PTV Peertv

TIDMPTV

RNS Number : 6079C

PeerTV PLC

19 October 2015

19 October 2015

PeerTV plc

("PeerTV" or "the Company")

Offer to Loan Noteholders of Digitek SMT Assemblies Limited

PeerTV plc (AIM:PTV), a provider of technology solutions for the OTT (TV over the internet) market, and PCB (printed circuit board) production solutions announces a proposed restructuring of the Secured Loan Notes issued by Digitek SMT Assemblies Ltd ("Digitek").

Digitek is engaged in the assembly of products and components and the associated sourcing and logistics for companies principally engaged in the hi-tech, telecommunications, medical and other technology based industries in Israel. For the first six months of 2015 Digitek contributed $670,000 sales, out of the group total for the period of $970,000.

An offer has been submitted to the Noteholders of Digitek ("the Noteholders") to exchange 100% of the Loan Notes in issue for 75% of the Ordinary Share Capital and 75% of the Preference Share Capital of Digitek ("Exchange Offer"). It has been made in light of:

   a)   Weaker than expected operating results of Digitek during Q2 and Q3 2015 

b) Digitek's inability to finance itself. Turnkey orders have been obtained, but the financing facilities needed to support them have not been put in place.

   c)    PeerTV's reluctance to continue supporting the Digitek business. 

In the last two weeks the Company has been in dialogue with the 20 largest Digitek Noteholders. It has communicated the financial situation of Digitek and discussed the Exchange Offer which has resulted in a general conclusion that the Exchange Offer is the best proposal to try to preserve value for both PeerTV and the Noteholders.

Digitek is currently a wholly owned subsidiary of Digitek Holdings Limited ("DHL") which is 64.1% owned by PeerTV. Under the terms of the Exchange Offer there would be a debt for equity swap by Noteholders who are owed approximately GBP1.9 million and also by PeerTV which has advanced approximately GBP2.6 million directly to Digitek on an unsecured basis ('the PeerTV Advance") over the past three years.

The following points should be noted:

a) Following the transaction PeerTV will hold 25% of both the Ordinary Share Capital and the Preference Share Capital of Digitek. The Noteholders would hold the remaining 75% of both categories of capital.

b) PeerTV's acquisition of 25% of both categories of capital would be achieved through the conversion of the PeerTV Advance to both Ordinary and Preference Share Capital and the write off of the remainder. The actual amount of the write off is dependent on the valuation of Digitek agreed between the parties at the time of the transaction.

c) A total of GBP666,667 of the combined amount converted by both parties would be allocated as preference shares which will be repayable a) in the event of a sale of the majority of the shares or assets of the business or b) from an allocation of 15% of the annual audited after tax profits of Digitek starting in 2017. In addition the preference shares will pay an annual dividend of 4% only out of after tax profits.

d) The new equipment acquired for the Digitek business earlier in 2015 at a cost of about $500,000 will continue to be owned by PeerTV Marketing Limited which is a 100% subsidiary of PeerTV. The equipment will be rented to Digitek under the terms of a monthly rental agreement, on terms yet to be agreed calculated on an arm's length basis which fairly reflect the value, age and condition of that equipment.

e) It is expected that under the proposed arrangements Digitek will seek additional working capital to enable it to improve performance, reaching and maintaining profitability. This will include an injection of GBP100,000 by PeerTV in the form of an unsecured loan. The terms are yet to be agreed. CSS Alpha Fund has offered to provide the funds needed to make this specific loan by PeerTV to Digitek within the framework of the existing revolving credit facility. It is expected that the release of pledges on the assets of Digitek will permit new lenders to advance secured funds.

If concluded, under the AIM Rules the Exchange Offer will be a substantial transaction requiring the disclosures set out in Schedule 4 of the AIM Rules. The profits attributable to the assets being disposed of, the book value of those assets and the effect on the PeerTV of the transaction can be seen from the attached pro-forma based on the interim unaudited financial statements for the six months ended 30 June 2015. For the foreseeable future PeerTV intends to hold its shareholding in Digitek.

Following the transaction PeerTV will hold 100% of both PeerTV Limited (operating the OTT business) and PeerTV Marketing Limited (owning the equipment). It will also hold 25% of Digitek and 64.1% of DHL, which shall be no longer active.

According to PeerTV Chairman Eitan Yanuv: "Over the past three years the Digitek business has required increasing amounts of capital and has utilized a disproportionate amount of the Group's resources. We believe that Digitek's operation as an independent business will be beneficial to all stakeholders. The Exchange Offer will help strengthen the PeerTV group balance sheet and facilitate focus on the OTT business which we feel is of greater interest to our shareholders."

A General Meeting of Noteholders to vote on the proposed Exchange Offer will be held in London on 2(nd) November 2015.

Further enquiries:

PeerTV Plc

Eitan Yanuv, Chairman

Tel: +972 974 07315

ZAI Corporate Finance Limited

Tim Cofman / Jamie Spotswood

Tel: +44 20 7060 2220

Daniel Stewart & Company plc

David Coffman

Tel: +44 207 776 6550

This information is provided by RNS

The company news service from the London Stock Exchange

END

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