REG-Superdry plc Superdry plc: Proposed Restructuring Plan, Equity Raise and Delisting

SuperdryAnnouncement

16/04/2024 07:00

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   Superdry plc (SDRY)
   Superdry plc: Proposed Restructuring Plan, Equity Raise and Delisting

   16-Apr-2024 / 07:00 GMT/BST

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   NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART,
   DIRECTLY OR INDIRECTLY, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD
   CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
   JURISDICTION.

   NOTHING IN THIS ANNOUNCEMENT SHALL CONSTITUTE OR FORM A PART OF ANY OFFER,
   INVITATION OR RECOMMENDATION TO PURCHASE, SELL OR SUBSCRIBE FOR ANY
   SECURITIES IN ANY JURISDICTION.  NOTHING IN THIS ANNOUNCEMENT SHOULD BE
   INTERPRETED AS A TERM OR CONDITION OF THE EQUITY RAISE.  NOTHING CONTAINED
   IN THIS ANNOUNCEMENT SHALL FORM THE BASIS OF, OR BE RELIED UPON IN
   CONNECTION WITH, OR ACT AS AN INDUCEMENT TO ENTER INTO, ANY INVESTMENT
   ACTIVITY. ANY DECISION TO PURCHASE, SUBSCRIBE FOR OR OTHERWISE ACQUIRE, OR
   TO SELL OR OTHERWISE DISPOSE OF, ANY SECURITIES MENTIONED IN THIS
   ANNOUNCEMENT MUST BE MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED
   IN AND INCORPORATED BY REFERENCE INTO THE CIRCULAR, ONCE PUBLISHED. 
   PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

   THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE
   7 OF THE UK VERSION OF THE MARKET ABUSE REGULATION (EU 596/2014), WHICH IS
   PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

   For immediate release

   16 April 2024

                                        

                                  Superdry plc

                         (“Superdry” or the “Company”)

                                        

            Proposed Restructuring Plan, Equity Raise and Delisting

   Superdry previously announced that it has been exploring various material
   cost saving options as part of a broader turnaround plan that positions
   the Company for long-term success.

   Today, in support of that objective, the Company announces that C-Retail
   Limited (the “Plan Company”), a wholly-owned subsidiary of the Company
   which owns the leasehold portfolio of the Superdry group (the “Group”)
   from which its UK store retail business trades, is launching a
   restructuring plan pursuant to Part 26A of the Companies Act 2006, which
   will principally involve a restructuring of its UK property estate and
   retail cost base (the “Restructuring Plan”). The Restructuring Plan is a
   key element of the Company’s turnaround plan that is intended to help the
   Company deliver its new, more financially sustainable, target operating
   model.

   In order to support the Company’s transition to this new target operating
   model over the coming years, Superdry is today also announcing an equity
   raise that will provide necessary liquidity headroom (the “Equity Raise”),
   as well as its intention to delist from the London Stock Exchange (the
   “Delisting”), which will allow the Company to benefit from significant
   cost savings associated with being listed and implement its turnaround
   plan away from the heightened exposure of public markets. The Equity Raise
   is fully supported and underwritten by Julian Dunkerton, Superdry’s CEO
   and Co-Founder.

   Together, the Restructuring Plan, Equity Raise and Delisting constitute a
   key package of measures that are needed to allow Superdry to return to a
   more stable footing, accelerate its turnaround plan and drive it towards a
   viable and sustainable future. Therefore, each element of this package
   will be inter-conditional upon the others, such that the package as a
   whole requires each of the Restructuring Plan, Equity Raise and Delisting
   to be approved.

   Restructuring Plan

   The Restructuring Plan will principally involve and facilitate the
   compromise and amendment of the Plan Company’s leasehold obligations, to
   reduce losses and property-related (including rent) liabilities. The
   Restructuring Plan will also involve the compromise of the Plan Company’s
   business rates liabilities owed to local authorities and will effect
   amendments to the Group’s debt facility agreements with its principal
   secured lenders, BB Funding (GBP) S.à r.l.  (“Bantry Bay”) and HUK 128
   Limited (“Hilco”).

