Proposed Cancellation of AIM Admission
02 12월 2009 - 3:18AM
UK Regulatory
TIDMMBF
RNS Number : 4290D
Madara Bulgarian Property Fund
01 December 2009
1 December 2009
MADARA BULGARIAN PROPERTY FUND LTD.
Rights Issue, Proposed Restructuring of the Company, and Cancellation of
Admission to Trading on AIM of the Company's Shares
The following announcement incorporates extracts from the Chairman's letter
contained in a circular which will be posted to the Company's shareholders later
today to convene an Extraordinary General Meeting of the Company to be held at
10.30 am on 23 December 2009 at Elizabeth House, 9 Castle Street, St Helier,
Jersey, JE2 3RT, Channel Islands.The Company is also raising funds through a
discounted pre-emptive Rights Issue to Shareholders which will provide working
capital to the Company during the Asset Realisation process. More detail
relating to the Rights Issue, which does not require Shareholders' approval, is
set out below.Shareholders should be aware that the new ordinary Shares to be
issued pursuant to the Rights Issue will not be admitted to trading on AIM.
The purpose of the EGM is to seek approval from the Shareholders for a number of
changes to the Company's structure and strategy, including:
+------+----------------------------------------------------------------------+
| * | a change of the Company's investment objectives with the intention |
| | of an early realisation of the Company's assets; |
+------+----------------------------------------------------------------------+
| | |
+------+----------------------------------------------------------------------+
| * | the cancellation of the admission of the Company's Shares to trading |
| | on AIM; |
+------+----------------------------------------------------------------------+
| | |
+------+----------------------------------------------------------------------+
| * | in light of the Asset Realisation, a change of the Company's |
| | regulatory status to terminate the regulation of the Company as an |
| | investment fund and to continue as an unlisted Jersey company; |
+------+----------------------------------------------------------------------+
| | |
+------+----------------------------------------------------------------------+
| * | subject to having received irrevocable commitments of up to EUR500,000 |
| | in relation to the Rights Issue, the purchase and cancellation of |
| | 10,557,330 shares being the shares held by Moran in return for |
| | cancelling the acquisition of certain land in Borovets from Moran |
| | (the "Buyback"). The contractual terms governing the Buyback shall |
| | be conditional also on the Company having received irrevocable |
| | commitments from Shareholders of up to EUR500,000 in relation to the |
| | Rights Issue; |
+------+----------------------------------------------------------------------+
| | |
+------+----------------------------------------------------------------------+
| * | to adopt new Articles subject to and following the restructuring, |
| | which are required to reflect the Listing Cancellation, the Asset |
| | Realisation and to reflect the cessation of the Company's existing |
| | regulation as a fund under the Collective Investment Funds (Jersey) |
| | Law 1988 ("CIF"); and |
+------+----------------------------------------------------------------------+
| | |
+------+----------------------------------------------------------------------+
| * | to extend the Company's current accounting period to 6 January 2010 |
| | to coincide with the date that the Listing Cancellation is expected |
| | to become effective. |
+------+----------------------------------------------------------------------+
A copy of the Articles will be available on the Company's website at
www.madarafund.com.
Background to and Reasons for the Asset Realisation and the Listing Cancellation
Having carefully considered the matter for some time, the Board has concluded
that it is in Shareholders' best interests to seek buyers for the Company's
assets in an orderly fashion and thereafter return the cash proceeds of sale to
Shareholders.
The Company's primary investment policy and objective, as stated in its AIM
Admission Document, has been to invest in land in Bulgaria, located in prime
coastal, mountain resorts or city locations, for development. However, the
change in market conditions for Eastern European property since the Company's
shares were admitted to trading on AIM means that having sought various forms of
financing for both development and working capital to achieve these investment
objectives for many months, the Board believes that funding for this type of
investment, either by way of equity or debt, is no longer available at terms
which make commercial sense. Therefore, the Directors consider that the Company
is unable to generate sufficient funding to pursue these investment objectives
and, as a consequence, to generate sufficient liquidity to meet its working
capital requirements for the foreseeable future.
