TIDMHTI
RNS Number : 5501C
Hawtin PLC
09 March 2011
Hawtin Plc
Circular to Shareholders and Notice of General Meeting
Hawtin Plc ("Hawtin" or the "Company") announces that a General
Meeting will be held at the offices of Eversheds, 1 Callaghan
Square, Cardiff CF10 5BT on 31 March 2011 at 10.00 a.m. to approve
a related party transaction.
A Circular to Shareholders and Notice of General Meeting will be
posted to shareholders and will appear on the Company's website
www.hawtin.co.uk today.
The full text of the Circular is set out below:
"Reason for the General Meeting
At the Company's last Annual General Meeting held on the 30(th)
June, 2010, a Resolution authorising the board to finalise and
agree the terms of an agreement to sell substantial non-cash assets
of the Company and its subsidiaries (together the "Group") to
Perceval Limited, a company connected with Richard Hayward, CEO of
Hawtin, was unanimously agreed. In our Interim Statement, announced
on the 30(th) September, 2010, I expanded upon the strategic
decisions your Board were considering and implementing. Since then,
certain properties have been disposed of and the terms of the
proposed disposal of substantial non-cash assets have altered in
some respects, including that of the purchaser, now Gracelands
Investments Limited ("Gracelands"), another company connected with
Richard Hayward (the proposed "Transaction"). The purpose of this
Notice of General Meeting is to explain the rationale for and seek
your approval of the Transaction as revised and finalised.
Summary of the Group's property assets
The Group currently owns two main portfolios of property assets
as follows:
1. The "Industrial Portfolio" being a collection of property
assets across England and Wales and the subject of the proposed
Transaction.
The adjusted book value of the Industrial Portfolio is GBP31.2m
against underlying debt and other liabilities due to Bank of
Scotland ("BoS") and Principality Building Society ("Principality")
totalling GBP32.5m (further details of which are provided
below)
2. Millennium Plaza, Cardiff.
The current book value of Millennium Plaza is GBP11.0m against
underlying debt, accrued interest and other liabilities due to
Anglo Irish Bank Corporation Limited ("AIBC") totalling GBP28.4m
(further details of which are also provided below).
Further, Hawtin has an existing parent company guarantee to AIBC
in relation to Millennium Plaza, where its liability is capped at
GBP3m.
As previously announced, AIBC appointed a Law of Property Act
("LPA") Receiver over Crown Investments Limited ("Crown"), the
wholly owned subsidiary of Hawtin that owns Millennium Plaza, on
27(th) November, 2010.
The proposed Transaction
The Board (excluding Richard Hayward) has now finalised an
agreement for sale with Gracelands, dependent upon shareholder
approval at the General Meeting, to sell those subsidiaries of the
Company which directly own the Industrial Portfolio of assets for a
sum based on the valuations included in our 2009 Annual Report and
Accounts. The total value of the Group's property assets in the
2009 Accounts was GBP56.1m, including Millennium Plaza (then valued
at GBP16.2m). Since that time and as announced to shareholders, the
Group has sold its Walton Road, Portsmouth site for GBP4.35m (book
value GBP4.0m) as well as its interest in the Wirral for GBP275,000
(book value of the Group's interest being GBP2.2m). Following a
negative revaluation of GBP2.6m as at 30(th) June, 2010, the book
value of the Industrial Portfolio was GBP31.2m. Current
indebtedness of this portfolio amounts to GBP32.5m in total,
comprising net debt due to BoS of GBP28.1m and an associated SWAPS
liability due to BoS of GBP3.0m as at 31(st) December 2010,
together with a debt due to Principality of GBP1.4m.
Gracelands has agreed to purchase the equity of the following
subsidiaries of Hawtin: Norfleet Properties (Holdings) Limited
("Norfleet"), Purabuild Limited, Hawtin Park Developments Limited,
Holywell Properties (Holdings) Limited and Foxleap Limited for a
total consideration equal to the greater of GBP1 and the aggregate
of:
(i) the net asset value of those companies; and
(ii) the BoS SWAPS liabilities.of GBP3m (which will be novated
to the purchaser).
In addition, the purchaser will procure the immediate settlement
of all liabilities to the Group of the companies being sold to
enable Hawtin to fully settle its outstanding liabilities to
BoS.
It is unlikely that the Company will receive any net cash from
the Transaction. Hawtin's one directly owned property asset, a
small plot of land valued at GBP100,000, will be transferred to
Norfleet prior to the settlement as an offset to the net
liabilities then being undertaken by the purchaser.
