TIDMINLZ
RNS Number : 2062U
Inland ZDP PLC
24 March 2023
Inland ZDP PLC
ZDP Share covenant compliance and update
24 March 2023
Covenant compliance
As at 31 December 2022, Inland Homes plc ("Inland Homes"), which
has guaranteed the amounts due to ZDP shareholders, had complied
with all its covenants under the Loan Note, Contribution Agreement
and related security documentation.
Cover ratio
The Cover Ratio as at 31 December 2022 has been calculated as
follows:
Cover Ratio (Assets / Financial Indebtedness) 2.2 times
Book values are used to calculate the Assets for the cover ratio
on a 'going concern' basis. However, as noted in the ZDPCo annual
report, the value of assets (such as a partially completed
development project) in a liquidation scenario could be
significantly lower than any value based on the Group being a
'going concern'.
The Financial Indebtedness includes the ZDP shares at the
redemption value of GBP36.46m, being the aggregate Final Capital
Entitlement of 201.4p per ZDP share due on 10 April 2024.
Security cover
Inland ZDP PLC ("ZDPCo") has the benefit of first legal charges
granted by members of the Inland Homes Group over specific pledged
assets and pledged cash. The book value of the Pledged Assets has
to be 120% of the accrued liability to ZDP Shareholders net of any
Pledged Cash.
At 31 December 2022, the accrued value of the ZDP shares was
GBP34,056,427 (188.1 pence per ZDP share) and the balance in the
pledged bank account (the Pledged Cash) was GBP4,000,000, leaving a
net GBP30,056,427 to be supported by Pledged Assets with a book
value of at least 36,067,712. As at 31 December 2022, the Pledged
Assets had a combined book value of GBP36,195,916, satisfying this
requirement.
Notes:
Capital Entitlement, Assets, Financial Indebtedness and Cover
Ratio have been determined as set out in the Circular to ZDP
Shareholders published by Inland ZDP PLC on 19 July 2018, which is
available at:
http://www.inlandhomesplc.com/investors/inland-zdp/zdp-documents-and-accounts/
.
The accrued Capital Entitlement is based on the initial issue
price (100p) and its accrual at 7.3% per annum from the initial
issue date (12 December 2012) to 148.8p on 13 August 2018, when an
extension of the redemption date was approved, subsequently
accruing at 5.5% to 10 April 2024. The accrued value calculated at
an even overall rate of 6.32% per annum from the initial issue at
100 per ZDP share to 201.4p on 10 April 2024, was 186.1p per ZDP
share.
Update
ZDPCo has lent the proceeds of ZDP share issues to Inland Homes
PLC for use in its Group's business and is reliant on the Inland
Homes Group's ability to transfer cash to fund the redemption of
the ZDP Shares on 10 April 2024. The market price of ZDP shares has
been affected by announcements by Inland Homes of significant
provisions for actual and expected losses on a few development
projects and construction contracts, bank covenant breaches and the
resignations of several directors. This has prompted certain ZDP
shareholders to ask for additional information about the above, the
value of the Pledged Assets and the Group's ability to redeem the
ZDP Shares in April 2024.
These factors led to a significant reduction and increased
volatility in the market price of ZDP shares. On 23 March 2023, the
mid market closing price of a ZDP share was 92.5 pence,
representing an annualised rate of return of 109.7% to 10 April
2024.
Pledged Assets
Any assets (other than intangible assets) may be pledged to
ZDPCo by companies in the Inland Group. Inland Homes PLC can
substitute one asset for another at any time, provided the book
value of all Pledged Assets exceeds 120% of the accrued Capital
Entitlement less any Pledged Cash. The security covenant is tested
quarterly and Inland has 90 days to remedy any shortfall (ie pledge
additional assets as security or buy in ZDP shares to reduce the
accrued Capital Entitlement). The values used for the security
covenant are the book values of the Pledged Assets.
The book values represent historical cost less any impairment
provisions. However, as noted in the ZDPCo annual report, the value
of assets (such as a partially completed development project) in a
liquidation scenario could be significantly lower than any book
value based on the Group being a 'going concern'.