Given this, the Board recommends that the Company's objectives be revised in
order to terminate the existing objectives of the Company as set out in the AIM
Admission Document and to require the Company to seek a realisation of the
Company's remaining assets. The Directors believe that in order to maximise the
sale price of the assets, the Asset Realisation will take up to 12 months to
achieve, although no commitments can be made. According to the AIM Admission
Document, the life of the Company is 10 years and is due to expire on 30 June
2016, and approval will be sought at a subsequent stage, after sufficient time
has been allowed to achieve a satisfactory outcome of the Asset Realisation, to
seek a winding up of the Company prior to this date whereby the proceeds of the
asset sale will be distributed to Shareholders.
The Company's NAV and Buyback
The Company's adjusted NAV in its recent interim results announcement for the 6
months ended 30 June 2009, was EUR36,693,618 or EUR0.94 per Share.Included in this
NAV calculation was a valuation of the Company's assets by Colliers
International carried out in April 2009, and valued as at 31 December 2008. The
basis of the valuation methodology was the weighted average of a market
comparison and an income approach. Shareholders should be aware that this
valuation is subject to change over time as market conditions change and the
Company has not instructed Colliers International to carry out a more recent
valuation of the Company's assets.
Included in the above NAV was 124,000 sq.m of development land in central
Borovets, a mature ski resort situated 73 kilometres from Sofia. The value of
the land in the above NAV is EUR9,915,828 net of taxes payable upon disposal. In
October 2006, the Company entered into a conditional purchase agreement to
acquire this land for a total consideration of EUR8,061,771. However, given the
delays to completing the purchase of this land, and the change in market
conditions in the Borovets region, the Board now believes that it is in
Shareholders' best interests to cancel this conditional purchase agreement.
Subject to achieving Shareholders' approval, this would involve the Company
buying from Moran 10,557,330 Shares, reflecting the rise in the value of the
Borovets' land since the date of the conditional purchase agreement, in
consideration for entering into a further agreement with Moran to terminate the
Company's existing rights to the Borovets land. The number of issued Shares in
the Company would be reduced from 39,013,307 to 28,455,977 following the
Buyback. The effect on the NAV per Share is expected to be neutral. The contract
to effect the Buyback is also conditional on the Company having received
irrevocable commitments from Shareholders of up to EUR500,000 in relation to the
Rights Issue.
Moran is a substantial shareholder (as defined in the AIM Rules) of the Company.
The Buyback is therefore classified as a transaction with a related party for
the purposes of the AIM Rules. In accordance, therefore, with the AIM Rules, the
Directors, having consulted with the Company's nominated adviser, Arbuthnot
Securities, consider that the terms of the transaction are fair and reasonable
insofar as the Company's Shareholders are concerned. In accordance with the
Companies (Jersey) Law 1991, as amended, Moran will be precluded from voting on
the Special Resolution in respect of the Buyback.
The Board anticipates that at 31 December 2009 the Company will have total
liabilities in the region of EUR2,998,629 out of which approximately EUR287,011
shall be settled immediately from the cash proceeds of the Rights Issue and a
further EUR399,214 is expected to be settled by Shares in lieu of cash. For
further details see paragraph entitled "Arrangements concerning New Shares not
taken up pursuant to the Rights Issue" set out below. The remainder of the
proceeds from the Rights Issue shall be used to provide on-going liquidity for
the Company.
Company Cash Flow & Liabilities
Whilst the Company is seeking buyers for its existing assets, the Board
recommends that several measures be undertaken to reduce the ongoing working
capital of the Company, as follows:
1.Delisting of the Company's shares. On 18 June 2007, the Company's Shares were
admitted to trading on AIM for the purpose of gaining exposure to a broader
range of investors, and of enabling a wider appreciation of the value of the
Company. To date less than 0.5 per cent. of the Company's Shares are held by
persons who were not Shareholders prior to the AIM listing, and there has been
very limited liquidity in the Company's Shares. In contrast to the benefits of
the AIM listing, there are high on-going costs resulting from the regulatory
requirements of maintaining a quotation on AIM, and a disproportionate amount of
the Board's and the investment manager's time is spent on meeting AIM listing
requirements. The Directors therefore believe that it is no longer appropriate
for the Company's Shares to continue to be admitted to trading on AIM. The
Company has announced earlier today, that it is proposing to seek Shareholder
approval for the cancellation of admission to trading on AIM of its Shares.
