REG - Distil PLC - Early CLN Conversion; Related Party Transactions

DistilAnnouncement

04/06/2026 09:30

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RNS Number : 0141H  Distil PLC  04 June 2026

Inside Information

This announcement contains inside information for the purposes of the UK
Market Abuse Regulations ('UK MAR'). Upon publication of this announcement,
this inside information (as defined in UK MAR) is now considered to be in the
public domain. The person responsible for arranging the release of this
announcement on behalf of the Company is Mr Don Goulding, Executive Chairman.

 

4 June 2026

Distil PLC

("Distil" or the "Company")

 

Agreement for early Conversion of the Ardgowan Convertible Loan Note; Related
Party Transactions

 

Distil plc (AIM: DIS), owner of premium drinks brands Blackwoods Gin and
Vodka, RedLeg Spiced Rum and Blavod Black Vodka, announces it has entered into
an agreement ("Early Conversion Agreement") with Ardgowan Distillery Company
Limited ("Ardgowan") which provides, subject to fulfilment of certain
conditions, for the early conversion ("Conversion") of the £3 million
Convertible Loan Note ("CLN") held by Distil. In addition, Distil has agreed
the terms of an agreement ("Supplemental Agreement") which amends the existing
shareholders' agreement with Ardgowan and its other shareholders, and which
becomes binding upon Distil upon Conversion.

 

Background

 

In July 2021, the Company announced a proposed investment of £3 million in
Ardgowan by way of a Convertible Loan Note Agreement ("CLN Agreement").

 

The principal terms of the CLN Agreement were:

 

(i)        Term:10 years from date of investment (which ended up being
made in January 2022);

(ii)       Coupon: 5% per annum;

(iii)     Conversion terms: At Distil's discretion at any time during the
term of the CLN at a pre-new money valuation of £30 million. (The £3 million
outstanding under the CLN equated to approximately 9.09% of Ardgowan's fully
diluted issued share capital);

(iv)      Security #1:   The lower of (a) £250,000 and (b) an amount
equal to the total interest payable on the CLN by Ardgowan during the then
current 'year' (being each period of 12 months from the date of signature of
the CLN Agreement) of the CLN term, is deposited and maintained in a GBP
denominated bank account in the Company's name ("escrow deposit");

(v)      Security #2:   Ardgowan pledges 10% of its annual production of
malt whisky (or other product at the discretion of Distil) to Distil during
the term of the CLN;

(vi)     Security #3: Ardgowan grants to Distil a floating charge over
10% of its annual production of malt whisky (or other product at the
discretion of Distil) until the above pledge takes effect; and

(vii)    Change of control:   Distil can require early repayment or
conversion of the Loan if a change of control event occurs.

 

As notified in June 2025, Ardgowan raised debt finance of £5 million (with a
further £5 million facility via stock lending of up to 60% of rolling stock
value) through a secured revolving credit facility ("RCF") with Clydesdale
Bank (t/a Virgin Money) ("Virgin Money") to fund completion of phase one of
the Ardgowan Distillery project (opening of the distillery), and to lay down
whisky stocks.  In addition, the 10% stock pledge in the original CLN
Agreement (as summarised in points (v) and (vi) above) held by Distil was
subordinated to Virgin Money's senior security.  As Virgin Money required its
RCF to rank ahead of Distil's CLN, an inter-creditor agreement ("ICA") was
entered into by Distil, Ardgowan, Virgin Money and others. To compensate
Distil, the CLN Agreement was also varied to increase the coupon on the CLN
from 5% to 6.5% and to increase Distil's shareholding on conversion from 9.09%
to 10.5% of Ardgowan's enlarged issued share capital.

 

As announced on 24 March 2026, due to some production issues caused by
snagging problems with new equipment and new power connections, liquid
production at Ardgowan was behind schedule which resulted in a delay to
Ardgowan being able to draw down on the Virgin Money facility. Most of these
issues, including power, have now been resolved satisfactorily and a double
shift has been implemented to catch up with forecast production forecasts over
the coming months.

