REG - Plexus Holdings Plc - ISSUE OF CONVERTIBLE LOANS

Plexus HoldingsAnnouncement

20/10/2022 07:01

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221020:nRST4737Da&default-theme=true

RNS Number : 4737D  Plexus Holdings Plc  20 October 2022

Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil equipment &
services

20 October 2022

 

This announcement contains inside information

 

 

 

 

Plexus Holdings PLC

('Plexus', 'the Company' or 'the Group')

 

ISSUE OF CONVERTIBLE LOANS

 

Plexus Holdings plc is pleased to announce that it has raised £1,550,000
through the issue of 1,550,000 convertible loan notes ("Loan Notes") to each
of OFM Investment Limited (an entity connected to the van Bilderbeek family),
Ben van Bilderbeek, CEO of Plexus, and Jeff Thrall, Non-executive Director of
Plexus, (together, the "Noteholders") under the terms of a loan note
instrument (the "Instrument").

 

The proceeds from the issue of the Loan Notes will be used for working capital
purposes and, along with the Company's existing cash resources, fund the
Company's activities as it seeks to capitalise on the increasing pipeline of
opportunities within Plexus' markets, and in particular its re-entry into the
exploration wellhead rental from Jack-up rigs market where Plexus is in a
licencing partnership with Schlumberger.

 

Background to the Issue of the Loan Notes

The Board has considered a number of options to secure additional working
capital and strengthen the Company's balance sheet, and has determined, in
conjunction with its advisors that the issue of the Loan Notes is the
preferred approach and that it is the most time and cost-efficient method to
enable Plexus to fund its strategic objectives and rental fleet build out in
the short-medium term.

 

The Board recognises the importance of the Company's existing shareholders,
and the issue of the Loan Notes will enable them to avoid dilution to their
holdings at this time. Furthermore, the Loan Note structure provides for the
participation of existing shareholders in a future capital raise, which is
anticipated to take place alongside the conversion of the Loan Notes.

 

Details of the Loan Notes

The issue of the Loan Notes has raised an aggregate of £1,550,000 loans from
OFM Investment Limited (an entity connected to the van Bilderbeek family), Ben
van Bilderbeek and Jeff Thrall in the following proportions:

 

a.   OFM Investment Limited £1,000,000;

b.   Ben van Bilderbeek £500,000; and

c.   Jeff Thrall £50,000.

 

The Loan Notes are non-interest bearing, and their 'long stop' maturity date
is the second-year anniversary of the date of the Instrument ("Maturity
Date").

 

Although the Loan Notes are currently unsecured, the Instrument contains
obligations on the Company to use all reasonable endeavours (so far as it lies
within its powers so to do) to satisfy certain conditions (including passing
of requisite shareholder resolutions to approve the grant of security) to
enable the Loan Notes to be secured by way of a first ranking charge over all
of the Company's assets (excluding any that are subject of a Bank of Scotland
security) to be granted in favour of Ben van Bilderbeek as security trustee on
behalf of the lenders.

 

The Instrument contains rights for the holders of Loan Notes to convert the
Loan Notes in certain circumstances, subject to certain conditions being
satisfied, specifically: (i) an offer of new shares to all or substantially
all of the then existing shareholders of the Company (but excluding the
Noteholders and their connected persons, save to the extent that such offer is
not fully subscribed by such shareholders, in which case the offer may be
extended to the Noteholders and their connected persons) on a materially
pre-emptive basis before the Maturity Date (the "Qualifying Financing"); (ii)
the passing of all shareholder resolutions required in respect of the
Qualifying Financing and the conversion of the Loan Notes; and (iii) the
Company, acting in good faith, deeming that any proposed exercise of such
rights would not result in an obligation pursuant to Rule 9 of the Takeover
Code on any person to extend an offer for all the shares in the Company.

 

The Instrument also contains an obligation for the Company to use reasonable
endeavours (if, acting in good faith, it deems it commercially appropriate to
do so at the relevant time) to procure satisfaction of the conditions to
conversion following the receipt of a trigger notice (which can be served by
the Noteholders if: (i) in the first year of the Instrument being constituted,
the Company's share price averages 4p or more in any rolling 45 day period; or
(ii) in the second year, the Company's share price averages 8p or more in any
rolling 45 day period), or, if earlier, by mutual agreement of the Noteholders
and the Company, or the Maturity Date.

