REG - Sancus Lending Group - ZDP Continuation, Tender Offer, Bond/Warrant Issue

Sancus LendingAnnouncement

19/10/2022 07:00

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RNS Number : 3306D  Sancus Lending Group Limited  19 October 2022

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The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations
2019. The person responsible for making this announcement on behalf of the
Company is Rory Mepham.

 

 

19 October 2022

 

Sancus Lending Group Limited (the "Group" or the "Company")

 

Proposed ZDP Continuation and Tender Offer, Bond Issue and Warrant Issue,
Exercise of Existing Warrants

and

Notice of Class Meetings and Extraordinary General Meeting and posting of
circular

 

 

The Board of the Company is pleased to announce proposals for a refinancing of
and a tender offer in respect of the Group's ZDP Shares, alongside a proposed
extension of the Group's existing funding facility with Pollen Street and an
injection of capital by the Group's largest existing ordinary shareholder,
Somerston.

 

HIGHLIGHTS

 

·    Proposed refinancing and extension of the final capital repayment of
the ZDP Shares to 5 December 2027, and a Tender Offer of up to 15% of the ZDP
Shares in issue (excluding those held in treasury), securing the long-term
support of ZDP Shareholders.

 

·   In principle agreement for an increase in the Company's existing
facility with Pollen Street to £125 million and a term extension for at least
three years, expanding the Group's access to strategic institutional long-term
financing.

 

·    Exercise of existing warrants held by Somerston Fintech (part of the
Somerston Group, the Company's largest Ordinary Shareholder), and a
subscription for additional new Bonds and Warrants by Somerston Fintech,
providing the Group with additional growth capital at a critical juncture in
its turnaround plan.

 

Rory Mepham, Chief Executive Officer of Sancus Lending Group Limited,
commented:

 

"The proposed refinancing, tender offer, extension of the Group's existing
facility and capital injection strengthens the Group's financial position and
will enable the Group to continue to execute its growth plans. The extension
of the Pollen Street facility for three years allows further growth in our
loans under management. I would like to thank our ZDP holders and Somerston
Group for their continued support as we continue to execute our turnaround and
focus on growth."

 

A circular setting out further details of the Proposals and including notices
of the Meetings will be posted to Shareholders later today (the "Circular")
and a copy will be available to download from the Company's website at
www.sancus.com (http://www.sancus.com) . Capitalised terms used but not
otherwise defined in the text of this announcement are defined in the
Circular.

 

 

For further information, please contact:

 

Sancus Lending Group Limited

Rory Mepham

+44 (0)1481 708 280

 

Liberum Capital (Nominated Adviser and Corporate Broker)

Lauren Kettle

Chris Clarke

William King

+44 (0) 20 3100 2000

 

Instinctif Partners (PR Adviser)

Tim Linacre

Victoria Hayns

+44 (0)207 457 2020

 

Sanne Fund Services (Guernsey) Limited (Company Secretary)

Matt Falla

Katrina Rowe

+44 (0)1481 755530

 

LEI: 213800S2XOO3YSEGCA26

 

 

Proposals for the ZDP Continuation and a Tender Offer

 

1.             Introduction

 

The Board has today posted a Circular to Shareholders setting out details of
Proposals that comprise the extension of the life of the ZDP Shares to 5
December 2027 (the "ZDP Continuation") and a Tender Offer for approximately 15
per cent. of the issued ZDP Shares, excluding ZDP Shares held in treasury,
(the "Tender Offer" and, together with the ZDP Continuation, the "Proposals").
The Board is also pleased to announce a further investment in the Company by
its largest shareholder, Somerston, by way of the exercise of Warrants and
subscription for New Bonds and further Warrants, both of which are
conditional, amongst other things, on the ZDP Continuation becoming effective.

 

The ZDP Continuation requires the approval of Ordinary Shareholders and ZDP
Shareholders at the Meetings and the making of the Tender Offer requires the
approval of Ordinary Shareholders at the Extraordinary General Meeting.

 

The Proposals are inter-conditional and include elements that require the
approval of Ordinary Shareholders and ZDP Shareholders at the Meetings. The
purpose of the Circular is to provide Ordinary Shareholders and ZDP
Shareholders with details of the Proposals and to set out the reasons why the
Board recommends that Shareholders vote in favour of the Proposals. The
Circular also contains the terms and conditions of the Tender Offer, together
with details of how ZDP Shareholders can tender ZDP Shares for purchase, if
they wish to do so.

 

 

2.             Financial information and trading update

 

On 26 September 2022 the Company published its interim report for the period
to 30 June 2022 (the "Report").

 

Earlier this year, the Company launched a range of new strategic initiatives,
with the aim of returning the Group to profitability; focused on origination,
loan management, funding and finance and operations. The Group's geographical
focus remains unchanged, and the business will look to expand its presence in
the UK and Ireland and grow its loan book in the offshore markets of the
Channel Islands and Gibraltar.

The Board considers that growth in lending volumes, supported by institutional
grade credit processes and effective management and execution, and co-funding
secured on improved terms from a broadened mix of private and institutional
funders, will provide the business with the scale and diversification it needs
to deliver sustainable profit growth. The Company has also focused on
strengthening operational processes, driven by technology enablement and data
integrity, and reinforcing its team, with significant investment in the sales
and credit teams at the end of 2021 and into 2022 to support and drive growth.