Millennium Plaza
In September 2010 following extensive negotiations with AIBC and
having widely marketed the property known as Millennium Plaza, the
sole asset of Crown, the directors received a number of third party
offers, the highest of which was GBP12m. Whilst this was GBP1m in
excess of Hawtin's book value of GBP11m of the property (written
down on 30(th) June 2010 by GBP5.2.m), it remained significantly
below the year end indebtedness of Crown to AIBC of GBP23.5m plus
accrued interest of GBP1.9m and a SWAPS liability of GBP3.0m,
totalling GBP28.4m. Whilst the Board considered this to represent a
fair market value as at that time, AIBC did not consent to the sale
and appointed an LPA Receiver over the property, which remains the
situation to this day. Crown is unable to satisfy the liability to
AIBC and its future is under close consideration by its directors.
As mentioned above, Hawtin has an existing parent company guarantee
to AIBC in relation to Millennium Plaza, where its liability is
capped at GBP3m and this guarantee remains a contingent liability
of the Company in accordance with International Financial Reporting
Standards.
If Millennium Plaza is sold by the LPA Receiver, given the
outstanding debt is significantly in excess of any likely sale
proceeds, it is likely that this would crystallise the GBP3m
guarantee in relation to Crown given by Hawtin to AIBC. Were that
to occur, Hawtin would be unable to meet this liability and would
almost certainly be required to enter into administration or some
other form of corporate insolvency. AIBC have not been willing to
enter into discussions with Hawtin in relation to this guarantee
and therefore the Directors cannot confirm whether or not AIBC will
ultimately try to enforce this guarantee. It should be noted,
however, that the book value of the assets of Crown has been
significantly lower than the outstanding indebtedness for several
years and AIBC have not previously sought to invoke their rights
under the guarantee.
The Directors are working hard to ensure a satisfactory outcome
with AIBC and the LPA Receiver and in particular, seeking
clarification that the GBP3m guarantee will not become payable.
There can be no guarantee that these negotiations will be
successful, but the Directors believe that the passing of the
proposed resolution, will permit the Group further time to continue
these negotiations. Whilst it is remote, the Directors also believe
that there is a possibility of finding a solution for the
Millennium Plaza that could deliver some value to Hawtin
shareholders.
Preliminary trading update
Unaudited management accounts for the year to 31(st) December,
2010 show the following preliminary position for the Group: The
Company's consolidated financial statements will be audited and
these unaudited figures may be subject to change, albeit it is not
expected that changes will be substantial unless there is a
variation of treatment of the consolidation of Crown. The current
treatment is to recognise Millennium Plaza as an asset and the
accumulated indebtedness to AIBC as a liability, which is
consistent with the treatment in 2009.
Preliminary Unaudited Consolidated Income Statement
Year ended 31(st) December, 2010:
GBP'000
Net rental income 3,312
Sundry items (1,562)
Property revaluations (7,827)
SWAPS valuation (2,405)
Net interest (3,666)
---------
Loss before tax (12,148)
Deferred tax gain 761
---------
Loss after tax (11,387)
---------
The property revaluation largely affected the value of
Millennium Plaza, which was reduced from GBP16.2m to GBP11m as at
30(th) June, 2010.
Interest includes an accrual for interest payable to AIBC from
27(th) November, 2010 when the LPA Receiver was appointed, to
31(st) December, 2010. Since that appointment, it should be noted
that no income has been received directly by Crown from tenants in
the building and any income has been collected by the LPA
Receiver.
The SWAPS valuation shows a loss for the year ended 31(st)
December, 2010. The certificated values attributable to the SWAPS
are GBP3.0m to BoS with the remaining GBP3.0m to AIBC, totalling
GBP6.0m. The current aggregate value is GBP3.6m as at 31(st)
December, 2009 resulting in a write down in value of GBP2.4m.
In relation to the industrial portfolio, the trading results
attributable to those assets during the year ended 31 December 2010
(included in the above unaudited consolidated income statement of
the Group) were rental income of GBP2.4m, which after interest of
GBP2.2m and other overheads resulted in a loss before taxation of
approximately GBP3.0m.
