Unsecured Convertible Loan Ag

RNS Number : 9769H

Manx Financial Group PLC

02 March 2010

 



FOR IMMEDIATE RELEASE         

2 March 2010

Manx Financial Group PLC (the 'Group')

Unsecured Convertible Loan Agreement

Background

Following the successful adoption of the resolutions at the recent EGM, the Group is pleased to announce that it has secured certain supplementary capital to meet the Regulatory requirements for significantly increasing commercial and retail lending in line with the business plan. This plan seeks to maximise the consolidation made by the Group during 2009 and anticipates the Group returning to profitability by the end of 2010, both by augmenting the core banking business and also by continuing the process of cost reduction.

Whilst the Group has had excess liquidity for some considerable time, without further Regulatory Capital, this surplus cannot be deployed to take advantage of the excellent opportunities for growth that have been identified. Thus to accelerate the implementation of the plan, the independent directors have taken advice from the Group's professional advisors as to the most suitable method of capital reorganisation. As a result, and as a first step, the Group has negotiated an unsecured convertible loan note with two of the Group's shareholders, both of whom are directors.

Although the capital raised by the loan note is adequate to release enough liquidity to implement the Group's immediate strategy, the directors and their professional advisors recognise that all shareholders might wish to have the opportunity to participate in any future capital increase to implement the second stage of the plan. Thus the directors are actively considering an open offer to all shareholders of ordinary shares when the Group's results are published later this year.

Convertible Loan Agreements

The Group is pleased to announce that it has entered into an unsecured convertible loan agreement ("the Loan") to raise a total of £1,710,000 of additional capital for the Group, of which £500,000 will used to repay the existing loan made to the Group's banking subsidiary by way of a subordinated loan with a coupon of 12% in December 2008.

The Loan is for the following amounts:

Amount £	Maximum Number of Ordinary Shares into which convertible	Lender	Relationship with the Group
1,250,000	13,888,888	James Mellon	James Mellon is Executive Chairman of the Group. He is a director of Burnbrae Limited, which is wholly owned by the trustees of a settlement of which James Mellon is a life tenant. Burnbrae Limited holds 12,000,000 Ordinary Shares representing 18.92 per cent. of the Group's issued share capital. Pershing Nominees Limited holds 125,000 Ordinary Shares on trust for Jim Mellon, representing 0.19 per cent of the Group's issued share capital. In addition, James Mellon holds 500,000 Ordinary Shares representing 0.79 per cent. of the Group's issued share capital in his own name.
460,000	5,111,111	Rock Holdings Limited	STM Fidecs Nominees Limited holds 7,889,645 Ordinary Shares, representing 12.44 per cent. of the Group's issued share capital, on trust for Rock Holdings Limited (5,278,645 Ordinary Shares) and for Southern Rock Insurance Company Limited (2,611,000 Ordinary Shares). In addition, Rene Nominees Limited (IOM) Limited holds 765,000 Ordinary Shares representing 1.2 per cent of the Group's issued share capital, on trust for Southern Rock Insurance Company Limited (740,000 Ordinary Shares) and Arron Banks (25,000 Ordinary Shares). Arron Banks, a Director of the Group, is beneficially interested in 51 per cent. of the issued share capital of Rock Holdings Limited and is beneficially interested in 37.5 per cent. of the issued share capital of Southern Rock Insurance Company Limited. Arron Banks is a director of Rock Holdings Limited and Southern Rock Insurance Company.
1,710,000	18,999,999

The principal terms of the Loan are as follows:

Repayment Date:	5 years after drawdown and no later than 28 March 2015
Interest Rate:	9 per cent. payable in arrears on 31 March, 30 June. 30 September and 31 December.
Conversion Rate:	9p per Ordinary Share (adjustable in such manner as will be determined by the Group's auditors for such corporate actions as share subdivisions and consolidations)
Conversion Period:	Not until the first anniversary of the Agreement, convertible in whole or in part (or earlier in such events as an offer being made for the Group)
Other: Transferability:	Each lender can only convert such as to remain below 30 per cent. of the Group's issued share capital or otherwise not to trigger a Rule 9 threshold and to comply with the Group subsidiary's banking licence obligations. The loan may only be transferred subject to the agreement of the Board of the Group.

AIM Rules

Due to the interests of James Mellon and Arron Banks in the transaction as set out above, the entering into of the Loan is a Related Party Transaction under the AIM Rules. Accordingly, the directors of the Group, with the exception of James Mellon and Arron Banks, consider, having consulted the Group's Nominated Adviser, that the terms of the transaction are fair and reasonable insofar as the entire 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]

 

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