 

As set out in the Report, in the first half of the financial year the Company
made a number of significant positive achievements, with good progress against
these strategic initiatives. Most notably, the Company saw impressive growth
of new loan facilities, with £86 million worth of new loans written,
surpassing the total for the 2021 financial year which was £83 million. This
momentum is expected to drive revenue growth in the second half of the 2022
financial year and beyond, reflecting the lag in fee generation as the loan
book grows.

 

The Group has a funding facility arranged by Pollen Street plc (the
"Facility"), which as at 26 September 2022 was drawn to £65 million and
currently matures on 28 January 2024.

 

The Company has signed non-binding heads of terms with Pollen Street plc which
agree in principle, subject to signing definitive documentation and the usual
diligence and approvals for facilities of this type, amendments including the
extension of the term of the Facility such that it will expire at least three
years from the date of the amendments and the capacity, over time, to increase
the commitment to £125 million (the "Facility Renegotiation").  A further
update on the progress of the Facility Renegotiation will be provided in due
course.The focus on returning the Group to profitability will continue to be
the Board's top priority, while also reporting progress against the strategic
key performance indicators which are set out in the Report. Shareholders may
refer to the Report for the latest financial information on the Company and
the Board's present views on the Company's financial and trading prospects.

 

 

3.             The ZDP Continuation
 

Background to the ZDP Continuation

 

The Company currently has two classes of Shares in issue; Ordinary Shares and
ZDP Shares. The Ordinary Shares have been traded on the AIM market of the
London Stock Exchange since August 2005. The ZDP Shares were issued in
December 2014 and have been traded on the standard listing segment of the main
market of the London Stock Exchange since October 2015. As at the date of the
Circular, the Company's issued share capital is 489,843,477 Ordinary Shares
(of which 11,852,676 Ordinary Shares are held by a subsidiary of the Company)
and 19,101,384 ZDP Shares (of which 12,574,705 ZDP Shares are held by the
Company as treasury shares).

 

The ZDP Shares are non-participating and non-voting (except in certain limited
circumstances, including at the ZDP Class Meeting and the Extraordinary
General Meeting) but carry the right to the repayment of a Final Capital
Entitlement on the ZDP Maturity Date. The ZDP Maturity Date is currently 5
December 2022, on which date the holders of ZDP Shares are entitled to receive
from the Company 164.64 pence for each ZDP Share that they hold, which would
represent a return on the issue price of the ZDP Shares equivalent to 5.5 per
cent. per annum up to and including 5 December 2019, and 8 per cent. per annum
from 6 December 2019 to the current ZDP Maturity Date of 5 December 2022. The
Final Capital Entitlement is to be paid by way of the redemption of the ZDP
Shares, and under the Articles and applicable company law the Company may only
redeem such Shares to the extent that the Board is comfortable that, after
such redemption, the Company can satisfy the solvency test prescribed by
Guernsey company law.

 

The Company has, in the past, utilised available cash funds to acquire ZDP
Shares (through on-market buybacks and tender offers) with a view to reducing
the quantum of the Final Capital Entitlement. The most recent ZDP buyback
exercise took place in July and August 2022, whereby approximately £500,000
was returned to ZDP Shareholders. Tender offers were completed in March 2020
and April 2021, returning approximately £6.2 million to ZDP Shareholders in
aggregate. ZDP Shares bought back on-market have previously been held by the
Company in treasury whereas those purchased by the Company in connection with
a tender offer have been cancelled. As at the date of the Circular, 6,526,679
ZDP Shares remain in issue and are not held by the Company in treasury,
equating to an aggregate 2022 Final Capital Entitlement on 5 December 2022 of
approximately £10.7 million.

 

As previously announced, as part of the Group's growth strategy the Company
has been considering options regarding this obligation to pay the Final
Capital Entitlement, including the re-financing, part repayment and/or
extension of the ZDP Shares. Following the publication of the Report, the
Company has consulted with relevant stakeholders, including certain Ordinary
Shareholders and ZDP Shareholders, in order to agree a long-term plan meeting
the needs of all stakeholders while also enabling the Group to continue to
reinvest for growth. With the support of those key stakeholders, the Board
intends that the ZDP Shares be an integral part of the Group's long-term
finance strategy.

 

The Board therefore proposes that the life of the ZDP Shares be extended such
that they carry the right to receive the 2027 Final Capital Entitlement of
253.32 pence per ZDP Share on 5 December 2027 (being the date falling five
years after the current ZDP Maturity Date). This represents an increase to a 9
per cent. per annum yield on the ZDP Shares in the period from 6 December 2022
to 5 December 2027. The Board believes that the Proposals are in the best
interests of both classes of Shareholder.

 

The ZDP Continuation will allow ZDP Shareholders to continue their investment
in the Company. As noted at paragraph 1 of Part 5 of the Circular, UK resident
ZDP Shareholders should generally not be treated as making a disposal for the
purposes of UK taxation of chargeable gains as a result of doing so. It is
important to note that the discussion of the tax treatment contained in Part 5
of the Circular is intended only as a general and non-exhaustive summary of
the expected tax treatment and ZDP Shareholders are advised to seek
independent professional advice as to the tax consequences for them of the
Proposals.

