,000 10,000,000 3.27%
Mark Quinn 1,500,000 1.71% 2,000,000 3,500,000 1.14%
Howard Raymond 14,050,000 16.01% 33,333,333 47,383,333 15.48%

Furthermore, Peter Webb, who is also a Substantial Shareholder of the Company, has agreed to convert £200,000 of Loan Notes (together with £19,619 of accrued, unpaid interest) issued to him into New Ordinary Shares pursuant to the Debt Conversion as set out below. This constitutes a related party transaction pursuant to the AIM Rules.

 Holding prior to the Debt Conversion and Placing Holding subsequent to the Debt Conversion and Placing
NameNumber of Existing Ordinary Shares currently held% of Existing Ordinary Shares in issueNumber of Debt Conversion Shares conditionally subscribed forTotal number of Ordinary SharesPercentage of Enlarged Share Capital

 
Peter Webb 9,274,000 10.57% 29,282,533 38,556,533 12.60%

The allotments of the New Ordinary Shares to Don Goulding, Howard Raymond and Peter Webb are classified as related party transactions for the purposes of the AIM Rules. The Independent Director, having consulted with N+1 Brewin, as nominated adviser to the Company, considers the terms of Don Goulding's and Howard Raymond's participation in the Placing and Peter Webb's participation in the Debt Conversion to be fair and reasonable insofar as Shareholders are concerned. In providing advice to the Independent Director, N+1 Brewin has taken into account the commercial assessment of the Independent Director.

Admission and dealings

Application will be made to the London Stock Exchange for the Ordinary Shares and the New Ordinary Shares to be admitted to trading on AIM. Both the Placing Shares and Debt Conversion Shares, when issued, will rank pari passu in all respects with the Ordinary Shares, including the right to receive dividends and other distributions declared following Admission. It is expected that Admission will become effective, and that dealings in the Ordinary Shares on AIM will commence, at 8.00 a.m. on 19 October 2012.

General Meeting

At the General Meeting, the Resolutions will be proposed to grant the Directors the authority to allot the Placing Shares and the Debt Conversion Shares without first offering them to existing Shareholders on a pre-emptive basis.  The Directors believe that raising new funds by way of the Placing is the most appropriate method of funding the Company at the present time.  

The Directors appreciate that it would be normal when a company issues a material number of new shares for cash for that issue to be fully pre-emptive, incorporating an offer to all Shareholders.  However, in view of the Company's current working capital requirements, the Directors believe it would not be in the Shareholders' best interests to incur the significant additional expense and time that would be required for such an offer to Shareholders to be implemented.

The Directors have therefore concluded that seeking a general authority from Shareholders to issue the New Ordinary Shares other than on a pre-emptive basis is the most flexible and cost effective method available to the Company.

The Resolutions which will be put to the existing Shareholders at the General Meeting are as follows:

Ordinary Resolution

1.   conditional upon the passing of resolution 3 below, to grant power to the Directors to allot and issue the New Ordinary Shares and an additional 102,034,170 Ordinary Shares (being one-third of the Enlarged Share Capital);

Special Resolutions

2.   conditional upon the passing of resolution 1, to disapply the pre-emption rights in respect of the allotment and issue of the New Ordinary Shares and an additional 30,610,250 Ordinary Shares (being 10 per cent. of the Enlarged Share Capital of the Company);

3.   conditional upon the passing of resolution 4 below, to approve the Capital Reorganisation; and

4.   conditional upon the passing of resolution 3 above, to approve the adoption of the Articles.

Irrevocable undertakings

The Company has received irrevocable undertakings from certain of the Directors and Shareholders to vote in favour of all of the Resolutions, who in aggregate have a beneficial interest in respect of 19,800,000 Existing Ordinary Shares representing approximately 22.65 per cent. of the existing issued share capital of the Company.

Importance of vote

The Placing and Debt Conversion are conditional, inter alia, upon the passing of all of the Resolutions at the General Meeting
.
Shareholders should be aware that if any of the Resolutions are not approved at the General Meeting, the Placing will not proceed and the Company will not have sufficient working capital to fund its operations. Furthermore, in the absence of immediate alternative additional funding, the Company could become insolvent imminently, potentially leading to the total loss of shareholder value.

Recommendation

The Independent Director considers the Proposals to be in the best interests of the Company and Shareholders as a whole and accordingly, the Independent Director recommends that you vote in favour of all of the Resolutions to be proposed at the General Meeting, as she intends to do so in respect of her entire beneficial or controlled holding representing 0.14 per cent. of the Existing Ordinary Shares in issue.

