CTNO Cantono

    RNS Number : 7583J
  Cantono PLC
  09 December 2008
   

    Cantono PLC ("the Company")

    Fundraising Update

    8 December 2008

    The Company provides the following update regarding its previously announced plans to raise new capital for the business. 

    As shareholders will recall, the Company obtained authority at a general meeting held on 29 October 2008 to raise finance by means of
issuing new ordinary shares of 1p each in the Company ("Ordinary Shares"), or other financial instruments convertible into new Ordinary
Shares, free from statutory pre-emption provisions (the "Fundraising"). 

    The Fundraising comprises two elements: an issue of convertible loan notes and a proposed issue of new Ordinary Shares.

    Convertible Loan Notes ("CLNs)

    The Board is pleased to announce that it has agreed to raise up to �2 million by the issue of A and B convertible secured loan notes to
a number of institutional investors. 

    Loan notes to the value of �1.125 million have been issued today, and a further issue of up to �0.4 million of loan notes is expected to
take place by 31 December 2008. 

    The latest date for the issue of the loan notes is 31 January 2009. 

    The principal terms of the A loan notes are as follows:

    Interest: no interest is payable on the A loan notes.

    Security: the A loan notes will be secured by a fixed and floating charge over all the assets and undertaking of the Company. This
security is subordinated to that held by the Company's bank, Barclays Bank plc.

    Term: the A loan notes have a three year term from the date of issue, unless converted or redeemed earlier. The A loan notes shall fall
to be repayable in one instalment on the earlier of: (1) a change of control of the Company, (2) a sale of a material part of the business
of the Company or (3) an event of default. 

    Redemption Premium: the A loan notes will be entitled to a redemption premium of 200% of the principal amount (in addition to the
principal repayment) if repaid within twelve months of being issued and to a redemption premium of 300% of the principal amount (in addition
to the principal repayment) if repaid after twelve months of being issued.

    Conversion: at the option of the A loan note holders, the principal of the A loan notes shall be convertible at any time, in whole or in
part, into new Ordinary Shares at an equivalent price of 3p per share. No redemption premium will be payable in the event of such
conversion.

    The terms attaching to the B loan notes are the same as for the A loan notes save that the B loan notes have a five year term from the
date of issue and that, if and to the extent that the B loan notes have not been redeemed or converted prior to the third anniversary of
their issue, interest will become payable on the B loan notes at a rate equivalent to 8.75% per annum on the total redeemable value of the
notes, such interest to be payable quarterly in arrears.

    Of the �1.125 million raised today �1.025 million has been subscribed for A notes and �0.1 million for B notes.

    Potential Dilution

    In the event that the �1.125 million of loan notes issued today are converted, this would result in the issue of 37,500,000 new Ordinary
Shares, representing 56.35 per cent of the share capital (as enlarged by the conversion of all the CLNs.)

    New Ordinary Shares

    In addition, an issue of new Ordinary Shares in a placing to raise up to a maximum of �250,000 is expected in the near future. Together
with the issue of loan notes referred to above, this issue will complete the Company's capital raising under the authority granted at the
general meeting on 29 October 2008. 

    Rationale for the Fundraising and use of Proceeds

    For some time the Company has been attempting to raise new finance to allow the Company's Data Centre division to be developed. The
Company and its advisers have approached a number of potential debt providers, and existing and potential institutional shareholders. It
became clear that, given the Company's funding requirements, the issue of new Ordinary Shares on its own was not a viable method of raising
sufficient capital, and the issue of convertible secured loan notes was the only deliverable source of funds in the timeframe.

    Your Directors have given consideration to the most appropriate method of conducting the  Fundraising in the circumstances balancing the
desire to allow existing shareholders the chance to participate in the issue against the time and cost of so doing, and the likely take up
of such an issue by those shareholders.

    Whilst in principle the Board would have preferred to offer existing shareholders the opportunity to participate in the fundraising by
way of, for example, a rights issue, it was decided that conducting the capital raising primarily by way of a limited marketing of loan
notes was a more suitable course of action. The principal reason for this has been that the extra time and cost involved in conducting a
pre-emptive issue such as an open offer or rights issue would be considerable as a full prospectus would have been required to be produced
which not only involves greater cost but would tie up significant management time that could be better allocated in achieving the Company's
operational goals. 

    Although the terms attaching to the CLNs may appear expensive and potentially highly dilutive,  shareholders are well aware of the
difficult current economic conditions and the impact of these in the equity and debt markets. In light of this, the Directors believe that
the issue of CLNs on the terms described represents the best opportunity for the Company to raise the working capital needed to move the
business forward. 


    Proposed Investment by Directors

    As was stated in the circular published by the Company at the end of November, all of the Directors are keen to invest in the equity of
the Company, and it is the intention that this investment will take place in the near future, subject to the Company not being in a close
period. The terms of such investment will be agreed at that time. As any subscription by the Directors will  constitute a "related party
transaction" under the AIM Rules, it will require the Company's nominated adviser, Brewin Dolphin Limited, to agree such terms and to
confirm publicly that such investment is "fair and reasonable insofar as the Company's shareholders are concerned". 

    Related Party Transaction

    The subscribers for the loan notes comprise a number of institutions, one of which, Troon Management Services Limited ("Troon"), is a
"substantial shareholder" in the Company as defined in the AIM Rules. As such, the subscription by Troon for CLNs represents a "related
party transaction". The Directors, having consulted with the Company's nominated adviser, Brewin Dolphin Limited, consider that the terms of
the subscription are fair and reasonable insofar as the Company's shareholders are concerned.

    Future Strategy 

    A resolution to dispose of the Company's Managed Services Business is to be put before shareholders at the general meeting scheduled for
15 December 2008. Assuming that the disposal is approved, the Company's sole activity will be the management of the Fareham Data Centre. 
Following completion of the disposal, the Board intends to review all options open to the Company to maximise shareholder value.

    For further information please contact:
    Cantono PLC
    Eamus Halpin, Chief Executive                                01895 444 420
    Brewin Dolphin Investment Banking
    Neil Baldwin, Director                                               0845 270 8612
    ENDS

This information is provided by RNS
The company news service from the London Stock Exchange
 
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