Debt Refinancing - Agreement in Principle

Pressure Technologies PLC

24 October 2023

 

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, ("MAR"), and is disclosed in accordance with the Group's obligations under Article 17 of MAR. Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain.

24 October 2023

Pressure Technologies plc

("Pressure Technologies" or "the Company" or "the Group")

Debt Refinancing - Agreement in Principle

Pressure Technologies plc (AIM: PRES), the specialist engineering group, is pleased to announce it has reached agreement in principle with Rockwood Strategic plc¹ and Peter Gyllenhammar AB (together "the Lenders"), both major shareholders in the Company, for the provision of a new Term Loan Facility of £1.5 million ("the Facility") that will be used to refinance the existing debt facilities of the Group and provide additional working capital headroom.

Background to the Debt Refinancing

The existing debt facilities of the Group currently comprise a bank loan of £0.9 million provided by Lloyds Banking Group ("Lloyds") and finance leases totalling £1.1 million. The Lloyds loan is secured against the assets of the Group and is due to be repaid in full on 31 December 2023 at which point the facility will expire. The finance leases are secured against specific assets and have a range of expiry dates over the next 4 years.

During 2023, the Group has explored refinancing the Lloyds loan with a number of mainstream lenders and challenger banks by way of raising new asset-backed lending facilities secured against the property assets, plant and debtors of the Group.

However, the challenging trading conditions experienced across 2022 and during the early part of 2023 subdued the financial performance of the Group in that period. Whilst profitability for the financial year ended 30 September 2023 ("FY23") reflected materially improved trading on the prior year, as updated in the Company announcement of 3 October 2023, it is expected to remain at this level in the next 12 months. As a result, and alongside tightening lending standards and credit availability, the debt capacity of the Group has been restricted and a suitable mainstream lending facility has not been made available.

Intention to divest Precision Machined Components ("PMC") division

Further to the Company's announcement of 3 October 2023, the Board has noted the continued improvement in oil and gas market conditions which drove the much improved order intake and financial performance of PMC in the second half of FY23. Considering the current trading environment, improved outlook and positive developments being made by PMC, the Board has decided that the timing is now favourable to realise value through the divestment of the PMC division.

The Group has appointed advisors to handle the sale process which it expects to launch in November 2023. The sale process is expected to run for approximately 6 months into the third quarter of the financial year ending 30 September 2024 ("FY24").

Group Funding Requirement

The Group currently has available cash resources of approximately £0.7 million, in addition to the debt facilities noted above.

The sale of PMC is expected to deliver material cash proceeds for the Group in the third quarter of FY24 which will underpin a strong and stable financial position from which to transition Chesterfield Special Cylinders into new UK defence, global defence and hydrogen programmes during the remainder of FY24 and beyond.

However, during the intervening period the cash position of the Group is expected to tighten as a result of the final repayment commitment to Lloyds of £0.9 million in December 2023 and reduced activity levels around the Christmas shutdown.

The Group has therefore identified a short-term funding requirement of up to £1.5 million to bridge the finances of the Group to a sale of the PMC division.

New Term Loan Facility

The Group has arranged the proposed new Facility with Harwood Capital LLP, as Investment Adviser to Rockwood Strategic plc (who hold a 20.0% shareholding in the Company), and Peter Gyllenhammar AB (who hold a 16.8% shareholding in the Company).

The Facility will provide £1.5 million on drawdown and will be used to repay Lloyds, pay transaction expenses and provide working capital headroom. The Facility is committed for a 5 year period and is secured against the assets of the Group.

The Facility is subject to full capital repayment over the 5 year term with £0.5 million repayable in FY24, £0.25 million repayable in October 2025 and £0.25 million repayable annually thereafter to expiry in October 2028. An arrangement fee of 3% is payable to the Lenders on drawdown and the Facility carries an interest rate of 14.25% per annum. The Facility may be repaid at any time by the Group without prepayment charges or penalties. Upon a successful sale of the PMC division, the Facility will be repaid in full.

In conjunction with the provision of the Facility, the Lenders will also be issued with 1,933,358 warrants in aggregate (representing 5% of the issued share capital) to subscribe for ordinary shares in the Company ("the Warrants") at a price of 32 pence per share, representing a 20% premium to yesterday's closing share price. The Warrants may be exercised at any time in the 5 years following drawdown of the Facility and continue to be exercisable in the event the Facility is repaid before its final expiry.

The Company and the Lenders expect to complete legal documentation required for the Facility during November 2023.

Related Party Transaction

The Lenders are each substantial shareholders in the Company and Richard Staveley, Non-Executive Director of the Company, is a board representative of Harwood Capital LLP, investment manager of Rockwood Strategic plc. The provision of the Facility, and the associated grant of the Warrants, constitutes a related party transaction pursuant to AIM Rule 13.

The Directors independent of the transaction (being all Directors other than Richard Staveley), having consulted with the Company's nominated adviser, Singer Capital Markets, consider that the terms of the Facility and the grant of the Warrants are fair and reasonable insofar as shareholders are concerned.

Chris Walters, Chief Executive of Pressure Technologies plc, commented:

"We appreciate the strong support from two of our major shareholders, demonstrated through this funding solution, confirming their confidence in the Group's prospects whilst we realise value from the sale of the PMC division in improving oil and gas market conditions."

Additional Information

The person responsible for arranging release of this announcement on behalf of the Company is Steve Hammell, Chief Financial Officer.

¹ Harwood Capital LLP is the investment manager of Rockwood Strategic plc.

For further information, please contact:

Pressure Technologies plc   Chris Walters, Chief Executive   Steve Hammell, Chief Financial Officer	Tel: [phone]
Singer Capital Markets (Nomad and Broker)   Rick Thompson / Asha Chotai	Tel: [phone]
Houston (Financial PR and Investor Relations)   Kay Larsen / Ben Robinson	Tel: [phone] [e-mail]

COMPANY DESCRIPTION

www.pressuretechnologies.com

With its head office in Sheffield, the Pressure Technologies Group was founded on its leading market position as a designer and manufacturer of high-integrity, safety-critical components and systems serving global supply chains in oil and gas, defence, industrial and hydrogen energy markets.

The Group has two divisions:

·    Chesterfield Special Cylinders (CSC) - www.chesterfieldcylinders.com 

·    Precision Machined Components (PMC) - www.pt-pmc.com

o  Includes the Al-Met, Roota Engineering and Martract sites.

 

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