 

Over recent weeks Ardgowan's board, working together with its shareholders,
convertible loan note holders and lenders, has sought to recapitalise
Ardgowan's balance sheet by agreeing a range of measures with these parties.

 

Ardgowan has confirmed that CLN holders who held circa £11 million of
convertible loan notes ("CLNs") (including accrued and rolled up interest to
maturity) have agreed to convert these CLNs into Ardgowan equity. Once
converted, this will have the effect of reducing Ardgowan's annual interest
bill, as well as materially reducing its indebtedness.

 

Early Conversion Agreement

 

Distil has, on 3 June 2026, entered into the Early Conversion Agreement with
Ardgowan whereby it has agreed, subject to satisfaction of the conditions (set
out below), to exercise conversion of its £3 million CLN into 10.5% of
Ardgowan's equity.

 

As a result, Distil will receive an immediate payment of £30,000,
representing interest due under the Distil CLN for April and May 2026.

 

In addition, Distil will receive a subsequent payment of £395,000, comprising
the £195,000 escrow deposit (to be "topped up" to this number by Ardgowan in
the event of any shortfall) held under the original CLN Agreement and a
further £200,000. This is payable at the point of Conversion, which has a
long stop date of 30 June 2026 (unless extended by agreement).

 

If Conversion has not occurred by 13 June 2026 Distil will also (on
Conversion) receive additional interest accrued under the CLN in the period
from 1 June 2026 to the date of Conversion.

 

Distil will also receive a waiver of rent to take effect from Conversion,
until such time as the amount of rent waived equals £170,000. This rent is in
respect of the Blackwoods' visitor centre which is located at Ardgowan. Distil
currently pays rent of c£46,000 per annum, which increases annually in line
with RPI.

 

A further announcement will be made once Conversion has taken place.

 

The conditions precedent for Conversion are:

 

1.      Prior conversion of all other convertible loans and the waiver or
other satisfaction of all other debt instruments issued by Ardgowan.

2.     Written consent to the Conversion and the other terms of the Early
Conversion  Agreement received from Nationwide Building Society (trading as
Virgin Money).

In considering whether to enter the Early Conversion Agreement the Distil
Board has taken account of a wide range of factors. These include:

 

-  that from Conversion Distil will forego the coupon of £195k per annum for
the period through to January 2032 to which it was previously entitled as a
CLN holder;

- that an equity shareholding in Ardgowan is riskier than holding the CLN
(notwithstanding the Distil CLN is subordinated to Virgin Money's RCF, and the
actual security foregone by Conversion may not fully cover the value of
Distil's CLN currently or in the future);

- that there is the possibility of further dilution to Distil's 10.5%
shareholding between now and 2032 if Ardgowan were to issue more shares.

 

However, the Distil Board also has taken account of the following:

 

-     Ardgowan (post Conversion) will have a stronger balance sheet,
relieved of c£14m (including accrued and rolled up interest to maturity) of
CLNs and c£0.6m of annual interest cost.

-     Conversion of all CLNs will improve Ardgowan's gearing and financial
position, which will be in Distil's interest as a resultant 10.5% shareholder.

-     Ardgowan should be in a stronger position to attract
investment/funding given the removal of CLNs with anti-dilution provisions.

-     As set out in Distil's RNS of 24 March 2026, Distil is facing
challenges which have necessitated a funding requirement for Distil. Entering
the Early Conversion Agreement ameliorates this requirement by a material
amount and increases Distil's cash runway.

 

Supplemental Agreement

 

A Supplemental Agreement, which amends the existing (2021) shareholders'
agreement (which predates Distil subscribing for its CLN) has been agreed by
Ardgowan and a number of Ardgowan's current principal shareholders, including
Grain GmbH. It is expected that the Supplemental Agreement (as well as amended
Articles of Association of Ardgowan) will be signed/adopted by Ardgowan and
those shareholders in the near future. Upon Conversion of Distil's CLN, Distil
will become a party to this amended shareholders' agreement and hold its
shares in Ardgowan subject to the newly adopted Articles of Association.