 

In respect of the shareholder resolutions required in respect of: (i) the
security described above; and (ii) the Qualifying Financing and the conversion
of the Loan Notes, the Company has received irrevocable undertakings from the
OFM Investment Limited, Ben van Bilderbeek, Jeff Thrall, Thrall Enterprises,
Inc. and Mutual Holdings Limited to vote in favour of such resolutions.
Together, such shareholders are interested in shares totalling 59.4% of the
issued share capital of the Company (note, however, that the irrevocable
undertakings relate to any shares held by such shareholders at the time such
shareholder resolutions are tabled at the relevant general meetings of the
Company).

 

The Loan Notes will be repayable on a winding up/ insolvency of the Company,
or at any time (in whole or in part) at the election of the Company with the
consent of the Noteholders. If the Loan Notes are repaid in cash, the
Noteholders will, in addition to the principal amount of their Loan Notes, be
paid an amount equal to 20% of the principal amount of their Loan Notes.

 

It has been agreed that the Noteholders, subject to shareholder authority,
will convert their loans into new shares at a 20% discount to the share price
paid by investors in the corresponding Qualifying Financing in recognition of
and compensation for the funding support that has been provided.

 

The Board had considered this scenario and has agreed that when the loan note
instrument conversion event occurs within the two-year term of the Loan Notes,
all shareholders, with the exception of the Noteholders, will be given the
opportunity to participate in a future capital raise via an offer of new
shares alongside the conversion. The Noteholders may participate to the extent
that the open offer, or equivalent, is not fully subscribed. This mechanism
gives existing shareholders the opportunity to participate in a capital raise
and to broadly maintain their shareholding percentage in Plexus, or indeed
potentially increase their holding if there was headroom to do so.

 

Related Party Transaction

The Noteholders consist of Jeff Thrall and Ben van Bilderbeek, both of whom
are directors and shareholders of the Company, and OFM Investment Limited (a
party connected to the Ben van Bilderbeek family), and the issue of the Loan
Notes (the "Transaction") to the Noteholders is deemed to be a related party
transaction pursuant to AIM Rule 13 of the AIM Rules for Companies. The
Company's directors (excluding Jeff Thrall and Ben van Bilderbeek, who are
both interested in the Transaction) consider, having consulted with the
Company's Nominated Adviser, that the terms of the Transaction are fair and
reasonable insofar as the shareholders of the Company are concerned.

 

The Takeover Code

The Takeover Code (the "Code") applies to the Company. Under Rule 9 of the
Code, any person who acquires an interest in shares which, taken together with
shares in which that person or any person acting in concert with that person
is interested, carry 30% or more of the voting rights of a company which is
subject to the Code is normally required to make an offer to all the remaining
shareholders to acquire their shares.

 

Similarly, when any person, together with persons acting in concert with that
person, is interested in shares which in the aggregate carry not less than 30%
of the voting rights of such a company but does not hold shares carrying more
than 50% of the voting rights of the company, an offer will normally be
required if any further interests in shares carrying voting rights are
acquired by such person or any person acting in concert with that person.

 

An offer under Rule 9 must be made in cash at the highest price paid by the
person required to make the offer, or any person acting in concert with such
person, for any interest in shares of the company during the 12 months prior
to the announcement of the offer.

 

The Company has agreed with the Takeover Panel (the "Panel") that Ben van
Bilderbeek (Chief Executive of Plexus) and Jeff Thrall (Non-executive Chairman
of Plexus), and their immediate families and related trusts (the "Concert
Party"), are acting in concert in relation to the Company. The Concert Party
is interested in 59,684,919 Ordinary Shares, representing 59.4 per cent. of
the voting rights of the Company. A table showing the respective individual
interests in shares of the members of the Concert Party is set out below.

 

 Concert Party Holdings   Ordinary Shares held                                         Percentage of issued share capital
 Mutual Holdings Limited                     42,700,001                                42.5%
 OFM Investment Limited                      15,069,767                                15.0%
 Nazdar Limited                                1,591,512                               1.6%
 Ben van Bilderbeek ¹                              307,639                             0.3%
 Jeff Thrall ²                                       16,000                            0.02%
                                             59,684,919                                59.4%

 

¹ Ben van Bilderbeek is settlor of a trust which controls 59.96% of the
shares of Mutual Holdings Limited and the entire issued share capital of OFM
Investment Limited. Ben van Bilderbeek and his immediate family and related
trusts have voting control over approximately 57.8% of the issued share
capital of the Company and are free to increase their aggregate interests in
shares without incurring any obligation to make an offer under Rule 9.

² Jeff Thrall has an indirect beneficial interest in a company which controls
32.5% of Mutual Holdings Limited. Additionally, Jeff Thrall has both a direct
and an indirect beneficial interest in Nazdar Limited. Jeff Thrall and his
immediate family and related trusts have voting control over approximately
1.6% of the issued share capital of the Company and are not able to increase
their percentage interests in shares through or between a Rule 9 threshold
without Panel consent.

