REG - PressureTechnologies - Debt Refinancing - Agreement in Principle

Pressure TechnologiesAnnouncement

24/10/2023 07:00

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RNS Number : 0258R  Pressure Technologies PLC  24 October 2023

The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated under the UK version of the EU
Market Abuse Regulation (2014/596) which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, ("MAR"), and is disclosed in accordance
with the Group's obligations under Article 17 of MAR. Upon the publication of
this announcement via a Regulatory Information Service, this inside
information will be considered to be in the public domain.

24 October 2023

 

Pressure Technologies plc

("Pressure Technologies" or "the Company" or "the Group")

 

Debt Refinancing - Agreement in Principle

 

Pressure Technologies plc (AIM: PRES), the specialist engineering group, is
pleased to announce it has reached agreement in principle with Rockwood
Strategic plc(1) and Peter Gyllenhammar AB (together "the Lenders"), both
major shareholders in the Company, for the provision of a new Term Loan
Facility of £1.5 million ("the Facility") that will be used to refinance the
existing debt facilities of the Group and provide additional working capital
headroom.

Background to the Debt Refinancing

 

The existing debt facilities of the Group currently comprise a bank loan of
£0.9 million provided by Lloyds Banking Group ("Lloyds") and finance leases
totalling £1.1 million. The Lloyds loan is secured against the assets of the
Group and is due to be repaid in full on 31 December 2023 at which point the
facility will expire. The finance leases are secured against specific assets
and have a range of expiry dates over the next 4 years.

 

During 2023, the Group has explored refinancing the Lloyds loan with a number
of mainstream lenders and challenger banks by way of raising new asset-backed
lending facilities secured against the property assets, plant and debtors of
the Group.

 

However, the challenging trading conditions experienced across 2022 and during
the early part of 2023 subdued the financial performance of the Group in that
period. Whilst profitability for the financial year ended 30 September 2023
("FY23") reflected materially improved trading on the prior year, as updated
in the Company announcement of 3 October 2023, it is expected to remain at
this level in the next 12 months. As a result, and alongside tightening
lending standards and credit availability, the debt capacity of the Group has
been restricted and a suitable mainstream lending facility has not been made
available.

 

Intention to divest Precision Machined Components ("PMC") division

 

Further to the Company's announcement of 3 October 2023, the Board has noted
the continued improvement in oil and gas market conditions which drove the
much improved order intake and financial performance of PMC in the second half
of FY23. Considering the current trading environment, improved outlook and
positive developments being made by PMC, the Board has decided that the timing
is now favourable to realise value through the divestment of the PMC division.

 

The Group has appointed advisors to handle the sale process which it expects
to launch in November 2023. The sale process is expected to run for
approximately 6 months into the third quarter of the financial year ending 30
September 2024 ("FY24").

 

Group Funding Requirement

 

The Group currently has available cash resources of approximately £0.7
million, in addition to the debt facilities noted above.

 

The sale of PMC is expected to deliver material cash proceeds for the Group in
the third quarter of FY24 which will underpin a strong and stable financial
position from which to transition Chesterfield Special Cylinders into new UK
defence, global defence and hydrogen programmes during the remainder of FY24
and beyond.

 

However, during the intervening period the cash position of the Group is
expected to tighten as a result of the final repayment commitment to Lloyds of
£0.9 million in December 2023 and reduced activity levels around the
Christmas shutdown.

 

The Group has therefore identified a short-term funding requirement of up to
£1.5 million to bridge the finances of the Group to a sale of the PMC
division.

 

New Term Loan Facility

 

The Group has arranged the proposed new Facility with Harwood Capital LLP, as
Investment Adviser to Rockwood Strategic plc (who hold a 20.0% shareholding in
the Company), and Peter Gyllenhammar AB (who hold a 16.8% shareholding in the
Company).

 

The Facility will provide £1.5 million on drawdown and will be used to repay
Lloyds, pay transaction expenses and provide working capital headroom. The
Facility is committed for a 5 year period and is secured against the assets of
the Group.

 

The Facility is subject to full capital repayment over the 5 year term with
£0.5 million repayable in FY24, £0.25 million repayable in October 2025 and
£0.25 million repayable annually thereafter to expiry in October 2028. An
arrangement fee of 3% is payable to the Lenders on drawdown and the Facility
carries an interest rate of 14.25% per annum. The Facility may be repaid at
any time by the Group without prepayment charges or penalties. Upon a
successful sale of the PMC division, the Facility will be repaid in full.

 

In conjunction with the provision of the Facility, the Lenders will also be
issued with 1,933,358 warrants in aggregate (representing 5% of the issued
share capital) to subscribe for ordinary shares in the Company ("the
Warrants") at a price of 32 pence per share, representing a 20% premium to
yesterday's closing share price. The Warrants may be exercised at any time in
the 5 years following drawdown of the Facility and continue to be exercisable
in the event the Facility is repaid before its final expiry.

 

The Company and the Lenders expect to complete legal documentation required
for the Facility during November 2023.

 

 

 

 

Related Party Transaction

 

The Lenders are each substantial shareholders in the Company and Richard
Staveley, Non-Executive Director of the Company, is a board representative of
Harwood Capital LLP, investment manager of Rockwood Strategic plc. The
provision of the Facility, and the associated grant of the Warrants,
constitutes a related party transaction pursuant to AIM Rule 13.

 

The Directors independent of the transaction (being all Directors other than
Richard Staveley), having consulted with the Company's nominated adviser,
Singer Capital Markets, consider that the terms of the Facility and the grant
of the Warrants are fair and reasonable insofar as shareholders are concerned.

 

Chris Walters, Chief Executive of Pressure Technologies plc, commented:

 

"We appreciate the strong support from two of our major shareholders,
demonstrated through this funding solution, confirming their confidence in the
Group's prospects whilst we realise value from the sale of the PMC division in
improving oil and gas market conditions."

 

 

Additional Information

 

The person responsible for arranging release of this announcement on behalf of
the Company is Steve Hammell, Chief Financial Officer.

 

(1) Harwood Capital LLP is the investment manager of Rockwood Strategic plc.

 

For further information, please contact:

   Pressure Technologies plc                                                                              Tel: 0333 015 0710

   Chris Walters, Chief Executive

   Steve Hammell, Chief Financial Officer
   Singer Capital Markets (Nomad and Broker)                                                              Tel: 0207 496 3000

   Rick Thompson / Asha Chotai
   Houston (Financial PR and Investor Relations)                                                          Tel: 0204 529 0549

   Kay Larsen / Ben                                                                                       pressuretechnologies@houston.co.uk
 Robinson

 

 

COMPANY DESCRIPTION

 

www.pressuretechnologies.com (http://www.pressuretechnologies.com/)

 

With its head office in Sheffield, the Pressure Technologies Group was founded
on its leading market position as a designer and manufacturer of
high-integrity, safety-critical components and systems serving global supply
chains in oil and gas, defence, industrial and hydrogen energy markets.

The Group has two divisions:

 

·    Chesterfield Special Cylinders (CSC) - www.chesterfieldcylinders.com
(http://www.chesterfieldcylinders.com/)

·    Precision Machined Components (PMC) - www.pt-pmc.com
(http://www.pt-pmc.com/)

o  Includes the Al-Met, Roota Engineering and Martract sites.

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