CAPITAL REORGANISATION
3 November 2006
3 November 2006
Luxfer announced that it had agreed heads of terms for the reorganisation of its balance sheet with an informal group representing 67% of holders of the Group's externally held �131.4 million 10.125% Senior Note due May 2009 and the two major institutional shareholders of the Company. As at 2 November 2006, the principal face amount of the outstanding Senior Notes which are subject to undertakings to support and implement the capital reorganisation exceed 75%. Additionally, shareholder undertakings of over 75% have been collected across all share classes.
The Group has in recent years been burdened with high levels of debt against a backdrop of volatile markets. In response to these pressures, the Group has been successfully implementing cost saving programmes and profit improvement plans to drive both sales and margin growth. If approved, the reorganisation will result in a significant reduction of the Company's debt and interest expense.
The Directors believe that the proposed reorganisation will provide the Company with a stable and strengthened capital structure and provide sufficient free cash flow to invest in targeted growth opportunities and cost saving projects.
Other than the Noteholders, no other creditors will be affected by the proposed reorganisation. The reorganisation is expected to take effect early in 2007.
Under the proposed reorganisation terms:
The existing noteholders will exchange the Company's outstanding �131.4 million Senior Notes and the 1 November coupon payment in return for approximately �71.6 million of new notes and 87% of the Company's post reorganisation equity, after taking into account a further subscription by Noteholders for �3.1 million of new notes. The new notes will have a new five-year maturity date.
Institutional and ex-management shareholders, in aggregate holding approximately 85% of current ordinary and preference share capital, will receive approximately �8.45 million in aggregate in return for their stake.
As part of the proposed reorganisation, the ordinary and 5% cumulative preference share capital will be converted into a combination of new ordinary share capital and deferred shares, which under International Financial Reporting Standards will reduce the Company's balance sheet liabilities by �110.8 million, based on the accrued liability outstanding at 30 June 2006.
Certain senior managers will exchange their current share capital for 13% of the post reorganisation share capital. Participation in the economic rights of this holding will initially be restricted to 5%, and may grow to 13% of post reorganisation share capital based upon the attainment of certain growth targets.
Overall, the proposed reorganisation will therefore eliminate the preference share liability and will also achieve a reduction of the Group's senior unsecured debt of approximately �60 million, offset by an increase in senior secured debt of approximately �10 million in order to meet the funding requirements of the proposed reorganisation.
Brian Purves, Chief Executive, commented: �The terms of the proposed reorganisation will greatly enhance the Group's balance sheet and provide the basis of a solid and stable capital structure. The substantial reduction in debt will increase the Group's financial liquidity and thereby place Luxfer in a strong position to develop its business through investing in exciting growth opportunities whilst continuing to provide the highest possible level of service to its customers."