The Board is of the view that the exchange of contracts over the
Welsh sites will provide the Group with a potential pipeline of
future work and increase the scale of its housebuilding activities.
A key long-term objective of the Board is therefore to establish a
substantial and profitable contract housebuilding operation. The
Board's intentions are also for the Group's land trading business
to supplement (but not to the extent that it jeopardises) the core
contract housebuilding operation on a case by case basis as
opportunities arise.
Conclusion
The Board believes that the site sales to Trilandium and
Trilandium Celtic will provide the Group with an opportunity over
the short to medium-term to strengthen its balance sheet through a
reduction in net borrowings. The agreement, in the first instance,
to build houses on the Welsh sites and for Jenard, with the
potential for similar arrangements at Birkwood will also provide
the Group with future income streams and cash flow and thus provide
it with the platform to secure its long-term commercial
viability.
Bank facilities
Set out below is a summary of the facilities and loans advanced
by each of the Group's banking partners, including, where relevant,
a summary of the revised arrangements following recent
discussions.
RBS
RBS, which holds a first charge over the Welsh sites, has
approved the sale of these sites to Trilandium Celtic. RBS will,
subject to the signing of facility documentation and the exchange
of contracts for the sale of the Welsh sites, also extend the
repayment date of loans advanced to the Group totalling GBP8.81
million, from 31 December 2010 to 31 March 2014. Of the GBP8.8
million, GBP5.2 million of the Group's revised capital and interest
repayment commitments under these loans will match the anticipated
timing of receipt of the proceeds from the sale of the Welsh sites
between now and 31 December 2013. A further GBP1.4 million is
scheduled to be received from Trilandium Celtic after the expiry of
the RBS facility.
The balance of the capital and estimated future interest
repayments due to RBS under these loans is approximately GBP3.2
million, which can be repaid at any time up to 31 March 2014. In
this respect, RBS holds charges over two properties owned by the
Group, including the freehold of Haycroft Farm, Eatonfield's Head
Office, which is currently being marketed for sale. The Group
intends to use the proceeds from any sale of Haycroft Farm to
reduce this GBP3.2 million balance.
As described above, RBS has also agreed, subject to the signing
of the facility documentation and the exchange of contracts for the
sale of the Welsh sites, to provide Eatonfield with a GBP0.25
million working capital facility in support of the Group's plans to
develop its contract housebuilding operation.
Allied Irish Bank plc ("AIB")
AIB has provided the Group with a GBP9.9 million facility,
secured on a number of land assets including Birkwood, the Corus
site at Workington, Cumbria and sites in Driffield, Yorkshire and
Pen-Y-Bont, Flintshire.
As discussed above, Eatonfield is in negotiations to sell parts
of Birkwood to Trilandium, with any such transaction requiring the
consent of all banks that hold charges over the site. Eatonfield is
also in discussions with interested parties to sell the sites at
Driffield and Pen-Y-Bont, as well as investigating options to
generate value from its Corus site. The repayment date of the
facility with AIB has been extended as follows:
-- to 31 May 2014 in respect of the loan over Birkwood of GBP2.8
million on condition that the Trilandium payments are made direct
to AIB; and
-- to 31 August 2011 in respect of the remaining loans.
The Co-operative Bank plc ("the Co-op")
The GBP4.5 million loan from the Co-op is secured by a first
charge over the Group's freehold site at Ystalyfera near Swansea.
The Board has, over recent months, been in active discussions with
a potential buyer of part of the site. The negotiations have
progressed positively and, the Board believes, are now nearing
completion.
The Co-op loan was due for repayment in October 2010 and the
Group has technically been in breach of the terms of the facility
since that date. The Co-op, however, is supportive of the Board's
plans to dispose of part of the site and the facility remains
available as at the date of this announcement. Once terms have been
agreed for the disposal, the Co-op will then complete its credit
committee approval procedures to extend the date of repayment on
the outstanding balance once the sale proceeds have been applied as
a partial repayment.