 

This agreement is intended to, inter alia, recognise the changes that have
occurred since 2021, including the conversion of the CLNs, and to remove
anti-dilution rights held by founder shareholders.

 

The Supplemental Agreement is in agreed form, and under the Early Conversion
Agreement, Distil has agreed its terms and will be bound by the Supplemental
Agreement once Conversion has occurred. The Supplemental Agreement updates the
original shareholders' agreement and contains normal terms for a document of
this type, although provisions are contained in the document (including a
waiver of pre-emption rights) which mean that there is no guarantee that
Distil will participate in any future equity raise by Ardgowan, which may
therefore result in dilution of Distil's shareholding in Ardgowan. The
agreement reflects an amended shareholder structure - which contained
different share classes - so that from signing the Supplemental Agreement and
adoption of the new Articles of Association there is only one class of
ordinary share in issue in Ardgowan. Certain reserved matters can only be
effected with the agreement of shareholders holding not less than  55% of
Ardgowan's share capital (previously 65% in the original shareholders'
agreement). Grain GmbH will remain a majority shareholder of Ardgowan post
Conversion, with in excess of this level of shareholding.

 

In addition, the Supplemental Agreement removes various anti-dilution
provisions previously held by founder shareholders.

 

Under the Supplemental Agreement, subject to having a shareholding of at least
10% in Ardgowan, Distil retains the right to appoint a director to the
Ardgowan board, and that (subject to having a 5% shareholding) it will retain
observer status at Ardgowan board meetings.

 

Related Party Transactions

 

Roland Grain is the CEO and majority shareholder of Ardgowan. In addition, up
until 10 December 2025 Grain GmbH (in which Roland Grain has an interest) was
a Substantial Shareholder in Distil. For this reason, Roland Grain, Grain GmbH
and Ardgowan are treated as related parties of the Company and the above
arrangements with Ardgowan constitute related party transactions for the
purposes of Rule 13 of the AIM Rules for Companies.

 

Having consulted with SPARK Advisory Partners, the Company's nominated
adviser, the Directors consider that the terms of (1) the Early Conversion
Agreement and (2) the Supplemental Agreement with Ardgowan are fair and
reasonable insofar as Shareholders are concerned.

 

Ardgowan Performance Update

 

Ardgowan Distillery faced challenges in terms of production last year which
delayed the pace at which whisky stocks have been laid down. However, they
have since been making strong progress, with the stills running double-shifts
to make up ground. In May, works were completed to connect the distillery to
permanent power, meaning the distillery is no longer reliant on a generator.

 

Progress has also been made in other areas, with general site improvements
being made during the downtime required to switch power supply, making for an
improved visitor experience in time for the key tourist season.

 

In addition, April saw Ardgowan Distillery release a range of six new Single
Cask Scotch Whiskies under its Clydebuilt range, strengthening its extensive
product portfolio.  The company has also made good progress over the last 12
months, achieving strong turnover growth, which has provided an important
revenue stream for the business.

 

Blackwoods Brand Home Update

 

Having opened to the public in February 2026, the Blackwoods Brand Home,
located on the Ardgowan estate, has been welcoming guests for tours, tastings,
and cocktails, and has achieved a 5* rating on Google. The team has made
strong connections within the Scottish tourism industry to raise the profile
of the experience. Over the coming months, the Brand Home will also launch
Blackwoods' Gin School, allowing guests to distil and label their own gin.

 

Enquiries:

For further information, please contact:

 

 Distil PLC
 Don Goulding, Executive Chairman         Tel: +44 203 283 4006

 SPARK Advisory Partners Limited

 (NOMAD)
 Neil Baldwin                             Tel: +44 203 368 3550

 Mark Brady
 Allenby Capital Ltd

 (Broker)
 James Reeve/ Jos Pinnington/Matt Butlin  Tel: +44 (0)20 3328 5656

 

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