   A restructuring plan is a formal procedure under Part 26A of the Companies
   Act 2006 for companies in financial difficulties, that are affecting its
   ability to carry on as a going concern, to agree with its creditors a
   compromise or arrangement in respect of its debts owed to those creditors.

   On 28 March 2024, the Group’s debt facility agreement with Hilco was
   amended to provide for two incremental facilities for an aggregate amount
   of £20 million, including a seasonal facility of up to £10 million. This
   seasonal facility is conditional upon Hilco being satisfied that
   sufficient progress has been made by the Plan Company in relation to the
   implementation of cost savings measures, including the Restructuring Plan.

   The Restructuring Plan, once completed, is expected to result in:

     • rent reductions on 39 UK sites;

    

     • the extension of the maturity date of loans made under the Group’s
       debt facility agreements with Bantry Bay and Hilco;

    

     • confirmation from Hilco that the conditions to making the seasonal
       incremental facility described above have been satisfied; and

    

     • material cash savings from rent and business rate compromises over the
       3 year period of the Restructuring Plan.

    

   The Restructuring Plan is conditional on the Company receiving the
   proceeds of the Equity Raise to help ensure that the Company has the
   necessary liquidity headroom to deliver its turnaround plan. The Company
   has consulted with Bantry Bay and Hilco, who have consented to the
   launching of the Restructuring Plan and remain supportive of the Company. 

   Further details on the Restructuring Plan are set out in Appendix 1 to
   this announcement and included in the Practice Statement Letter (“PSL”)
   sent to impacted creditors today.

   The launch of the Restructuring Plan is not expected to affect the
   ordinary course operations of Superdry, and in particular:

     • the Group’s suppliers, employees and landlords of sites outside of the
       UK will not be affected;

    

     • except for the creditors compromised by the Restructuring Plan (which
       principally comprise landlords of UK sites, rating authorities, Bantry
       Bay and Hilco), no other creditors’ claims will be affected; and

    

     • the process to implement the Restructuring Plan is expected to
       complete in June 2024, with the sanction hearing for the Restructuring
       Plan expected to be held on 17 and 18 June 2024 (the “Sanction
       Hearing”).

   The Plan Company believes that, unless the Restructuring Plan comes into
   effect, it will need to enter administration and other companies in the
   Group will need to enter into administration or an equivalent insolvency
   process. This outcome would leave creditors, including the creditors whose
   claims would otherwise be compromised by the Restructuring Plan,
   materially worse off than they would be under the Restructuring Plan.

   The Restructuring Plan is an important element of helping the Company
   deliver its new, more financially sustainable, target operating model. The
   target operating model also incorporates other measures including, among
   others: returning the underlying Retail channel to positive like-for-like
   revenue growth through internal initiatives such as improved product
   ranges and a reallocation of marketing spend, and also an improvement in
   the external environment; an improvement in gross margins through
   initiatives such as improved promotional strategies; and a more efficient
   and focused operating cost base appropriate for the Group’s target revenue
   base, benefitting from initiatives including the delisting. On a
   medium-to-long term view, whilst recognising there is a complex pathway in
   the interim to navigate in order to deliver this, the target operating
   model targets Group revenue of between £350m to £400m, a gross margin
   slightly ahead of current levels, and mid to high-single digit EBITDA
   margin (on a pre-IFRS 16 basis).

   Equity Raise

   The Company continues to face challenging trading conditions and, as
   announced on 28 March 2024, recently extended and increased its secondary
   lending facility with Hilco to provide improved liquidity headroom as it
   implements its turnaround plan. To further bolster that liquidity headroom
   and provide the Company with the appropriate degree of funding certainty
   to enter into the Restructuring Plan, the Company is today announcing a
   proposed Equity Raise (which is fully supported and underwritten by Julian
   Dunkerton, Superdry’s CEO and Co-Founder), to provide it with additional
   equity funding.