KEY STATISTICS

Placing Price 0.75p
Gross proceeds of the Placing receivable by the Company £1,200,000
Net proceeds of the Placing receivable by the Company £1,138,250
Number of Existing Ordinary Shares in issue as at the date of this announcement 87,758,508
Number of Placing Shares to be issued pursuant to the Placing 160,000,000
Number of Debt Conversion Shares to be issued pursuant to the Debt Conversion

Total number of New Ordinary Shares
58,344,000

218,344,000
Number of Ordinary Shares in issue following Admission 306,102,508
Number of Deferred Shares in issue following Admission 87,758,508
Placing Shares expressed as a percentage of the Enlarged Share Capital at Admission 52.27 per cent.
Debt Conversion Shares expressed as a percentage of the Enlarged Share Capital at Admission 19.06 per cent.
New Ordinary Shares expressed as a percentage of the Enlarged Share Capital at Admission

(Note: The above assumes no further issues of Existing Ordinary Shares or Ordinary Shares on or before Admission)
71.33 per cent.
ISIN GB0030164023

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Latest time and date for receipt of Forms of Proxy in respect of the General Meeting 11:00 a.m. on 12 October 2012
Time and date of the General Meeting 11:00 a.m. on 16 October 2012
Admission and dealings in the Placing Shares and Debt Conversion Shares expected to commence on AIM 8.00 a.m. on 19 October 2012
Expected date for CREST accounts to be credited in respect of the New Ordinary Shares in uncertificated form (where applicable) 19 October 2012
Despatch of definitive share certificates for the New Ordinary Shares (where applicable) on or around 23 October 2012

Each of the times and dates in the above timetable is subject to change.  References to time are to London time unless otherwise stated.

DEFINITIONS

"Act" the Companies Act 2006, as amended;
"Admission" the admission of the Placing Shares and the Debt Conversion Shares to trading on AIM becoming effective in accordance with the AIM Rules;
"AIM" the AIM market of the London Stock Exchange;
"AIM Rules" the AIM Rules for Companies published by the London Stock Exchange;
"Articles" the articles of association to be adopted at the General Meeting;
"Board" or "Directors" the directors of the Company;
"Capital Reorganisation" the proposed reorganisation of the share capital of the Company;
"Company" Blavod Wines and Spirits plc;
"CREST" the relevant system (as defined in the Uncertificated Securities Regulations 2001 (SI 2001 No 3875)) for the paperless settlement of trades and the holding of uncertificated securities, operated by Euroclear UK & Ireland Limited, in accordance with the same regulations;
"Debt Conversion" the proposed conversion by certain holders of £400,000 of Loan Notes (and accrued, unpaid interest totalling £37,580) into 58,344,000 New Ordinary Shares pursuant to the Debt Conversion Agreements;
"Debt Conversion Agreements" the conditional agreements dated on or about 28 September 2012 between the Company and certain lenders relating to the Debt Conversion;
"Debt Conversion Shares" the 58,344,000 New Ordinary Shares which are to be issued pursuant to the Debt Conversion;
"Deferred Shares" the deferred shares of 0.9p each in the capital of the Company arising pursuant to the Capital Reorganisation;
"Enlarged Share Capital" the issued ordinary share capital of the Company on Admission, following the issue of the Placing Shares and the Debt Conversion Shares;
"Existing Ordinary Shares" the ordinary shares of 1p each in the capital of the Company in issue at the date of this announcement;
"Form of Proxy" the form of proxy for use by Shareholders in connection with the General Meeting;
"Financial Services Authority" the UK Financial Services Authority;
"General Meeting" the general meeting of the Company convened for 11:00 a.m. on 16 October 2012 (or any adjournment or postponement thereof);
"Group" Blavod Wines and Spirits plc and its subsidiaries;
"Independent Director" Sarah Bertolotti (Finance Director), being the independent director not participating in the Placing or Debt Conversion;
"Loan Notes" the up to £500,000 convertible unsecured 6 per cent. loan notes 2014 constituted by the Company pursuant to the Loan Note Instrument;
"Loan Note Instrument" the loan note instrument constituting the Loan Notes, dated 8 October 2006;
"London Stock Exchange" London Stock Exchange plc;
"New Ordinary Shares" the new Ordinary Shares to be issued pursuant to the Placing and Debt Conversion;
"N+1 Brewin" Nplus1 Brewin LLP, nominated adviser and joint broker to the Company;
"Notice of General Meeting" the notice of General Meeting;
"Ordinary Shares" ordinary shares of 0.1p each in the capital of the Company arising pursuant to the Capital Reorganisation;
"pence", "p", "pounds" or "£" pounds sterling, the legal currency of the United Kingdom;
"Placing" the placing by the Company of the Placing Shares pursuant to the conditional Subscription Agreements;
"Placing Price" 0.75p per Placing Share;
"Placing Shares" 160,000,000 New Ordinary Shares which are to be placed in accordance with the terms of the Subscription Agreements;
"Proposals" the Placing, the Debt Conversion and the Capital Reorganisation;
"Regulatory Information Service" a regulatory information service approved by the Financial Services Authority and which is on the list of regulatory information service providers maintained by it;
"Resolutions" the resolutions numbered 1 to 4 set out in the Notice of General Meeting;
"Shareholders" or "Members" holders of Existing Ordinary Shares and, following Admission, holders of Ordinary Shares;
"Subscription Agreements" the conditional direct subscription letters dated on or about 27 September 2012 between the Company and Don Goulding (Executive Chairman), Mark Quinn (non-executive Director) and certain investors relating to the Placing;
"Substantial Shareholder" has the same meaning as defined in the AIM Rules;
"uncertificated" or "in uncertificated form" a share or shares recorded on the register or members as being held in uncertificated form in CREST, entitlement to which, by virtue of the Uncertificated  Securities Regulations, may be transferred  by means of CREST;
"Uncertificated Securities Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3875), as amended; and
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland.



This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Blavod Wines & Spirits plc via Thomson Reuters ONE

HUG#1644734

Companies

Distil (DIS)
UK 100

Latest directors dealings