 

Key Features of the amended ZDP Shares
 

If the Proposals are adopted, the ZDP Shares:

 

 ·         will have a repayment date of 5 December 2027;
 ·         are intended to provide ZDP Shareholders with an increased level of capital
           growth at a rate of 9 per cent. per annum with effect from 6 December 2022
           (subject to the performance of the Company's business and investments);
 ·         subject to the Company having sufficient assets at the time to satisfy the
           solvency test set out under Guernsey company law, will carry the right to be
           paid the 2027 Final Capital Entitlement of 253.32 pence in cash on 5 December
           2027; and
 ·         will continue to benefit from the protection afforded by the Cover Test.

 

Save as set out above, the rights of the ZDP Shares following the
implementation of the Proposals will be the same as the rights of the existing
ZDP Shares. The amended rights of the ZDP Shares are set out in the New
Articles and are described in full in Part 2 of the Circular. The New Articles
are available for inspection as set out in Part 6 of the Circular.

 

The ability of the Company to pay the 2027 Final Capital Entitlement is dependent on the performance of the Company's business and investments. ZDP Shares are not a guaranteed, protected or secured investment and ZDP Shareholders may therefore not receive their full 2027 Final Capital Entitlement.

 

Adoption of the New Articles

 

The ZDP Continuation will be implemented by way of the adoption of the New
Articles.

 

The New Articles contain the amended rights attaching to the ZDP Shares as set
out in Part 2 of the Circular. The New Articles contain a right attaching to
all ZDP Shares for such ZDP Shares to be redeemed on 5 December 2027 at a
redemption price of 253.32 pence per ZDP Share (being the 2027 Final Capital
Entitlement).

 

The Existing Articles and the New Articles (in the form of a comparison
document showing the changes between the two) are available for inspection as
set out in Part 6 of the Circular.

 

If the Proposals are approved by Shareholders, the New Articles will be
adopted on the date on which the Resolutions are passed. Upon the ZDP
Continuation, ZDP Shareholders shall continue to hold ZDP Shares on the
amended terms as set out in the New Articles. In the case of any discrepancy
between the Circular and the New Articles, the terms of the New Articles will
prevail.

 

Dealings in ZDP Shares
 

No new securities will be issued by the Company in connection with the ZDP
Continuation and the ZDP Shares will continue to be held by ZDP Shareholders,
albeit on the revised terms of the ZDP Continuation.

Dealings in the ZDP Shares will continue to be effective in CREST and the
existing ISIN number GG00BTDYD136 will continue to apply.

 

ZDP Shareholders who hold their ZDP Shares in certificated form will not
receive replacement certificates in respect of their ZDP Shares.

 

 

4.             The Tender Offer
 

Background to the Tender Offer

 

The Tender Offer is being made for up to 979,001 ZDP Shares, being 15 per
cent. of the issued ZDP Shares as at the date of the Circular (excluding ZDP
Shares held in treasury). Each ZDP Shareholder (other than Restricted
Shareholders and certain Overseas Shareholders as explained in paragraph 11 of
Part 3 of the Circular) may elect to sell up to 15 per cent. of their ZDP
Shareholding.

 

The Tender Offer is being made at the Tender Price of 164.64 pence per ZDP
Share. This is equal to the accrued capital entitlement per ZDP Share as at 5
December 2022, the anticipated date of completion of the Tender Offer and the
existing ZDP Maturity Date, calculated in accordance with the Existing
Articles. The aggregate Tender Price, assuming that the full entitlement of
ZDP Shares is tendered, will be approximately £1.6 million.

 

The Tender Offer is being made for the benefit of both Ordinary Shareholders,
who will benefit from the reduced overall capital entitlement of the ZDP
Shares as a result of repurchasing 15 per cent. of the ZDP Shares sooner than
the 2027 ZDP Maturity Date; and ZDP Shareholders, who may elect to realise
some of their investment at this time if they wish to do so. ZDP Shareholders
are not obliged to tender any of their ZDP Shares and, if they do not wish to
do so, they should not return a Tender Form or TTE Instruction. Ordinary
Shareholders may not participate in the Tender Offer.

 

Details of the Tender Offer
 

The Tender Offer enables those ZDP Shareholders (other than Restricted
Shareholders and certain Overseas Shareholders) who wish to sell some of their
ZDP Shares to elect to do so, subject to the overall limits of the Tender
Offer. ZDP Shareholders who successfully tender ZDP Shares will receive the
Tender Price per ZDP Share, being equal to the accrued capital entitlement per
ZDP Share as at 5 December 2022, the anticipated date of completion of the
Tender Offer, calculated in accordance with the Existing Articles.

 

Under the terms of the Tender Offer, ZDP Shareholders (other than Restricted
Shareholders and certain Overseas Shareholders) will be entitled to tender up
to their Tender Entitlement, being 15 per cent. of the ZDP Shares they hold as
at the Record Date. Tenders in excess of the Tender Entitlement will not be
satisfied.

