REG - Distil PLC - Variation to Ardgowan Convertible Loan Agreement

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RNS Number : 0661O  Distil PLC  24 June 2025

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Distil PLC

 

24 June 2025

 

Variation to the terms of the Ardgowan Convertible Loan Note Agreement

 

Distil plc (AIM: DIS), owner of premium drinks brands Blackwoods Gin and
Vodka, RedLeg Spiced Rum and Blavod Black Vodka, announces it has varied the
terms of the Convertible Loan Note Agreement (as announced on 20 July 2021)
with Ardgowan Distillery Company Limited ("Ardgowan") by entering into a deed
of variation ("Deed of Variation").

 

Background

 

In July 2021, the Company announced a proposed investment of £3 million (with
an option for a further £2 million - which was ultimately not exercised) 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;

(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.

 

Update regarding Ardgowan

 

The initial stage of construction at the Ardgowan site is near completion,
with whisky production testing also having begun, a pivotal moment in the
journey of what will become a landmark for whisky enthusiasts.

 

The development's scale and ambitions have grown since its initial
fundraising, and as previously communicated, Ardgowan has invested £28
million into the project to date, increasing its production capabilities to be
able to produce 2 million litres of whisky annually in the future.

 

The eco-friendly distillery is designed with state-of-the-art technologies,
including heat recovery, water conservation, and carbon capture initiatives to
reduce its carbon footprint significantly, with a goal to eventually achieve
carbon neutrality.

 

The distillery has also invested into bespoke sherry casks developed for
ultra-long aging. Dubbed 'infinity cask', they were unveiled at Ardgowan's
Open Day on 20 June 2025.

 

Variation to the CLN Agreement by way of Deed of Variation

 

Ardgowan is in the process of raising 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) to fund completion of phase one of the Ardgowan
Distillery project (opening of the distillery), and to lay down whisky stocks.
 

 

The Virgin Money RCF will rank ahead of Distil's Convertible Loan Note, and
this has been effected by Ardgowan, Distil and Virgin Money and other parties
entering into an inter-creditor agreement ("ICA") on 23 June 2025.

 

In addition, the 10% stock pledge in the original CLN Agreement (as summarised
in points (v) and (vi) above) held by Distil will be subordinated to Virgin
Money's senior security.

 

Under the Terms of the CLN Agreement, Ardgowan requires Distil's signed
agreement to the ICA and consent to the Virgin Money RCF.

 

To compensate Distil for the subordination of the CLN, the following changes
have been made to the CLN Agreement:

 

(i)         Coupon: the fixed rate coupon on the CLN (currently 5%)
increases by 1.5% to 6.5% for the duration of the CLN (ending January 2032).
This increases the interest receivable by Distil by £45,000 per annum (to
£195,000 per annum) for around 6 years and 7 months amounting to a cumulative
additional c. £0.3 million over the duration (assuming conversion does not
take place prior to January 2032);

 

(ii)         Conversion terms: the percentage equity share in Ardgowan
on conversion increases by c. 1.4% from 9.09% to 10.5%, representing a 15.5%
equity conversion premium. This equates to additional equity value for Distil
of £465,000 at the pre-new money valuation of £30 million; and

 

(iii)        Assignment: The terms of the CLN will be amended to enable
Distil to assign/sell part or all of the CLN to a third party at its sole
discretion, subject to certain protections (e.g. removal of existing consent
rights) being included in favour of Ardgowan.

 

Related Party Transaction

 

Roland Grain has held the position of director of the Company within the past
12 months and is also a Substantial Shareholder. He is also CEO and majority
shareholder of Ardgowan. For these reasons both he 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 the arrangements with
Ardgowan are fair and reasonable insofar as Shareholders are concerned.

 

 

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/Piers Shimwell        Tel: +44 (0)20 3328 5656

 Jos Pinnington/Guy McDougall

 

 

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