Small print in the Countrywide rescue plan announced yesterday spells out in stark terms what could happen if the company’s bid for up to £140m additional funding either fails or is rejected by the company’s shareholders at a meeting scheduled for August 28.
Peter Long, executive chairman, has told Estate Agent Today that he is “delighted” that investors will buy the shares in the new investment, which will be heavily discounted.
The fundraise will generate proceeds of £129m after fees; if this sum is raised it will be used to pay off around two thirds of Countrywide’s current £200m debt.
The firm’s biggest backer - Oaktree Capital which has a 30 per cent stake - has already agreed to the deal but a largely unreported statement at the very end of the 35-page trading update and recovery plan released yesterday makes sombre reading, and sets out what happens if shareholders do not support the deal.
The statement comes from chartered accountacy group PricewaterhouseCoopers, which has Countrywide as a client.
“If the Group’s shareholders do not approve the Capital Refinancing Resolutions and/or the Issue has not otherwise taken place by 30 September 2018, or if the gross aggregate proceeds of the Issue is otherwise less than £100.0 million, the Group will enter into a 10 Business Day consultation with its lenders regarding the continuation of the Group’s Amended Credit Facility.
“Following the end of that consultation period, the majority lenders may notify the Group that they require the Amended Credit Facility to be prepaid and cancelled. If such notice has been provided, the Amended Credit Facility must be prepaid and cancelled. In such circumstances, the Group would seek to renegotiate or refinance the Amended Credit Facility.
“There can be no certainty that the Group would be able to do so on commercially acceptable terms or at all. In the event that the Group were unable to renegotiate or refinance the Amended Credit Facility and its lenders were to demand repayment of all borrowings without further support of its lenders, the Group would be unable to meet its liabilities as they fall due, which would likely result in the Group becoming insolvent and having to cease trading.
“These conditions, along with other matters explained in Note 3 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern. The Group’s interim financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.”
Meanwhile in an interview with Estate Agent Today, Countrywide’s new Group Managing Director insists the company is not going to sell any of its brands or assets. You can see the interview here.