Rule 41 of the AIM Rules requires an AIM company wishing the London Stock
Exchange to cancel admission of its shares to trading on AIM to notify such
intended cancellation and separately inform the London Stock Exchange of its
preferred cancellation date at least twenty Business Days prior to such date.
The cancellation is conditional upon the consent of not less then 75 per cent.
of votes cast by Shareholders given in a general meeting.
The notice of the EGM contains a Special Resolution numbered 2 which proposes
that the admission to trading on AIM of the Company's Shares is cancelled.
Subject to the passing of Special Resolution 2 at the EGM, it is expected that
the last day of dealings in Shares on AIM will be 5 January 2010 and that the
Listing Cancellation will be effective from 7.00 a.m. on 6 January 2010.
2.Changing the Company's regulatory status. The Company is currently regulated
by the Jersey Financial Services Commission ("JFSC") as a Jersey Listed Fund
under the Collective Investment Funds (Jersey) Law 1988. Subject to
Shareholders' approval of the Special Resolution numbered 1 in the notice of the
EGM, being the Asset Realisation, the Company would cease to be treated as a
collective investment fund. While this will remove the need for regulatory costs
associated with the Company's existing regulated status, investors should take
into account that these aspects of the restructuring will also remove the need
for the Company to be subject to regulatory oversight and, taken into account
with the Listing Cancellation, will reduce current obligations of the Company to
comply with applicable transparency and reporting requirements.
3.Reduction in the number of Directors on the Board. The number of Directors on
the Board will be reduced with effect from 6 January 2010 from seven to three
members to reflect the change in the Company's investment objectives. The three
remaining members of the Board will be Nigel le Quesne, Stephen Burnett and
Scott Perkins.
Furthermore, several creditors of the Company have indicated that they are
willing to accept new Shares in lieu of cash to settle certain liabilities of
the Company.
How Shareholders will be able to effect share transactions following the Listing
Cancellation
The Listing Cancellation is expected to become effective as at 7.00 a.m. on 6
January 2010, which is the preferred date for the Company.
Shareholders should be aware that following the Listing Cancellation becoming
effective there will be no market facility for dealing in the Shares and no
price will be publicly quoted for the Shares. As such, liquidity in, and
marketability of, the Shares will be very limited and holdings of Shares will be
difficult to value and to trade.
Whilst the Board believes that the proposed Listing Cancellation is in the
Company's and the Shareholders' best interests, it recognises that cancelling
admission to trading on AIM will make it more difficult for Shareholders to
trade their Shares subsequently as there will be no alternative trading
arrangements put in place by the Company for such Shares.
If Shareholders wish to sell their Shares on AIM, they must do so prior to the
Listing Cancellation becoming effective (such Listing Cancellation will occur no
earlier than five clear business days after the EGM and it is expected that
trading in the Shares on AIM will cease at the close of business on 5 January
2010, with Listing Cancellation becoming effective at 7.00 am on 6 January
2010).
Following the Listing Cancellation becoming effective, there will be no dealing
facilities for the Shares. Transfers of Shares will be effected by submission of
a duly executed transfer form to the Company.
Separately, in connection with the Listing Cancellation and de-regulation of the
Company, the accounting period of the Company for the period 1 January-31
December 2009 shall be extended to 6 January 2010 (to coincide with the Listing
Cancellation date). Shareholder approval by way of ordinary resolution is sought
in connection with this proposal.
