In a letter to the shareholders, Chairman Dato Chan Tien Ghee wrote:
“It is now over a year since we made our initial investment in the company and I took up the role of Chairman. A lot has happened in twelve months and it has been a steep learning curve. I believe it will go down as another eventful year in the history of the football club. We have had the disappointment of once more narrowly missing out on promotion, parting company with our long-term manager, Mr Dave Jones, and appointing our new manager, Mr Malky Mackay, who joins us from Watford to oversee the next stage in our development and progress. In addition, significant progress has been made in addressing and concluding a number of the Group’s historical financial issues and problems.
“As a part of that ongoing process, I am pleased to confirm that we have reached agreement with a number of creditors to restructure their debts involving an agreed payment plan together with the conversion of a significant element into shares in the company, thereby improving the Group’s financial position and strengthening its balance sheet.”
To enable the conversion of the debts into shares, two resolutions will need to be passed by the shareholders at the General Meeting, although that will be a formality as the company has already received irrevocable undertakings to vote in favour of the resolutions from each of the directors, the creditors and related parties who represent approximately 72% of the existing shareholders.
The details of the proposed share issue to the creditors are as follows:
PMG
PMG Estates Ltd is the successful Cardiff-based commercial property development firm owned and controlled by Bluebirds directors Paul Guy and Mike Hall. PMG have agreed to convert £2,850,000 of their loan into 18,164,436 new ordinary shares at a subscription price of 15.69p per share. The balance of the debt will be restructured to be repayable in full by 31 May 2013.
MICHAEL ISAAC
Board member Michael Isaac has agreed to convert £500,000 of the monies owed to him into 3,186,743 new ordinary shares at a subscription price of 15.69p per share.
STEVE BORLEY AND CMB ENGINEERING
Director Steve Borley has agreed to convert £400,000 of the debts owed to him and his company, CMB Engineering, into 2,549,395 new ordinary shares at a subscription price of 15.69p per share.
VINCENT TAN AND ASSOCIATES
Malaysian investor Vincent Tan and his associates, including Chairman Dato Chan Tien Ghee, have advanced significant funds to the football club since making their original investment in 2010. They have agreed to convert £5,089,441 of those loans into 32,437,482 new ordinary shares at a subscription price of 15.69p per share. This latest issue will mean the Malaysians hold a combined total of 49% of the company’s share capital.
Subject to the resolutions being passed by the shareholders, the directors will have the authority to allot 204,656,719 new ordinary shares. Using the current subscription price of 15.69p as a guide, the new shares will be worth approximately £32 million. The directors propose to immediately issue 56,338,056 to the creditors as detailed above, while the rest will be set aside for future investment opportunities. The notice states the directors do not currently intend to issue shares to anyone who is not already a shareholder, but they reserve the right to do so if circumstances so dictate.
In his letter to the shareholders, the Chairman continued:
“Of the principal historical creditors of the Group, this (the new share issue) leaves only the Langston Corporation to deal with. While negotiations (with Langston) have continued, to date they have not been successful. Your board will continue to attempt to find a way of achieving a satisfactory outcome which does not prejudice or damage the long-term interests of the Group.”
It is unclear from this latest notice whether or not options under the May 2010 issue to convert £2,700,000 of the PMG debt and £500,000 of Michael Isaac’s loan into shares were taken up by the company. The various elements of the previous share issue were outlined in a piece entitled ‘The Devil is in the Detail’, which was published on this blog last July.
No doubt there will be further clarification as regards the PMG debt, the Langston loan notes situation and various other issues during the General Meeting, which I will be attending. A full report will appear here in due course.