 

The members of the Concert Party currently hold shares carrying more than 50%
of the voting rights of the Company and (for so long as they continue to be
acting in concert) may accordingly increase their aggregate interests in
shares without incurring any obligation to make an offer under Rule 9,
although individual members of the concert party will not be able to increase
their percentage interests in shares through or between a Rule 9 threshold
without Panel consent.

 

Under sections 979 to 982 of the Companies Act (the "Act"), if an offeror were
to acquire 90 per cent. of the Ordinary Shares within four months of making a
takeover offer as defined in section 974 of the Act, it could then
compulsorily acquire the remaining 10 per cent. It would do so by sending a
notice to outstanding shareholders telling them that it will compulsorily
acquire their shares and then, six weeks later, it would execute a transfer of
the outstanding shares in its favour and pay the consideration to the Company,
which would hold the consideration on trust for outstanding shareholders. The
consideration offered to the shareholders whose shares are compulsorily
acquired under the Act must, in general, be the same as the consideration that
was available under the takeover offer unless the shareholders can show that
the offer value is unfair.

 

Pursuant to sections 983 to 985 of the Act, minority shareholders in the
Company have a right to be bought out in certain circumstances by an offeror
who has made a takeover offer. If a takeover offer related to all the Ordinary
Shares and at any time before the end of the period within which the offer
could be accepted the offeror held or had agreed to acquire not less than 90
per cent. of the Ordinary Shares, any holder of shares to which the offer
relates who has not accepted the offer can require the offeror to acquire his
shares. The offeror would be required to give any shareholder notice of his
right to be bought out within one month of that right arising. The offeror may
impose a time limit on the rights of minority shareholders to be bought out,
but that period cannot end less than three months after the end of the
acceptance period. If a shareholder exercises its rights, the offeror is bound
to acquire those shares on the terms of the offer or on such other terms as
may be agreed.

 

Update

Although the Company continues to actively promote its proprietary wellhead
and related technologies, it has taken longer than anticipated to recover from
what has been for some time challenging market conditions. However, the Board
of Plexus is confident that the medium-term outlook for the Company remains
strong and is encouraged by the recent increase in activity that is taking
place, which has resulted in a growing number of customer enquiries and
tenders. Strengthening the Company's working capital position at this time
will help enable the Company to respond to and secure new orders as it seeks
to make inroads into new markets. These include the "Exact-EX" and Centric-15"
Jack-up rental exploration wellhead market, where Plexus is in a licencing
partnership with Schlumberger, and for example the surface production wellhead
and Plug & Abandonment markets.

 

In further consideration of steps being taken to strengthen the financing of
Plexus, one of Plexus' licencing partners has indicated its agreement in
principle to provide equipment manufacturing credit funding on a 'lease to
own' basis, to help accelerate the build out of the Company's wellhead rental
inventory, which if actioned would be paid down over a three-year period.

 

The Company continues to monitor its cost base and will manage this in line
with the requirements of the business and the anticipated uplift in activity.
With this in mind, the Board is also considering how best to manage its asset
base in relation to non-core assets, and currently anticipates selling the
long leasehold interest in a property in Aberdeen, which has become surplus to
requirements. This property has already been sub-let to a third-party tenant
and, if such a transaction could be concluded, it would accelerate the receipt
of income from the property to further improve Plexus' working capital
position and support the Company's planned capex programme.

 

Finally, it must not be forgotten what lies behind Plexus' value and
prospects, and what its technology can contribute to the oil and gas industry.
The Board believes that the vast majority of older hydrocarbon producing
wellheads around the world are not operating to a recognised standard. This is
because conventional annular seals have limited field-life, and for much of
their service life must seek remedial solutions to address leaking, such as
the use of unregulated periodic injection of sealing liquids, by service
providers, who themselves have described such external intervention as a
temporary fix. As Plexus' approach is to promote "prevention" and the
long-term integrity of its equipment and the capabilities of its
metal-to-metal "HG" seals, the Board considers that the case for the
continuing use of conventional wellhead seal "cures", which it believes to be
unreliable is becoming increasingly hollow. With the focus now firmly on
eliminating methane emissions wherever possible, Plexus' leak-free metal
sealing wellhead capability, based on the POS-GRIP method of engineering,
which uniquely meets ESG and NetZero objectives, and which has resulted in the
Company achieving the LSE "Green Economy Mark", should logically secure the
place in the industry it deserves.