Preliminary Unaudited Consolidated Balance Sheet:
As at 31(st) December, 2010
Draft 2010 Audited 2009
GBP'000 GBP'000
Non-current assets 42,177 56,123
Deferred tax asset 357 -
----------- -------------
42,534 56,123
Current assets:
Trade and other receivables 673 843
Cash and cash equivalents 645 3,579
----------- -------------
1,318 4,422
Current liabilities:
Trade and other payables 3,692 3,655
Derivative financial instruments 5,966 3,561
Borrowings and overdrafts 52,977 60,614
----------- -------------
62,655 67,830
----------- -------------
Net current liabilities (61,337) (63,408)
Non-current liabilities:
Borrowings 2,350 2,130
Cumulative preference shares 549 549
Deferred tax - 386
----------- -------------
2,899 3,065
Net liabilities (21,702) (10,350)
----------- -------------
Shareholders funds:
Equity share capital 5,017 50,17
Equity reserve 900 900
Reserve arising on acquisition (100) (100)
Other reserves 3,336 3,301
Retained earnings (30,855) (19,468)
----------- -------------
(21,702) (10,350)
----------- -------------
Looking forward we have without doubt a difficult period of
deliberation - agreement to the proposed Transaction will in
essence remove some GBP32.5m of liabilities from the Group.
Further, the industrial portfolio currently remains in breach of a
key BoS covenant of Loan to Value, where it stands at 88 per cent.
against a required value of less than 80 per cent. It is the
Directors' view that in the regions served by the Group, it is
difficult to foresee any dramatic improvement in valuations over
the coming months which would bring that covenant into a compliant
position. Further, the Directors consider it unlikely that BoS will
grant longer term funding to the Group. Should the proposed
resolution as set out at the end of this notice not be passed by
shareholders, the Directors believe that BoS's facilities will be
withdrawn, thereby forcing the Company into receivership or some
other form of corporate insolvency. The Directors understand,
however, that Gracelands could meet a similar covenant because the
covenant test would be measured across Gracelands' larger property
portfolio.
Irrespective of this, however, we still have to resolve the
issues arising in Crown regarding Millennium Plaza and the Hawtin
parent company guarantee to AIBC.
It is therefore with a degree of frustration that we cannot find
a more amenable solution to the Group's problems. The Transaction,
whilst not providing the Group with any net cash, will remove the
risk of BoS withdrawing its facilities and thereby forcing the
Company into receivership or some other form of corporate
insolvency.
Following completion of the Transaction, Hawtin will hold a
small amount of cash which it intends to utilise to seek other
opportunities for the Company over the next six to twelve months.
During this period, the directors will waive all fees and costs
will only be incurred to seek opportunities in shareholder's
interests. To assist in working capital adequacy, the Company has
agreed with the holders of the GBP2.85m of outstanding Convertible
Loan Notes an immediate deferral of payment of the interest coupon
of 6.5% and the extension of the final repayment date from 31(st)
July, 2012 to at least the 31(st) July, 2013. The continuance of
the Company as a going concern is dependent upon it being able to
negotiate a settlement with AIBC and the Convertible Loan Note
holders and to it being able to direct its remaining resource into
creating a value that can be sustained.
A notice convening a General Meeting is set out below together
with the resolution to be put to shareholders for your approval of
the transaction more particularly described above.
The sale of the Industrial Portfolio to Gracelands is considered
to be a related party transaction under the Companies Act 2006 and
under the AIM Rules for Companies as published by London Stock
Exchange plc ("AIM Rules"). With the current negative attitude of
bankers to providing ongoing finance, albeit with thanks to them
for showing a degree of patience whilst we move forward in this
orderly manner, I would suggest that we are faced with no other
realistic alternatives but to approve the proposed Transaction. As
stated above, I have little doubt that failure to pass the proposed
resolution will result in BoS withdrawing its facilities, thereby
forcing the Company into receivership or some other form of
corporate insolvency.
The Directors, excluding Richard Hayward, having consulted with
Seymour Pierce Limited, the Company's nominated adviser, consider
the terms of the disposal to be fair and reasonable insofar as the
shareholders of the Company are concerned and therefore recommend
that shareholders vote in favour of the resolution. It should be
noted that as the Company's preference shareholders have unpaid
dividends due to them, they currently also have voting rights in
respect of their stock.
Yours faithfully,
Bob Carlton-Porter
Chairman"
- Ends -
Enquiries:
Hawtin PLC
Bob Carlton-Porter, Chairman Tel: 01633 682130
Nicola Crickmore, Company Secretary
Seymour Pierce Limited
Guy Peters / David Foreman (Corporate Tel: 020 7107 8000
Finance)
Richard Redmayne (Corporate Broking)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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