   The Equity Raise will be structured in one of two different ways.
   Shareholders will be asked to approve both different options and, assuming
   shareholders do so, Superdry’s independent directors, in consultation with
   Julian Dunkerton and Peel Hunt (the Company’s financial advisers), will in
   due course (after shareholders have voted) choose the option to be adopted
   by Superdry.  The two different options are as follows:

     • Option A: an open offer at £0.01 per share to raise gross proceeds of
       the sterling equivalent of up to €8 million (the “Open Offer”); or

    

     • Option B: a placing at £0.05 per share to raise gross proceeds of £10
       million (the “Placing”).

    

   In the Open Offer, Superdry’s existing shareholders (other than those in
   certain restricted overseas jurisdictions) will retain their pre-emption
   rights and will therefore be able to participate pro rata to their
   existing shareholdings.  The Open Offer will be fully underwritten by
   Julian Dunkerton, which ensures that the Group will receive the full €8
   million. The Placing would be open to Julian Dunkerton only (with the
   pre-emption rights of existing shareholders disapplied).

   Completion of the Equity Raise is conditional on a number of matters,
   including:

     • shareholders passing the necessary resolutions to approve the Open
       Offer and/or the Placing as well as the Delisting (the “Resolutions”)
       at a general meeting to be convened by the Company in due course
       (the “General Meeting”); and

    

     • the Restructuring Plan having been sanctioned by the court.

    

   Julian Dunkerton, who held approximately 26.36% of Superdry’s issued share
   capital as at the close of business on 15 April 2024, has irrevocably
   undertaken to vote in favour of all the resolutions to be proposed at the
   General Meeting (other than those on which he is not entitled to vote). 

   Similarly, each of Superdry’s directors who holds shares in Superdry
   (excluding Julian Dunkerton) has irrevocably undertaken to vote in favour
   of all the resolutions to be proposed at the General Meeting in respect of
   his or her own holding of Superdry shares, which in aggregate represented
   approximately 0.23% of the Company’s issued share capital as at the close
   of business on 15 April 2024.

   The Resolutions will include approval by independent shareholders of
   Julian Dunkerton’s participation in the Equity Raise as a “related party
   transaction” for the purposes of Chapter 11 of the Listing Rules and for
   the purposes of Rule 9 of the City Code on Takeovers and Mergers

   Further details about the Equity Raise, including the Company’s approach
   to determining which of Option A or Option B will be implemented if both
   are approved by shareholders at the General Meeting, will be included in a
   shareholder circular, expected to be published in May 2024
   (the “Circular”).

   Superdry has also been exploring raising funds through potential
   transactions relating to its brand and intellectual property in non-core
   territories. However, the Board considers it unlikely that any such deals
   could be negotiated and completed in the requisite timeframes.

   Delisting

   Given the material changes to the Company’s business envisioned under the
   new target operating model, the Company considers it best to implement
   these changes away from the heightened exposure of public markets. In
   addition, the Company believes it can achieve significant annual cost
   savings from the Delisting that will contribute to delivering its target
   operating model.

   As a result, subject to shareholder approval at the General Meeting, the
   Company intends to make the relevant applications to effect the
   cancellation of the listing of its shares on the Official List maintained
   by the Financial Conduct Authority (“FCA”) and their trading on the London
   Stock Exchange’s Main Market for listed securities.

   The Company intends to explore the implementation of a matched bargain
   facility with a third party matched bargain facility provider in the event
   the Company is delisted. This will facilitate shareholders buying and
   selling shares on a matched bargain basis following the Delisting. If the
   Company decides to implement such a facility, further detail about it will
   be set out in the Circular.

   Further details of the Delisting and the implications of the Delisting for
   shareholders will be included in the Circular.

   Anticipated timetable

   Publication of PSL                         16 April 2024
   Restructuring Plan Convening Hearing         16 May 2024
   Publication of Circular                         May 2024
   General Meeting                                June 2024
   Restructuring Plan Sanction Hearing  17 and 18 June 2024
   Restructuring Plan becomes effective           June 2024
   Delisting                                      July 2024
   Equity Raise completes                         July 2024
                                                           

   These dates are provided by way of indicative guidance and are subject to
   change. If any of the above dates change, the Company will make further
   announcements as appropriate.