 

Subject to the satisfaction of the Conditions relating to the Tender Offer,
the Company will purchase ZDP Shares validly tendered under the Tender Offer
at the Tender Price by way of an on-market transaction on the main market of
the London Stock Exchange. The ZDP Shares which the Company acquires from
tendering ZDP Shareholders will be cancelled. The repurchase will be made in
accordance with the conditions set out in the Resolution to be proposed at the
EGM, including maintaining compliance with the Cover Test.

 

The Tender Offer is subject to the conditions set out in paragraph 3 of Part 3
of the Circular. The Tender Offer may be terminated in certain circumstances
as set out in paragraph 9 of Part 3 of the Circular. ZDP Shareholders'
attention is drawn to Part 3 of the Circular, which (and in the case of ZDP
Shares held in certificated form, together with the Tender Form) set out the
terms and conditions of the Tender Offer, and to Part 3 of the Circular which
contains a summary of certain risks associated with the Tender Offer. Details
of how ZDP Shareholders will be able to tender ZDP Shares can be found in
paragraph 5 of Part 3 of the Circular.

 

The proposed repurchase of ZDP Shares pursuant to the Tender Offer would be
categorised as a form of distribution under Guernsey Companies Law. Before the
repurchase may be undertaken, the Board must be satisfied, on reasonable
grounds, that the Company will satisfy the solvency test as defined under the
Guernsey Companies Law immediately after the repurchase has been completed.

 

The Board will also need to consider if the financial position of the Company
is expected to, or has, changed materially between the time of the
authorisation of the repurchase and the actual time of the repurchase.

 

Currently, the Board is satisfied that the Company will satisfy the solvency
test. However, if the Board ceases to be satisfied prior to completion of the
Tender Offer that the Company will satisfy the above-mentioned solvency test
immediately after the repurchase by the Company of the ZDP Shares from
tendering ZDP Shareholders, then the repurchase will no longer be deemed to be
authorised, and as a result, the Tender Offer will not proceed (or be capable
of becoming unconditional) and the ZDP Shares will not be repurchased.

 

ZDP Shareholders should note that, once tendered, ZDP Shares may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.
 

Shareholders who are in any doubt as to the contents of the Circular or as to
the action to be taken should immediately consult their stockbroker, bank
manager, solicitor, accountant or other independent financial adviser
authorised under FSMA.

 

At the Extraordinary General Meeting, Ordinary Shareholders will be asked to
approve an ordinary resolution that will allow the implementation of the
Tender Offer. The Company's general authority to repurchase its own ZDP
Shares, which was granted at the last annual general meeting of the Company
held on 10 May 2022, in respect of up to 100 per cent. of the issued ZDP
Shares as at the date of that meeting, will remain in force and be unaffected
by the Tender Offer. However, the Company will not repurchase any ZDP Shares
prior to the date of completion of the Tender Offer.

 

This is not a recommendation for ZDP Shareholders to tender their ZDP Shares
under the Tender Offer. Whether or not ZDP Shareholders tender their ZDP
Shares will depend on, amongst other things, their view of the Company's
prospects and their own individual circumstances, including their tax
position, on which they should seek their own independent advice.

 

Overseas Shareholders and Restricted Shareholders
 

The making of the Tender Offer to persons outside the United Kingdom may be
prohibited or affected by the laws of the relevant overseas jurisdictions. ZDP
Shareholders with registered or mailing addresses outside the United Kingdom
or who are citizens or nationals of, or resident in, a jurisdiction other than
the United Kingdom should read carefully paragraph 11 of Part 3 of the
Circular.

 

The Tender Offer is not being made to ZDP Shareholders who are resident in, or
citizens of, Restricted Jurisdictions. Restricted Shareholders are being
excluded from the Tender Offer in order to avoid offending applicable local
laws relating to the implementation of the Tender Offer. Accordingly, copies
of the Tender Form are not being and must not be mailed or otherwise
distributed in or into Restricted Jurisdictions.

 

It is the responsibility of all Overseas Shareholders to satisfy themselves as
to the observance of any legal requirements in their jurisdiction, including,
without limitation, any relevant requirements in relation to the ability of
such holders to participate in the Tender Offer.

 

 

5.             The Somerston fundraising
 

The Conditional Warrant Exercise and Conditional Bond Issue

 

The Company's major shareholder, Somerston Group, has indicated its continued
support of the Company's relaunched growth strategy and, accordingly, has
indicated its support for the Proposals. Conditional upon the ZDP Continuation
being approved and implemented and the Facility Renegotiation being completed,
Somerston has agreed to invest further capital into the Company as described
below.

Somerston Fintech has irrevocably committed, conditional upon the ZDP
Continuation becoming effective (which includes Shareholders approving the
Proposals at the Meetings) and the Facility Renegotiation being completed, to
subscribe for 94,294,869 new Ordinary Shares by way of the full exercise of
the Warrants held by Somerston (the "Conditional Warrant Exercise"). The
Warrants are being exercised for an aggregate subscription price of
£2,121,634.56 (with an exercise price of 2.25 pence per Ordinary Share, a
premium to the current market value of the Ordinary Shares). The new Warrants
proposed to be issued to Somerston fall within the Shareholder authority
granted in December 2020.