Anglo Irish Bank ("Anglo")
The GBP3.3 million loan from Anglo is secured on Eatonfield's
freehold property at Europa Drive in Sheffield which is being
actively marketed for sale. The Board is confident that the
property will be sold in due course and that the disposal proceeds
will repay most if not all of the loan.
The Anglo loan was due for repayment on 29 October 2010 and the
Group has technically been in breach of the terms of the loan since
this date. Anglo has provided the Board with a comfort letter
confirming its support of management's actions to repay the
loan.
HSBC Bank plc ("HSBC")
Repayment of Eatonfield's GBP1.2 million facility with HSBC has
been extended until 29 November 2011. This loan is secured on the
Group's freehold properties in Mold and Buckley in Flintshire,
North Wales, both of which are currently at the early stages of
being marketed for sale.
Principality Building Society ("PBS")
The repayment date of the Group's GBP0.35 million facility with
the PBS has been extended until 31 July 2011. The Board intends to
develop houses on the site on which this loan is secured, subject
to further development funding being made available by the PBS.
Equity fundraising
As discussed above, the Board is now seeking to raise equity
funding to clear certain of the Group's outstanding trade
creditors. The Board is currently at the advanced stages of
planning an investor roadshow, expected to take place imminently.
The Board believes that any offers of equity funding will be
subject to finalisation of facility documentation with RBS and the
Co-op. Further updates on the progress of the intended equity
fundraising will be provided in due course.
Summary
As announced in the Group's half year report released on 31
March 2011, the Board expects that the Group's existing financial
resources will provide it with sufficient working capital until mid
April 2011 and the Group clearly remains in a very difficult
financial position. The Board believes, however, that the residual
funding currently available should provide the Group with
sufficient time to agree facility documentation with RBS and the
Co-op and conclude its equity fundraising.
Subject to the signing of the facility documentation with RBS
(enabling the sale of the Welsh sites to proceed to exchange of
contracts and the new GBP0.25 million working capital facility from
RBS to be made available for drawdown) and successful completion of
an equity fundraising, the Board believes these together will be
sufficient to fund the Group to the point where its contract
housebuilding operation is forecast to start generating net
positive cash flow later this year.
The Board highlights that whilst the above would eliminate some
of the immediate risks to the Group, certain specific risks would
still remain, including the following:
-- the forecast net cash inflows from the Group's contract
housebuilding operations are either delayed or not generated in
line with the Board's expectations;
-- the Group's banking partners withdraw their support and
choose not to renew facilities at the various expiry dates detailed
above;
-- Trilandium and/or Trilandium Celtic experiences financial
difficulties and is unable to complete the acquisitions of the
Welsh sites in line with the agreed timings; and
-- the Board is unable to complete the disposal of the Group's
other properties and its banking partners take enforcement action
against the Group as a result.
The Board is confident that once the Group's immediate position
has been stabilised, these risks would become more manageable and
that, eventually, long-term solutions will be found.
Overall, the Board believes that the strategy outlined above
represents the only viable means of protecting the interests of all
of the Group's stakeholders. These arrangements will, in time,
provide an exit route for senior lenders, prospects of long-term
value creation for existing and new shareholders alike and,
ultimately, a means by which a meaningful future for the Group can
be secured.
For further information please contact:
Eatonfield Group plc Tel: +44 (0)1829 261 910
Brian Corfe (Executive Chairman)
Rob Lloyd (Group Chief Executive)
Duncan Syers (Group Finance Director)
Evolution Securities Limited Tel: +44 (0)113 243 1619
Joanne Lake/Peter Steel
Optiva Securities Limited Tel: +44 (0)203 137 1904
Jeremy King
Threadneedle Communications Tel: +44 (0)207 653 9850
Graham Herring/John Coles
This information is provided by RNS
The company news service from the London Stock Exchange
END
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