    

   Peter Sjӧlander, Superdry Chairman, commented on today’s proposals:

   “The Board has spent a lot of time engaging with Julian Dunkerton to come
   up with a plan which gives the business the best possible prospects for
   the long term while protecting the interests of shareholders and other
   stakeholders to the greatest extent possible. The business has faced
   extraordinary external challenges and, while good progress has been made
   on our cost saving initiatives, more needs to be done to get the business
   on a stable financial footing for the future. We believe that the proposed
   Restructuring Plan, combined with the Equity Raise fully supported and
   underwritten by Julian, is the best way to achieve this, together with a
   delisting which would further reduce costs and enable the business to
   progress the turnaround. While we recognise the compromises we are asking
   from some of our stakeholder groups, we would urge them to support the
   proposals which we believe are the best way of ensuring Superdry’s
   recovery over the long-term.”

   Julian Dunkerton, Superdry CEO and Co-Founder, commented on today’s
   proposals:

   “Today’s announcement marks a critical moment in Superdry’s history. At
   its heart, these proposals are putting the business on the right footing
   to secure its long-term future following a period of unprecedented
   challenges. I am aware of the implications for all our stakeholders and I
   have sought to protect their interests as much as possible in the
   proposals we are announcing today. My decision to underwrite this equity
   raise demonstrates my continued commitment to Superdry, its stakeholders,
   its suppliers and the people who work for it. My passion for this great
   British brand remains as strong today as it was when I founded the
   business.”

    

   Enquiries

   Superdry

   Peter Sjӧlander, Chairman                              +44 (0) 1242 586747

    
   Peel Hunt LLP (Sole Sponsor and Financial Adviser  to
   Superdry)

   George Sellar
                                                         +44 (0) 207 418 8900
   Michael Nicholson
                                                          
   Andrew Clark

   Edward Lowe

    
   Teneo Financial Advisory  Limited (Financial  Adviser
   to the Plan Company)

   Gavin Maher                                           +44 (0) 208 052 2345

   Jonathan Lees

    
   Brunswick Group LLP (Financial PR)
                                                         +44 (0) 207 404 5959
   Tim Danaher

    

   The person responsible for releasing this announcement is Jennifer
   Richardson, General Counsel & Company Secretary.

    

   Appendix 1

   Restructuring Plan

   The Restructuring Plan is an integral part of the Company’s turnaround
   plan and transition to a new target operating model. The Company and the
   Plan Company believe that there is no other viable or acceptable
   alternative to the Restructuring Plan that would return the business to a
   stable financial footing, and without this process they believe that the
   Plan Company and other members of the Group would enter insolvency in the
   near term.

   The Restructuring Plan will enable the Plan Company to undertake a
   fundamental restructuring of its UK property portfolio which will
   accelerate the delivery of its own and the Group’s turnaround plan.  The
   Restructuring Plan will not materially affect any other external creditors
   of the Plan Company or suppliers to the Group, except for those landlords
   of compromised sites, rating authorities and certain other creditors
   associated with the Plan Company’s UK property portfolio and the Plan
   Company’s secured creditors (Bantry Bay and Hilco).  If approved and
   implemented, the Restructuring Plan will demonstrably provide these
   creditors with a greater return than the amount that it is estimated they
   would receive if the Plan Company and the other companies in the Group
   were to enter insolvency.

   Superdry has, with advice from Teneo, their financial adviser on the
   Restructuring Plan, carried out a comprehensive review of the Plan
   Company’s UK property portfolio and identified 39 sites that are
   underperforming and/or on unfavourable lease terms or, in certain cases,
   not expected to have significant strategic value going forward.

   Under the Restructuring Plan, it is proposed that most of the Plan
   Company’s landlords of UK sites and concession counterparty creditors will
   be arranged into seven separate classes. The rent and other payments due
   in respect of the leases and concession contracts in each of those classes
   will be compromised to a level which would mean that they are able to make
   a sustainable EBITDA contribution to the group (if they do not already) or
   will be reduced to zero.