 

In addition, Somerston Fintech has irrevocably committed, conditional upon (i)
the ZDP Continuation becoming effective, (ii) admission to AIM of the ordinary
shares issued pursuant to the Conditional Warrant Exercise becoming effective,
and (iii) the Facility Renegotiation being completed, to subscribe for New
Bonds in an aggregate principal amount of £2,425,000 (the "Conditional Bond
Issue"). The New Bonds will be on the same terms as the existing Bonds issued
by the Company, with an interest rate of 7 per cent. per annum (paid
quarterly) and a maturity date of 31 December 2025. The New Bonds proposed to
be issued to Somerston form part of the aggregate principal amount of Bond
issuance of £15 million described to Shareholders as part of a refinancing
transaction approved in December 2020. As was the case with the existing Bonds
when issued in December 2020, the New Bonds will be issued alongside a bonus
issue of Warrants in respect of 0.25 per cent. of the Company's issued
Ordinary Share capital (calculated as at admission of the Ordinary Shares that
were issued in December 2020, being the same number as are in issue at the
date of the Circular and, for the avoidance of doubt, prior to the Conditional
Warrant Exercise) being issued for every £100,000 of principal amount of New
Bonds issued. Accordingly, following the Conditional Bond Issue, Somerston
will hold Warrants in respect of 29,696,761 Ordinary Shares (representing 5.08
per cent. of the Company's issued Ordinary Share capital following the
Conditional Warrant Exercise).

 

NO NEW SECURITIES ARE BEING OFFERED TO ANY PERSON PURSUANT TO THIS ANNOUNCEMENT OR THE CIRCULAR.

 

Implications under the Takeover Code
 

The Company is a limited company whose Ordinary Shares are admitted to trading
on AIM and its Shareholders are therefore entitled to the protections afforded
by the Takeover Code.

 

Under Rule 9 of the Takeover Code, where any person acquires, whether by a
series of transactions over a period of time or by one specific transaction,
an interest in shares which (taken together with shares in which persons
acting in concert with that person are interested) carry 30 per cent., or more
of the voting rights of a company that is subject to the Takeover Code, that
person is normally required by the Panel to make a Rule 9 Offer to the
remaining shareholders to acquire their shares. Similarly, Rule 9 of the
Takeover Code also provides that where any person, together with persons
acting in concert with that person, is interested in shares which in aggregate
carry not less than 30 per cent. of the voting rights of a company which is
subject to the Takeover Code, but does not hold shares carrying more than 50
per cent. of the voting rights of that company and such person or any such
person acting in concert with that person acquires an interest in any other
shares which increases the percentage of shares carrying voting rights in
which that person is interested, then such person or persons acting in concert
will normally be required by the Panel to make a Rule 9 Offer to the remaining
shareholders to acquire their shares.

 

As at the date of the Circular, Somerston holds 200,349,684 Ordinary Shares
(representing 40.90 per cent of the Company's voting share capital).

 

In December 2020, independent Shareholders approved the waiver by the Panel of
an obligation that would otherwise arise for Somerston and certain parties
acting in concert with it (the "Concert Party") to make a mandatory offer
under Rule 9 of the Takeover Code as the result of the exercise of the
Warrants to subscribe for 94,294,869 new Ordinary Shares (the Conditional
Warrant Exercise).

 

Following the Conditional Warrant Exercise, Somerston will hold 294,644,553
Ordinary Shares (representing 50.44 per cent of the Company's voting share
capital).

 

Shareholders should be aware that Rule 9 of the Takeover Code provides that
where any person who, together with persons acting in concert with that
person, holds shares carrying more than 50 per cent. of the voting rights of a
company and acquires an interest in shares which carry additional voting
rights, that person will not normally be required to make a Rule 9 Offer to
the other shareholders to acquire their shares.

 

Therefore, following implementation of the Proposals and the Conditional Warrant Exercise, both Somerston and the members of the Concert Party together will, in aggregate, hold Ordinary Shares carrying more than 50 per cent. of the Company's voting share capital. As a result, Somerston and, for as long as they continue to be treated as acting in concert, the Concert Party will be able to increase their aggregate holding in the Company (including as a result of the exercise of the Warrants in respect of the 29,696,761 Ordinary Shares to be issued to Somerston in connection with the Conditional Bond Issue) without incurring an obligation under Rule 9 to make a mandatory offer to the other Shareholders.
 

Subject to the implementation of the ZDP Continuation, the Facility
Renegotiation and the admission to AIM of the Ordinary Shares issued pursuant
to the Conditional Warrant Exercise becoming effective, and following the
Conditional Bond Issue, Somerston will hold Warrants which, if exercised,
would result in Somerston holding 324,341,314 Ordinary Shares in aggregate
(representing up to 52.84 per cent. of the Company's increased voting share
capital).