The main asset pledged to ZDPCo is the Group's loan to Cheshunt
Lakeside Developments Ltd ("CLDL"). However, with the increase in
the accrued Capital Entitlement over time, 79 modular homes have
been pledged to ZDPCo in anticipation of the 31 March 2023 security
covenant. These homes are bespoke, modular housing units which can
be moved from one site to another. Located on dormant land going
through the planning process, the modular homes generate additional
cashflow for the Inland Group while offering a high-quality,
cost-effective solution to local authorities and others in meeting
short-term housing needs.
Cheshunt Lakeside Developments Ltd
CLDL is a joint venture company owned by Inland Group (50%) and
a third party investor (50%). Inland is entitled to performance
fees under a promote agreement as well as its 50% profit share. A
loan account balance due from CLDL to Inland is Pledged to ZDPCo.
As at 31 December 2022 this amounted to GBP34,993,521 (30 September
2022: GBP37,792,479).
The 30 acre Cheshunt Lakeside development site was formerly a
Tesco headquarters and supermarket and is being developed in line
with an approved masterplan.
Planning permission took three years of close consultation with
the local Councils and community and was granted in June 2019, with
the terms of the Section 106 agreement agreed promptly and signed
in August 2019.
The Cheshunt Lakeside original masterplan and outline planning
consent was for a new "urban village" comprising 1,725 homes,
19,000 sqm of commercial space together with the provision for a
new primary school. Inland Homes, together with its equal joint
venture partner, owned and controlled 853 residential plots and
4,905 sqm of commercial and educational space within the masterplan
area. Inland Homes is the lead developer on the broader masterplan,
which it is working with the council to deliver.
On 9 March 2023 Inland announced that CLDL had received detailed
consent for a further phase at Cheshunt Lakeside, Hertfordshire
with a further 51 homes on the site, subject to the Section 106
Agreement being varied. The detailed consent for this phase
delivers a total of 425 homes including the 51 extra homes added to
the development masterplan, as such the masterplan will now deliver
1,776 new homes overall, of which 904 are controlled by Inland and
its joint venture partner. This phase of development also delivers
the new local centre for the development including 2,400 sqm of
commercial space, a landscaped public square and key highways
infrastructure.
CLDL has loan facilities from Paragon Bank and Homes England as
well as the loan from Inland Ltd. The land loans are being repaid
as land sales occur. The loan from Inland Ltd fluctuates with
ongoing cash requirements. During the three months to 31 December
2022 Inland received approximately GBP2.8 million (net) from CLDL,
part of which has been subsequently redrawn by CLDL.
The recoverability of Inland's loan to CLDL as at 30 September
2022 has been assessed by reference to forecasted cash flows
regarding the development of the site and no impairment provisions
were found to be required.
Funding the redemption of ZDP Shares
The Inland Homes Group generates cash from selling sites and
completed residential and commercial units as part of its normal
business activities. It has adopted a less capital intensive
business model over recent years, pursuing major new developments
as either asset management projects (funded by third parties with
Inland receiving fees for services and performance), partnership
housing or joint ventures. Thus much of the cash realised on sales
of development sites and homes owned by Inland Homes Group is not
needed for re-investment in further projects and can be applied to
reduce borrowings and for working capital. This led to a reduction
of net debt from GBP152.3m as at 30 September 2019 to GBP86.8m as
at 30 September 2022.
The Inland Homes Group does not seek to time specific asset
sales to match individual loan maturity dates in order to avoid
being pushed into a forced sale position by the buyers of
assets.
The group borrowing policy is to have facilities with compatible
covenants from a range of sources, mostly with certain
subsidiaries. The Group can seek new term facilities to refinance
those which mature.
Inland Homes has a business plan for managing its cash flows and
meeting its obligations to ZDP shareholders, retaining flexibility
to adapt to circumstances rather committing to a fixed source of
repayment.
Enquiries:
Inland ZDP PLC
Nishith Malde FCA Tel: 01494 762450
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END
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