   Liabilities owed by certain Group companies under the debt facility
   provided by Bantry Bay will also be compromised / amended pursuant to the
   Restructuring Plan such that:

    1. the final repayment date in respect of loans made will be extended
       from 22 December 2025 to the date immediately following the date
       falling three years after the Restructuring Plan takes effect; and

    

    2. all defaults and events of default caused by the entry into the
       Restructuring Plan, the Delisting and the Equity Raise will be waived.

   Liabilities owed by certain Group companies under debt facilities provided
   by Hilco will also be compromised / amended pursuant to the Restructuring
   Plan such that:

    1. the final repayment date in respect of loans made under the Hilco
       Facilities Agreement will be extended from 7 February 2025 to the date
       immediately after the date falling three years after the Restructuring
       Plan takes effect;

    

    2. Hilco will confirm that the conditions to borrowing under the
       incremental seasonal facility referred to above have been satisfied;
       and

    

    3. all defaults and events of default caused by the entry into the
       Restructuring Plan, the Delisting and the Equity Raise will be waived.

   The Restructuring Plan will also compromise:

    1. all business rates arears owed by the Plan Company to local
       authorities in respect of the period from and including 1 April 2024
       to the effective date of the Restructuring Plan; and

    

    2. liabilities of the Plan Company in respect of business rates for the
       period in which the relevant store would be void in the “relevant
       alternative” (being an administration of the Plan Company).

   The Restructuring Plan will not compromise claims of any creditors other
   than those set out above. Accordingly, the claims of all suppliers and
   customers, the entitlements of employees, liabilities owed to certain
   ancillary finance providers and sums owed to HMRC will continue to be paid
   in full.

   The launch of the Restructuring Plan does not affect the current ordinary
   course operations of the Group. No member of the Group is in and will not
   be in administration as a result of launching the Restructuring Plan.

    

   IMPORTANT NOTICES

   This announcement has been issued by and is the sole responsibility of the
   Company. The information contained in this announcement is for background
   purposes only and does not purport to be full or complete. No reliance may
   or should be placed by any person for any purpose whatsoever on the
   information contained in this announcement or on its accuracy, fairness or
   completeness. The information in this announcement is subject to change
   without notice.

   Neither this announcement nor anything contained in it shall form the
   basis of, or be relied upon in conjunction with, any offer or commitment
   whatsoever in any jurisdiction. Investors should not acquire any
   securities to be offered pursuant to the Equity Raise (“New Ordinary
   Shares”) except on the basis of the information contained in the Circular
   to be published by the Company in connection with the Equity Raise and the
   application form which will accompany the Circular (the “Application
   Form”).

   Neither the content of the Company's website, nor any website accessible
   by hyperlinks on the Company's website, is incorporated in, or forms part
   of, this announcement. The Circular will provide further details of the
   New Ordinary Shares being offered pursuant to the Equity Raise.

   This announcement is for information purposes only and is not intended to
   and does not constitute or form part of any offer or invitation to
   purchase or subscribe for, or any solicitation to purchase or subscribe
   for, New Ordinary Shares or to take up any entitlements to New Ordinary
   Shares in any jurisdiction. No offer or invitation to purchase or
   subscribe for, or any solicitation to purchase or subscribe for, New
   Ordinary Shares or to take up any entitlements to New Ordinary Shares will
   be made in any jurisdiction in which such an offer or solicitation is
   unlawful. The information contained in this announcement and the Circular
   is not for release, publication or distribution to persons in  any
   jurisdiction where the extension or availability of the Equity Raise (and
   any other transaction contemplated thereby) would breach any applicable
   law or regulation, and, subject to certain exceptions, should not be
   distributed, forwarded to or transmitted in or into any jurisdiction where
   to do so might constitute a violation of local securities laws or
   regulations.

   The distribution of this announcement, the Circular, the Application Form
   and the offering or transfer of New Ordinary Shares into jurisdictions
   other than the United Kingdom may be restricted by law, and, therefore,
   persons into whose possession this announcement, the Circular, the
   Application Form and/or any accompanying documents comes should inform
   themselves about and observe any such restrictions. Any failure to comply
   with any such restrictions may constitute a violation of the securities
   laws of such jurisdiction. In particular, subject to certain exceptions,
   this announcement, the Circular and the Application Form should not be
   distributed, forwarded to or transmitted in or into any jurisdiction where
   the extension or availability of the Equity Raise (and any other
   transaction contemplated thereby) would breach any applicable law or
   regulation.