 

Related party transaction
 

Somerston Fintech is a related party to the Company in accordance with the AIM
Rules, by virtue of its shareholding in the Company. Accordingly, Somerston
Fintech's subscription for New Bonds and Warrants pursuant to the Conditional
Bond Issue is a related party transaction for the purpose of the AIM Rules.
Furthermore, Philip J Milton is a related party to the Company in accordance
with the AIM Rules, by virtue of its Ordinary Shareholding in the Company.
Accordingly, the proposed ZDP Continuation in respect of the ZDP Shares held
by Philip J Milton is also a related party transaction for the purposes of the
AIM Rules.

 

The Directors consider, having consulted with the Company's nominated adviser,
Liberum, that the terms of Somerston Fintech's participation in the
Conditional Bond Issue and the ZDP Continuation by Philip J Milton,
respectively, are fair and reasonable insofar as Shareholders are concerned.

 

 

6.             Importance of voting on the Proposals
 

The Board believes that the Proposals are in the best interests of Ordinary
Shareholders and ZDP Shareholders, and that there is strong support for the
Proposals.

 

In the event that Shareholders do not vote in favour of the Proposals at the
Meetings, then the terms of the ZDP Shares will remain unchanged and the
Somerston fundraising will not occur. Accordingly, the Company would be
required to pay the 2022 Final Capital Entitlement on 5 December 2022 and
would not benefit from the further investment.

 

If the Resolutions are not passed, the Board believes there is a material risk
that the Company may not have sufficient cash resources to pay the 2022 Final
Capital Entitlement in full in a manner that would satisfy the solvency test
set out under Guernsey company law, also compromising the Company's ability to
continue as a going concern.

 

In the event that the Company is required to pay the 2022 Final Capital
Entitlement and has insufficient cash resources to lawfully do so then, in
accordance with the Existing Articles, the Company shall redeem such number of
ZDP Shares (on a pro-rata basis amongst ZDP Shareholders) as it is lawfully
able to redeem on 5 December 2022, and thereafter shall redeem further ZDP
Shares in tranches (on a pro-rata basis amongst ZDP Shareholders) as and when
it is lawfully able to do so. In such circumstances, the Board believes it
would be required to liquidate existing assets on terms which are likely to be
disadvantageous to the Group and therefore detrimental to the interests of
Shareholders. Furthermore, in doing so, the Board considers that there may be
an adverse reaction amongst the Group's loan funder network, which may disrupt
the Company's operations and prejudice the ability of the Group to effectively
pursue its lending business. The Board considers that such a situation would
pose a material risk to the financial and trading position of the Group.

 

THE RESOLUTIONS ARE INTER-CONDITIONAL, SUCH THAT IF ANY OF THE RESOLUTIONS ARE NOT PASSED, THE PROPOSALS WILL NOT BE IMPLEMENTED.

 

 

7.             Taxation
 

The attention of ZDP Shareholders is drawn to Part 5 of the Circular which
sets out a general guide to certain aspects of current UK and Guernsey
taxation law and HMRC and Revenue Service published practice. This information
is a general guide and is not exhaustive. Shareholders should seek advice as
to their tax position from an appropriate professional adviser.

 

 

8.             Costs of the Proposals
 

The Company estimates that it will incur costs of approximately £140,000 in
respect of the development and implementation of the Proposals.

 

 

9.             The Meetings
 

The implementation of the Proposals requires Shareholder approval as set out
below:

 

•        the passing by ZDP Shareholders of the Resolution to be
proposed at the ZDP Class Meeting;

•        the passing by Ordinary Shareholders of the Resolution to be
proposed at the Ordinary Class Meeting; and

•        the passing by Ordinary Shareholders and ZDP Shareholders of
the Resolutions to be proposed at the Extraordinary General Meeting.

 

Notices of the ZDP Class Meeting, the Ordinary Class Meeting and the
Extraordinary General Meeting are set out in Part 8 of the Circular.

 

Voting on each of the Resolutions will be held by a poll.

 

ZDP Class Meeting
 

The ZDP Class Meeting has been convened for 7 November 2022 at 10.00 a.m. to
enable ZDP Shareholders to consider and, if thought fit, pass a special
resolution consenting to the passing of the ZDP Continuation Resolution to be
proposed at the Extraordinary General Meeting and any variation of their class
rights which might arise under or as a result of the passing and carrying into
effect of such Resolution. In the event that this Meeting is adjourned due to
the absence of a quorum, the adjourned Meeting will be held at the same venue
on the same day at 10.30 a.m.

 

The majority required for the passing of the Resolution to be proposed at the
ZDP Class Meeting is not less than 75 per cent. of the votes cast (in person
or by proxy) on that Resolution at the ZDP Class Meeting.

 

The ZDP Class Meeting will take place at the Company's registered office,
Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL, Channel
Islands. ZDP Shareholders alone are entitled to attend and vote at the ZDP
Class Meeting.

 

The quorum for the ZDP Class Meeting is two persons present in person or by
proxy and holding at least one third of the issued ZDP Shares at the date of
the Meeting. If the Meeting is not quorate, it will be adjourned to the time
and place indicated above, whereupon one person holding ZDP Shares and present
in person or by proxy shall form the quorum.