 

The Board appreciates the ongoing support of its shareholders, the market, and
the industry, and looks forward to providing further updates as the above
initiatives progress.

 

Ben van Bilderbeek CEO today said, "As your CEO, and the principal shareholder
of Plexus Holdings Plc, I could not be prouder of our company, although I more
than anyone am frustrated about the challenges faced by Plexus in recent
years.

 

"Primarily because of circumstances beyond our control, Plexus had to navigate
difficult trading conditions since 2015. Indeed, the huge drop in the price of
oil placed us in the crosshairs of the major service providers who had to
fight over every scrap of work, which meant that our potentially disruptive
presence became less tolerated as drilling activity declined, whereas now this
trend is reversing.

 

"Our choice was to soldier on, or to lock-down and preserve our IP assets
until better days. However, the value of uniquely enabling intellectual
property requires a qualified team to keep it active, which is why your Board
decided to absorb negative cash flow, whilst we repositioned ourselves to be
ready with a more diversified product mix once the market returns. In the
event, we survived very challenging times by selling IP applications, non-core
assets and by licencing non-exclusive rights to certain applications of our
POS-GRIP technology.

 

"As the purveyors of disruptive technologies, Plexus elected to compete with
the established gatekeepers of our industry. To their credit, some of these
companies such as TechnipFMC ('TFMC') and Schlumberger/Cameron ('Cameron')
recognised the value of our technology by entering into license agreements for
certain aspects of our array of POS-GRIP applications.

 

"Specifically, the Plexus POS-GRIP Jack-up exploration wellhead system, now
owned by TFMC, is still, we believe, the top choice in the Jack-up exploration
wellhead rental market, and a few years later Cameron is developing its own
version of POS-GRIP surface production wellheads, also under license.

 

"As a coincidence, I believe the two most competent ESG compliant exploration
wellhead systems from Jack-up rigs in use today, have both been designed and
developed by Plexus. The POS-GRIP system is now owned by TFMC, and our
previous EXACT-15 exploration drilling system was bought by Cameron in 1995.

 

"In a welcome development, Plexus was able to licence back the rights to its
original Exact-15 system from Cameron and has initiated a joint rental
wellhead inventory investment programme, based on upgraded threaded hanger
technology, which will soon be online.

 

"Our return to the exploration wellhead rental market is assisted by access to
international markets through our partner Cameron, and Plexus is still well
known throughout the industry as the original inventors of through the BOP
Jack-up drilling technology, with previous customers looking forward to once
again doing business with Plexus.

 

"In the meantime, the Ukrainian conflict has refocussed the North Sea and the
rest of the world on the need to increase exploration and production
activities, which is reflected by growing enquiry levels for our rental
exploration and sold production wellheads.

 

"As announced today, I am pleased to be supporting Plexus through my
investment in the Loan Notes, to meet the short-term investment needs of the
Company. We recognise the support and importance of our shareholders, and it
is intended that they will be given the opportunity to invest at the time of
loan conversion, and I strongly recommend that they seriously consider
'standing their corner', when the opportunity presents.

 

"After the Gulf of Mexico incident of 2010, the opportunity for Plexus to
develop a new subsea wellhead application using POS-GRIP technology lifted the
Company's market cap to record highs. We backed our belief in the technology
by developing, through a widely supported JIP, our Python subsea wellhead
system. Only a concept then, the Python subsea wellhead is now a qualified,
circa £4 million invested prototype ready for trial, which the Board of
Plexus believes offers a wide range of operational, time saving and safety
advantages, and represents an early example of a progressive collaboration
approach to a significant challenge faced by the industry.

 

"With Python ready to undergo field trials, Plexus' extensive IP suite,
know-how and goodwill is today far greater in scope compared to the time when
Plexus was valued at circa £300 million. Although a return to such Halcyon
days is not anticipated in the near future, the opportunity to re-enter the
rental exploration wellhead market, where we were the original "go to"
supplier for the North Sea, together with renewed interest in our Python
subsea wellhead and surface production technology, gives me growing confidence
that Plexus' shareholder value can recover, this time driven by a more
diversified product and services mix, and now also in partnership with the
world's largest international oil and gas service company.

 

"Our current product and service range includes exploration rental wellhead
services; leak-free surface and subsea production wellheads; plug and
abandonment technology; gas and hydrogen storage applications; POS-GRIP
geothermal wellhead solutions; and special applications when inaccessible
bespoke challenges present themselves.

 

"Although our industry has in the past been reluctant to openly recognise ESG
objectives and NetZero targets, the reality is that engineers have an
obligation to pursue the Best and Safest Technology available, which logically
extends to both personnel and the environment.