   Recipients of this announcement, the Circular and/or the Application Form
   should conduct their own investigation, evaluation and analysis of the
   business, data and property described in this announcement and/or the
   Circular. This announcement does not constitute a recommendation
   concerning any investor's options with respect to the Equity Raise. The
   price and value of securities can go down as well as up. Past performance
   is not a guide to future performance. The contents of this announcement
   are not to be construed as legal, business, financial or tax advice. Each
   shareholder or prospective investor should consult his, her or its own
   legal adviser, business adviser, financial adviser or tax adviser for
   legal, financial, business or tax advice.

   Notice to all investors

   Peel Hunt, which is authorised and regulated by the FCA in the UK, is
   acting exclusively for Superdry and no one else in connection with the
   matters described in this announcement and will not be responsible to
   anyone other than Superdry for providing the protections afforded to
   clients of Peel Hunt, nor for providing advice in connection with the
   matters referred to herein. Neither Peel Hunt nor any of its subsidiaries,
   branches or affiliates owes or accepts any duty, liability or
   responsibility whatsoever (whether direct or indirect, whether in
   contract, in tort, under statute or otherwise) to any person who is not a
   client of Peel Hunt in connection with this announcement, any statement
   contained herein or otherwise.

   Forward-looking statements

   This announcement contains forward-looking statements, including with
   respect to financial information, that are based on current expectations
   or beliefs, as well as assumptions about future events. These
   forward-looking statements can be identified by the fact that they do not
   relate only to historical or current facts. In some cases, forward-looking
   statements use words such as “anticipate”, “target”, “expect”, “estimate”,
   “intend”, “plan”, “goal”, “believe”, “will”, “may”, “should”, “would”,
   “could”, “is confident”, or other words of similar meaning.

   None of the Company, its officers, advisers or any other person gives any
   representation, assurance or guarantee that the occurrence of the events
   expressed or implied in any forward-looking statements in this
   announcement will actually occur, in part or in whole.

   No undue reliance should be placed on any such statements, because they
   speak only as at the date of this announcement and, by their very nature,
   they are subject to known and unknown risks and uncertainties and can be
   affected by other factors that could cause actual results, and the
   Company's plans and objectives, to differ materially from those expressed
   or implied in the forward-looking statements. No representation or
   warranty is made that any forward-looking statement will come to pass.
   Forward-looking statements are not fact and should not be relied upon as
   being necessarily indicative of future results, and readers of this
   announcement are cautioned not to place undue reliance on any
   forward-looking statements, including those regarding prospective
   financial information. You are advised to read the Circular when published
   and the information incorporated by reference therein in their entirety. 

   No statement in this announcement is intended as a profit forecast or
   estimate for any period, and no statement in this announcement should be
   interpreted to mean that underlying operating profit for the current or
   future financial years would necessarily be above a minimum level, or
   match or exceed the historical published operating profit or set a minimum
   level of operating profit, nor that earnings or earnings per share or
   dividend per share for the Company for the current or future financial
   years would necessarily match or exceed the historical published earnings
   or earnings per share or dividend per share for the Company.

   The Company is not under any obligation to update or revise publicly any
   forward-looking statement contained within this announcement, whether as a
   result of new information, future events or otherwise, other than in
   accordance with its legal or regulatory obligations. Additionally,
   statements of the intentions or beliefs of the board of directors of the
   Company reflect the present intentions and beliefs of the board of
   directors of the Company as at the date of this announcement and may be
   subject to change as the composition of the board of directors of the
   Company alters, or as circumstances require.

   ══════════════════════════════════════════════════════════════════════════

   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

   ══════════════════════════════════════════════════════════════════════════

   ISIN:           GB00B60BD277
   Category Code:  REP
   TIDM:           SDRY
   LEI Code:       213800GAQMT2WL7BW361
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   315727
   EQS News ID:    1880971


    
   End of Announcement EQS News Service

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