 

Ordinary Class Meeting
 

A meeting of Ordinary Shareholders has been convened for 7 November 2022 at
10.05 a.m. (or as soon thereafter as the ZDP Class Meeting shall have
concluded or been adjourned) to enable Ordinary Shareholders to consider and,
if thought fit, pass a special resolution consenting to the passing of the ZDP
Continuation Resolution to be proposed at the Extraordinary General Meeting
and any variation of their class rights which might arise under or as a result
of the passing and carrying into effect of such Resolution. In the event that
this Meeting is adjourned due to the absence of a quorum, the adjourned
Meeting will be held at the same venue on the same day at 10.35 a.m.

 

The majority required for the passing of the Resolution to be proposed at the
Ordinary Class Meeting is not less than 75 per cent. of the votes cast (in
person or by proxy) on that Resolution at the Ordinary Class Meeting.

 

The Ordinary Class Meeting will take place at the Company's registered office,
Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL, Channel
Islands. Ordinary Shareholders alone are entitled to attend and vote at the
Ordinary Class Meeting.

 

The quorum for the Ordinary Class Meeting is two persons present in person or
by proxy and holding at least one third of the issued Ordinary Shares at the
date of the Meeting. If the Meeting is not quorate, it will be adjourned to
the time and place indicated above, whereupon one person holding ZDP Shares
and present in person or by proxy shall form the quorum.

 

Extraordinary General Meeting
 

The Extraordinary General Meeting has been convened for 7 November 2022 at
10.10 a.m. (or as soon thereafter as the Ordinary Class Meeting concludes or
is adjourned). In the event that this Meeting is adjourned due to the absence
of a quorum the adjourned meeting will be held at the same venue on the same
day at 10.40 a.m.

 

At the Extraordinary General Meeting, Shareholders will be asked to consider
and, if thought fit, pass the following Resolutions.

 

Resolution 1

Resolution 1 is a special resolution to approve the adoption of the New
Articles in substitution for the Existing Articles, thereby to implement the
ZDP Continuation.

 

Resolution 2

Resolution 2 is an ordinary resolution to allow the Company to repurchase from
ZDP Shareholders the ZDP Shares successfully tendered under the Tender Offer

 

Ordinary Shareholders and ZDP Shareholders are entitled to vote (together) in respect of Resolution 1 to be proposed at the Extraordinary General Meeting.
 

The majority required for the passing of Resolution 1 to be proposed at the
Extraordinary General Meeting is not less than 75 per cent. of the votes cast
(in person or by proxy) on that Resolution at the Extraordinary General
Meeting.

 

The majority required for the passing of Resolution 2 to be proposed at the
Extraordinary General Meeting is a simple majority of the votes cast (in
person or by proxy) on that Resolution at the Extraordinary General Meeting.

 

The Extraordinary General Meeting will take place at the Company's registered
office, Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL,
Channel Islands.

The quorum for the Extraordinary General Meeting is two members present in
person or by proxy and holding 5 per cent. or more of the voting rights
available at the Meeting. If the Meeting is not quorate, it will be adjourned
to the time and place indicated above, whereupon such Shareholders as attend
in person or by proxy shall form the quorum.

 

Notices of all of the above Meetings are set out in Part 8 of the Circular.

 

THE TWO RESOLUTIONS ARE INTER-CONDITIONAL. IF EITHER OF THE RESOLUTIONS ARE NOT PASSED, NEITHER OF THE PROPOSALS WILL BE IMPLEMENTED.

 

 

10.          Action to be taken in respect of the Meetings
 

Forms of proxy for Shareholders are enclosed as follows:

 

•        for ZDP Shareholders to vote at the ZDP Class Meeting, a
pink form of proxy;

•        for Ordinary Shareholders to vote at the Ordinary Class
Meeting, a blue form of proxy; and

•        for all Shareholders to vote at the Extraordinary General
Meeting, a white form of proxy.

Completed Forms of Proxy should be returned by post or by hand to the
Company's Registrar, Link Group, PXS1, 10th Floor, Central Square, 29
Wellington Street, Leeds LS1 4DL, United Kingdom, as soon as possible, and in
any case so as to be received by the Registrar by not later than:

•        10.00 a.m. on 3 November 2022 in relation to the pink form
of proxy for the ZDP Class

 

Meeting;

•        10.05 a.m. on 3 November 2022 in relation to the blue form
of proxy for the Ordinary Class Meeting; and

•        10.10 a.m. on 3 November 2022 in relation to the white form
of proxy for the Extraordinary General Meeting.

 

Action to be taken: ZDP Shareholders

 

ZDP SHAREHOLDERS WHO WISH TO MAINTAIN THEIR CURRENT SHAREHOLDING IN THE COMPANY SHOULD NOT COMPLETE OR RETURN A TENDER FORM OR SUBMIT A TTE INSTRUCTION IN CREST.
 

Only those ZDP Shareholders (other than Restricted Shareholders and certain
Overseas Shareholders) who wish to tender ZDP Shares and who hold their ZDP
Shares in certificated form should complete a Tender Form in accordance with
the instructions set out therein and return the completed Tender Form to Link
Group, Corporate Actions, 10th Floor, Central Square, 29 Wellington Street,
Leeds LS1 4DL, United Kingdom, to arrive as soon as possible and, in any
event, by no later than 1.00 p.m. on 1 December 2022.

 

ZDP Shareholders who participate in the Tender Offer and hold their Shares in
certificated form should also return their ZDP Share certificate(s) and/or
other document(s) of title in respect of the ZDP Shares tendered with their
Tender Form.

 

Those ZDP Shareholders who hold their ZDP Shares in uncertificated form (that
is, in CREST) do not need to complete or return a Tender Form. ZDP
Shareholders who wish to participate in the Tender Offer and hold their ZDP
Shares in uncertificated form should arrange for the relevant ZDP Shares to be
transferred to escrow by means of a TTE Instruction as described in paragraph
5 of Part 3 of the Circular.

 

 

11.          Irrevocable undertakings
 

ZDP Shareholders holding, in aggregate, 4,650,082 ZDP Shares (representing
71.25 per cent. of the voting rights in respect of ZDP Shares as at the date
of the Circular) have given their irrevocable undertaking to vote the ZDP
Shares held in their name at the time of the relevant Meetings in favour of
the Proposals.

 

 

12.          Recommendation
 

The Board considers that the terms of the Proposals are in the best interests
of both ZDP Shareholders and Ordinary Shareholders and the Company as a whole.

 

The Board unanimously recommends that ZDP Shareholders vote in favour of the
Resolution to be proposed at the ZDP Class Meeting and the Resolution to be
proposed at the Extraordinary General Meeting. The Board unanimously
recommends that Ordinary Shareholders vote in favour of Resolutions to be
proposed at the Ordinary Class Meeting and the Resolutions to be proposed at
the Extraordinary General Meeting, as they intend to do in respect of their
own beneficial shareholdings, totalling 1,518,992 Ordinary Shares
(representing in aggregate approximately 0.31 per cent. of the issued Ordinary
Share capital of the Company).

 

Shareholders in any doubt as to the action they should take should consult an appropriately qualified independent adviser, authorised under the Financial Services and Markets Act 2000, without delay.
 
Expected Timetable of Events
 
                                                                                                        2022
 Publication of the Circular and Tender Offer opens                                                     19 October
 Latest time for receipt of pink form of proxy                                                          10.00 a.m. on 3 November
 for the ZDP Class Meeting
 Latest time for receipt of blue form of proxy for the Ordinary Class Meeting                           10.05 a.m. on 3 November
 Latest time for receipt of white form of proxy for the Extraordinary General Meeting                   10.10 a.m. on 3 November
 ZDP Class Meeting                                                                                      10.00 a.m. on 7 November
 Ordinary Class Meeting                                                                                 10.05 a.m. on 7 November
 Extraordinary General Meeting                                                                          10.10 a.m. on 7 November
 Publication of the results of the Meetings                                                             7 November
 Effective date of the ZDP Continuation                                                                 following the EGM on 7 November
 Latest time and date for receipt of Tender Forms and submission of TTE Instructions from Shareholders  1.00 p.m. on 1 December
 Record Date and time for the Tender Offer                                                              6.00 p.m. on 1 December
 Completion of the Tender Offer                                                                         5 December
 CREST settlement date: payments through CREST made and CREST accounts settled                          on or around 14 December
 Balancing share certificates and cheques despatched to certificated ZDP Shareholders                   on or around 14 December

 

All of the times and dates in the expected timetable may be extended or
brought forward without further notice, at the discretion of the Company. If
any of the above times and/or dates change materially, the revised time(s)
and/or date(s) will be notified to Shareholders by an announcement through a
Regulatory Information Service provider.

 

All references to time in the Circular are to UK time.

 

IMPORTANT NOTICE

If Shareholders are in any doubt about the contents of this announcement or
the action they should take, they are recommended to seek advice from their
stockbroker, solicitor, accountant, bank manager or other appropriately
authorised independent financial adviser authorised under the Financial
Services and Markets Act 2000 (as amended) if they are in the United Kingdom
or from another appropriately authorised independent financial adviser if they
are in a territory outside the United Kingdom.

This announcement does not constitute, or form part of, any offer for or
invitation to sell or purchase any securities, or any solicitation of any
offer for, securities in any jurisdiction. Any acceptance or other response to
the Tender Offer should be made only on the basis of information contained in
or referred to in the Circular. The Circular will contain important
information, including the full terms and conditions of the Tender Offer,
which Shareholders are urged to read carefully. The Tender Offer is not being
made, directly or indirectly, in or into, or by use of the mails of, or by any
means or instrumentality of interstate or foreign commerce of, or any
facilities of a national securities exchange of United States, Canada,
Australia, New Zealand, South Africa and Japan and any other jurisdiction
where such distribution of the Circular into or inside or from such
jurisdiction would constitute a violation of the laws of such jurisdiction.

Certain statements in this announcement constitute forward-looking statements.
Any statement in this announcement that is not a statement of historical fact
including, without limitation, those regarding the Company's future
expectations, operations, financial performance, financial condition and
business is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions. These and
other factors could adversely affect the outcome and financial effects of the
plans and events described in this presentation. As a result you are cautioned
not to place reliance on such forward-looking statements. Nothing in this
announcement should be construed as a profit forecast.

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