Proposed Ordinary Resolution and Special Resolutions and Approvals
Ordinary and Special resolutions are proposed for Shareholders to consider at
the EGM. By way of summary:
The Ordinary Resolution seeks Shareholders' approval to extend the current
accounting period of the Company from 1 January 2009 - 31 December 2009 to 1
January 2009 - 6 January 2010;
Special Resolution 1 seeks Shareholders' approval for the proposed change of the
Company's investment objectives;
Special Resolution 2 seeks Shareholders' approval for the proposed cancellation
of the admission to trading on AIM of the Company's Shares;
Special Resolution 3 seeks Shareholders' approval, subject to the change of the
Company's investment objectives set out in Special Resolution 1 above, for the
proposed continuation of the Company as a non-regulated investment holding
company;
Special Resolution 4 seeks Shareholders' approval for the proposed Buyback and
cancellation of the Borovets Shares and the cancellation of the Borovets land
purchase agreement; and
Special Resolution 5 seeks Shareholders' approval for the proposed adoption of
new Articles as described above subject to the change in the Company's
investment objectives set out in Special Resolution 1, the Listing Cancellation
becoming effective set out in Special Resolution 2 and the continuation of the
Company as a non-regulated investment holding company set out in Special
Resolution 3.
To be passed, the Ordinary Resolution requires the approval of a simple majority
of those Shareholders present and entitled to vote or voting by proxy at the EGM
and Special Resolution 2 requires votes in favour representing at least 75 per
cent. of the votes cast by Shareholders in person or by proxy at the EGM. Each
of the other special resolutions referred to above, to be passed, requires the
approval of a 2/3rd majority of those Shareholders present and entitled to vote
or voting by proxy at the EGM.
All of the Resolutions must be passed by Shareholders at the EGM in order for
the restructuring to proceed. If the Proposals considered herein are not
approved by Shareholders at the EGM, it is likely that the Company would face
immediate insolvency and the Board will need to undertake a further review of
the options available to the Company at that stage with a view to recommending
alternative proposals to the Shareholders that the Board considers to be in the
best interests of Shareholders as a whole.
The Rights Issue
The Board believes the Asset Realisation may take up to 12 months to achieve
which will require the Company to raise working capital. Following a thorough
review of the available funding options, the Board believes that a pre-emptive
rights issue of new ordinary Shares to existing Shareholders is the most
commercial and equitable funding option available and is in the best interests
of the Company and its Shareholders as a whole.
Accordingly, your Board has resolved to issue up to 24,000,000 new ordinary
shares of no par value in the Company (representing approximately 62 per cent.
of the existing issued ordinary shares in the Company, or 84 per cent. of the
Company's reduced share capital following the Buyback and cancellation of the
Borovets Shares becoming effective) at a price of EUR0.05 per new ordinary share
to raise a maximum of EUR1,200,000. The issue price of EUR0.05 reflects the poor
demand for the Shares at a valuation of between EUR0.10 and EUR0.13 since June 2009,
and represents a discount of approximately 90 per cent. to the post-money
adjusted NAV per Share of the Company and 60 per cent. to the closing middle
market quotation of EUR0.125 per Share on 30 November 2009, the latest practicable
date prior to the publication of this document.
Shareholders should be aware that the new ordinary Shares to be issued pursuant
to the Rights Issue will not be admitted to trading on AIM. The new ordinary
shares will rank pari passu in all respects with the existing issued ordinary
share capital of the Company. The new ordinary shares have been provisionally
allotted in proportion to each Shareholder's holding of ordinary shares
following the cancellation of the Borovets Shares. Any commitment for shares
under the Rights Issue will be an irrevocable commitment.
The Board anticipates that there may be some Shareholders who are unable or
unwilling to participate in the Rights Issue. The Board is therefore giving
existing Shareholders the opportunity to subscribe for additional new ordinary
shares, over and above their pro rata entitlement if they so elect.
Alternatively, you may subscribe for a lesser amount than the pro rata
entitlement provisionally allocated to you.
Arrangements concerning New Shares not taken up pursuant to the Rights Issue
Any new ordinary shares not taken up pursuant to the Rights Issue will be
offered/allocated in the following order:
* in the first instance, to existing Shareholders of the Company who have
subscribed for additional shares in the Rights Issue as referred to above; and
* in the second instance, up to 10,000,000 new ordinary shares (EUR500,000 in value)
to certain creditors of the Company.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
+----------------------------------------+-------------------------------------+
| Latest time and date for receipt of | 10.30 am on 22 December 2009 |
| Forms of Proxy & Forms of Acceptance | |
| | |
+----------------------------------------+-------------------------------------+
| Extraordinary General Meeting | 10.30 am on 24 December 2009 |
+----------------------------------------+-------------------------------------+
| Last day of dealings in Shares on AIM | 5 January 2010 |
+----------------------------------------+-------------------------------------+
| Cancellation of admission to trading | with effect from 7.00 am on 6 |
| on AIM of the Shares | January 2010 |
| | |
+----------------------------------------+-------------------------------------+
| Shares issued pursuant to rights issue | 6 January 2010 |
+----------------------------------------+-------------------------------------+
| Share certificates despatched | by 7 January 2010 |
+----------------------------------------+-------------------------------------+
DEFINITIONS
The following definitions apply throughout this announcement unless the context
otherwise requires:
+--------------------------+---------------------------------------------------+
| "AIM" | the Alternative Investment Market operated by the |
| | London Stock Exchange |
+--------------------------+---------------------------------------------------+
| "AIM Admission Document" | the document published by the Company dated 14 |
| | June 2007 |
+--------------------------+---------------------------------------------------+
| "AIM Rules" | the rules of AIM governing admission to and the |
| | operation of AIM for AIM companies and their |
| | nominated advisers as published by the London |
| | Stock Exchange from time to time |
+--------------------------+---------------------------------------------------+
| "Arbuthnot Securities" | Arbuthnot Securities Limited, the Company's |
| | nominated adviser and broker |
+--------------------------+---------------------------------------------------+
| "Articles" | Memorandum and Articles of Association of the |
| | Company |
+--------------------------+---------------------------------------------------+
| "Asset Realisation" | a change of the Company's investment objectives |
| | with the intention of an early realisation of the |
| | Company's assets |
+--------------------------+---------------------------------------------------+
| "Board" or "Directors" | the directors of the Company |
+--------------------------+---------------------------------------------------+
| "Borovets Shares" | the 10,557,330 Shares held by Moran which are the |
| | subject of the Buyback |
+--------------------------+---------------------------------------------------+
| "Buyback" | the proposed repurchase by the Company of |
| | 10,557,330 Shares held by Moran in accordance |
| | with the provisions of the Companies (Jersey) Law |
| | 1991, as amended |
+--------------------------+---------------------------------------------------+
| "Company" | Madara Bulgarian Property Fund Limited |
+--------------------------+---------------------------------------------------+
| "Extraordinary General | the extraordinary general meeting of the Company |
| Meeting" or "EGM" | to be held at 10.30 am on 23 December 2009 |
+--------------------------+---------------------------------------------------+
| "London Stock Exchange" | London Stock Exchange plc |
+--------------------------+---------------------------------------------------+
| "Listing Cancellation" | the proposed cancellation of the admission to |
| | trading on AIM of the Company's Shares |
+--------------------------+---------------------------------------------------+
| "Moran" | Moran Trade & Investments Inc |
+--------------------------+---------------------------------------------------+
| "NAV" | Net Asset Value |
+--------------------------+---------------------------------------------------+
| "Proposals" | the matters set out in the resolutions contained |
| | in the notice of the EGM which is set out in the |
| | Circular |
+--------------------------+---------------------------------------------------+
| "Rights Issue" | the rights issue of up to 24,000,000 new ordinary |
| | shares of no par value in the Company at a price |
| | of EUR0.05 per new ordinary share, further details |
| | of which are set out in this document |
+--------------------------+---------------------------------------------------+
| "Shareholders" | holders of the Company's Shares |
+--------------------------+---------------------------------------------------+
| "Shares" | the ordinary shares of no par value in the |
| | capital of the Company |
+--------------------------+---------------------------------------------------+
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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