Update on strategic review and changes to convertible note terms

Update on strategic review and changes to convertible note terms

Calibre announces today an update on its strategic review and confirms that it has started a sale process in respect of each of its businesses, Professional Services (PS), Diona and G&S Engineering.  

Following receipt of a number of expressions of interest for Calibre and its businesses, the Calibre Board is now engaging in further discussions with the parties it has assessed as having made the most attractive proposals, taking into account the interests of shareholders and all relevant stakeholders.  

The Company is in discussions with various bidders in relation to G&S Engineering and those bidders are currently conducting due diligence with a view to making a final offer. 

To facilitate discussions in relation to the PS and Diona businesses, the Company has granted an 8 week period of exclusivity to one of the consortia who bid for those businesses.  A copy of the Exclusivity Deed in the form executed today is attached.  The consortium consists of a private equity bidder and the former owners of the Diona business, who also hold convertible loan notes that were issued by the Company in late 2017 (Notes).   There is a carve out to the Company’s obligations under the Exclusivity Deed where such obligation would cause a breach of the Calibre Board’s fiduciary or statutory obligations.  

The Company also has an obligation to reimburse the consortium’s costs, up to $1.25 million if the Company breaches its obligations under the Deed or if the Calibre Board recommends a superior proposal.

The consortium has proposed a fixed floor price for the Diona and PS businesses and has agreed to certain amendments to the terms of the Notes to better facilitate the sale process.  If the consortium does not make a final binding offer at the floor price, then the amendments to the Notes will be in effect for 6 months to allow the Company to procure and complete either a bid for all of the shares in the Company or separate bids for its individual businesses.  

In particular, the Noteholders have agreed:

1. To facilitate the sale of businesses at the conclusion of any sale process if approved by Calibre’s secured lenders.
2. That the extraordinary general meeting (EGM) to approve the conversion of the Notes will be delayed and need not be held until later in 2018.
3. To allow redemption of Series B Notes by Calibre at any time during the 6 month period after the exclusivity period ends (the Series A Notes are already redeemable at the election of Calibre).

It is the current intention of the Board to accept a final offer from the consortium if it is made at or above the fixed floor price, and to use the proceeds from the sale to repay bank debt and redeem the notes.  If the Diona and PS businesses are sold for the fixed floor price, the Board expects that there will be sufficient cash to repay all debt while still retaining a cash surplus.  

The amendment to the Note terms will not apply if the Company does not accept a binding offer from the consortium at or above the fixed floor price, for example, because there is a superior offer at that time by another bidder for all of the shares in the Company.  

If the Notes are not redeemed by the Company prior to maturity (31 October 2018 in respect of the Series A Notes and 31 October 2020 in respect of the Series B Notes), then the Noteholders may elect to convert the Notes into fully paid ordinary shares in the Company.

The reasons why the Notes might not be redeemed include:  
1. the Company does not have the funds to redeem the Notes;
2. the Series B Notes cannot be redeemed in a situation where the amendment to the Note terms does not apply because the Company has not accepted the consortium’s final offer at the fixed floor price; or
3. if there is a change of control of Calibre before maturity which entitles the Noteholder to elect to convert the Notes rather than have them redeemed.

If the Notes are converted into fully paid ordinary shares in the Company, the conversion ratio is as follows:

Age (days) Conversion Date after Conversion Price
Series A Notes ($) Series B Notes ($)
1 to 91 30 January 2018 0.12 0.12
92 to 182 1 May 2018 0.09 0.09
183 to 273 1 July 2018 0.07 0.07
274 to 365 31 October 2018 0.05 0.05
366 to 730 31 October 2019 n/a 0.03
731 to 1,095 30 October 2020 n/a 0.02

Unless and until shareholders approve conversion of the Notes at the EGM, conversion by the Noteholders will be limited to such number of shares as gives each of the Noteholders (inclusive of their Associates) up to 19.9% voting power in the Company. 

There are a total of 100 million Series A Notes with a total face value of $15 million.  Interest accrues on the Series A Notes daily at 20% per annum.  There are a total of 66.7 million Series B Notes with a total face value of $10 million.  Interest on the Series B Notes accrues daily at 16% per annum.


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