 

"Ever since the Company's inception in 1987, Plexus has sought to identify and
address certain established operating practices, which caused us to naturally
gravitate towards leak-proof seal solutions and through the BOP operating
practices. We did not have to be asked to adopt EGS principles! Indeed,
although Plexus' efforts over many years were, I believe, labelled disruptive,
our company today is (to my knowledge) the only oil and gas service company to
have its emissions reducing technology recognised through the London Stock
Exchange Green Economy Mark programme.

 

"For these reasons, and with the world in desperate need for safe and near
NetZero energy sources whilst alternatives are in reality still a long way
off, and with Putin exposing the risk of global sourcing energy policies, our
time, in respect of a NetZero-Now capability may have come. This is
particularly the case for natural gas, where recently the UK and European
energy policies have pivoted back to exploration and production closer to
home, whilst at the same time our partners have strengthened our reach into
international markets.

 

"In the case of the UK, such fast moving developments are clearly evidenced by
the Prime Minister's recent pronouncements in relation to energy security and
the need to make Britain energy independent by 2040. Such a pledge to
strengthen domestic power supplies after decades of short-term thinking, and
the focus on homegrown fossil fuel extraction was bolstered by the Government
indicating that it is poised to make available more than 100 new oil and gas
permits in the North Sea, the first licencing round of its kind since 2020.
This, I believe, bodes well for the future of Plexus, particularly if we can
convince our industry and the regulators that in the field of critical
wellhead technology home-grown leak-proof solutions are available, and which
are based on prevention rather than cure."

 

**ENDS**

 

For further information please visit www.plexusplc.com
(http://www.plexusplc.com) or contact:

 

 Plexus Holdings PLC       Tel: 020 7795 6890

 Ben van Bilderbeek, CEO

 Graham Stevens, CFO
 Cenkos Securities PLC     Tel: 0131 220 6939

 Derrick Lee

 Pete Lynch
 St Brides Partners Ltd    plexus@stbridespartners.co.uk

 Isabel de Salis

 Ana Ribeiro

 Max Bennett

 

Notes to Editors

 

Plexus Holdings plc (AIM: POS)

Plexus is an IP led company focussed on establishing its patented leak-proof
POS-GRIP® wellhead and associated equipment as the go-to technology for
energy markets whilst making a genuine contribution to the oil and gas
industry's ESG and NetZero goals by championing "through the BOP" (Blow-out
Preventer) designs, and lifetime leak-proof HG® metal-to-metal sealing
systems.  Having protected the environment for many years through these
technological innovations, the Company was awarded the London Stock Exchange's
Green Economy Mark in July 2021 and continues to place emphasis on its ability
to reduce harmful methane emissions and unnecessary maintenance and
intervention costs.

 

Headquartered in Aberdeen, the Company has provided leak-free wellhead
performance in over 400 wells worldwide and worked with an array of blue-chip
oil and gas company clients.  As well as generating direct revenues from
securing orders for surface production wellheads particularly in the UK and
European North Sea regions, the Company has several licencing agreements with
major partners including FMC Technologies, which is a subsidiary of TechnipFMC
and Cameron, a Schlumberger Group company. Cameron has a non-exclusive licence
to use the POS-GRIP and HG® metal-to-metal seal method of wellhead
engineering for the development of conventional and unconventional oil and gas
surface wellheads, and Plexus entered into a Cooperation Agreement, which
enabled Plexus to return to the Jack-up Exploration (Adjustable) Wellhead
rental business for 'through the BOP' jack-up applications, where Cameron will
help to provide Plexus with sales leads and market insight through a formal
Sales Advisory Board.

 

Plexus' current suite of products and applications include: "HG" wellheads,
which combine POS-GRIP technology with gas tight leak free metal-to-metal
sealing; the Python® subsea wellhead, developed in a Joint Industry Project
with several industry leaders; the POS-SET™ Connector for the
de-commissioning and abandonment market; and Tersus-PCT, an innovative HP/HT
tie back connector product. Having proved the superior uniquely enabling
qualities of POS-GRIP Technology, Plexus is now also focused on establishing
its technology and equipment in other markets such as Plug and Abandonment
de-commissioning, carbon capture, gas storage, hydrogen and geothermal where
it can play an important role in reducing harmful methane emission risks as
operators strive to deliver on ESG commitments and NetZero goals in a safe and
cost-effective way.

 

For more information visit: https://www.plexusplc.com/
(https://www.plexusplc.com/)

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCDKLFFLBLFFBF