LEND Sancus Lending Group Limited

TIDML

RNS Number : 3306D

Sancus Lending Group Limited

19 October 2022

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH THE PUBLICATION, DISTRIBUTION OR RELEASE OF THIS ANNOUNCEMENT WOULD BE UNLAWFUL.

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 GBP125 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 . 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 GBP86 million worth of new loans written, surpassing the total for the 2021 financial year which was GBP83 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 GBP65 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 GBP125 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 GBP500,000 was returned to ZDP Shareholders. Tender offers were completed in March 2020 and April 2021, returning approximately GBP6.2 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 GBP10.7 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 GBP1.6 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 GBP2,121,634.56 (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 GBP2,425,000 (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 GBP15 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 GBP100,000 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 GBP140,000 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                         19 October 
    Offer opens 
   Latest time for receipt of pink form of          10.00 a.m. on 3 November 
    proxy for the ZDP Class Meeting 
   Latest time for receipt of blue form of          10.05 a.m. on 3 November 
    proxy for the Ordinary Class Meeting 
   Latest time for receipt of white form            10.10 a.m. on 3 November 
    of proxy for the Extraordinary General 
    Meeting 
   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        1.00 p.m. on 1 December 
    Forms and submission of TTE Instructions 
    from Shareholders 
   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          on or around 14 December 
    CREST made and CREST accounts settled 
   Balancing share certificates and cheques         on or around 14 December 
    despatched to certificated ZDP Shareholders 
 

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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October 19, 2022 02:00 ET (06:00 GMT)