Wed 21st Mar 2018 - Conviviality reveals plans for £125m fund-raise to save business Conviviality reveals plans for £125m fund-raise to save business: Conviviality, the UK alcohol wholesaler serving consumers through the on-trade and its franchise retail estate, has revealed plans for an £125m equity fund-raise to provide the necessary funding to recapitalise the business. The company also revealed adjusted Ebitda for the year ending 29 April 2018 would be in the range of £45.5m to £46.0m if the fund-raise was successful. Without the funds being raised, the company said it was unlikely it would be able to continue trading. Conviviality stated: “Further to the company’s announcement of 16 March 2018, the board of Conviviality is providing an update on a number of actions it has been taking with regards to working through its funding requirements. Customers and suppliers continue to remain supportive of the company and continue to work closely and constructively with the company at this time. Constructive discussions with our lenders are continuing. PricewaterhouseCoopers (PwC) has undertaken a review of the business and its future funding requirements and will continue to provide assistance to the company going forward. PwC is continuing to work and support the company in its discussions with key stakeholders. The company has held constructive discussions with HMRC regarding the £30.0m payment due on 29 March 2018. On 16 March 2018, the company announced it was engaging with its advisers and broker regarding the possibility of an equity fund-raise to effect a recapitalisation of the business. The board of the company announces, through its broker Investec Bank, meetings with institutional investors have been arranged for the coming days starting today (Wednesday, 20 March) to effect an equity placing to raise gross proceeds of £125.0m, which the directors believe will provide the necessary funding to recapitalise the business. The £125.0m gross proceeds from the placing will, among other things, provide capital for the company to resolve overdue payments with its creditors and return them to normalised trading terms; settle payments with HMRC; repay the company’s £30.0m revolving credit facility in its entirety; and provide working capital headroom and fund costs associated with the work undertaken to recapitalise the business. In addition, should the placing prove successful, the directors intend to make an open offer of up to the pound sterling equivalent of €5.0m, the maximum permitted without requiring the company to publish a prospectus under the EU Prospectus Directive, which would be made available to all existing Conviviality shareholders. The open offer would allow those shareholders who could not participate in the placing to have the opportunity to invest. Both the placing and open offer would be subject to the approval of Conviviality shareholders at a general meeting of the company. On 13 March 2018, Conviviality announced it expected adjusted Ebitda for the year ending 29 April 2018 to be in the range of £55.3m to £56.4m. In addition, net debt was expected to be £150.0m as at 29 April 2018. Assuming the placing is successful, the board would expect that the adjusted Ebitda for the year ending 29 April 2018 to be in the range of £45.5m to £46.0m and net debt to be below £100.0m. For the financial year ending 28 April 2019, the board expects adjusted Ebitda to show modest growth compared to the expected outcome for the current financial year. The reduction in the expected adjusted Ebitda outturn for the current financial year from that announced on 13 March is principally due to (i) the company managing its customer and supplier base through the issues associated with its short term funding requirements and (ii) the deferral of franchise income arrangements as a consequence of the board delaying completion of further franchise agreements. The company remains in compliance with its existing banking covenants and as noted above, the company is in constructive discussions with its lending banks. In addition, as also noted above, if successful the proceeds from the placing will reduce the amount of covenant debt by £30.0m with the repayment and cancellation of the revolving credit facility. The board believes the placing is the most appropriate mechanism to recapitalise the business. However, the company continues to explore other funding alternatives in the event the placing is unsuccessful. If the company is unable to raise funds by way of the placing or otherwise, it is unlikely to be able to trade on a going concern basis. A further announcement will be made in due course. The shares of Conviviality remain suspended pending further notice.”