$US10 Million Funding Facility Secured
Sydney, May 3, 2017 AEST (ABN Newswire) - Brand Protection and Customer Engagement solutions company YPB Group Ltd (
ASX:YPB) has secured a USD 10,000,000 (US Ten million dollar) flexible funding facility with Bracknor Investment Group (Bracknor).
- Funding facility with Dubai based Bracknor Investment Group
- Convertible Bond with warrants structure
- Zero coupon and mandatory conversion
- YPB controls the timing of the use of the facility
Bracknor is a Dubai-based investment group demonstrating a strong partnership focus with its investee companies. Its portfolio companies are primarily in France, the UK and Finland. Bracknor views itself as an "investor-partner in businesses" and aims to "finance outstanding but not yet fully recognized business models that need uplifting capital to achieve their true potential". YPB will become Bracknor's first investment in Australia.
YPB has directly confirmed with a number of Bracknor investee companies that it is a valuable and reputable funding partner. It has strong relationships with management and is a trusted advisor on business strategy and capital management.
The facility is a USD 10,000,000 interest free mandatory convertible bond with warrants funding programme over 3 years. Bracknor must convert its convertible bonds to equity (at all times subject to shareholder approval, if required). Each convertible bond has a zero percent coupon rate. The effective interest rate for the whole facility if fully drawn to USD 10,000,000 will be 10.3% with conversion for the first tranche at a 12% discount to face value and conversion of each subsequent tranche at a 10% discount.
There is also a facility commitment fee of 2.5% of the total commitment payable in proportion to each drawdown for the first $6,000,000 to be satisfied by the issue of YPB shares. This takes the budgeted total cost of funds if fully drawn to 12.8%. The payment in shares aligns Bracknor's interests with those of shareholders.
YPB controls the timing of the use of the facility and can draw:
- up to USD 1,500,000 at closing; and
- a further USD 8,500,000 in 17 tranches post the first drawdown.
YPB has committed to drawing USD 4,000,000 in year 1 and USD 2,000,000 in year 2 of the programme. Importantly, should those funds not be needed there is a 50% redemption ability and the capacity to deliver existing, rather than new, stock to Bracknor.
Timing of conversion of the bonds into equity is at Bracknor's discretion with the conversion price set with reference to the share price at the time of conversion, (subject to shareholder and other approvals, if required). Bracknor's model is to convert the bonds somewhat regularly and recycle its capital via selling equity at opportune times. It is important to emphasise that Bracknor can only profit from a stable to rising share price.
The agreement specifically protects against manipulation of the share price in order to affect the conversion price, namely:
- A "cool down period" between cash drawdowns which ensures Bracknor does not exceed its desired maximum portfolio position relative to the market turnover of the stock;
- A shorting prohibition agreed to by Bracknor;
- A trading volume restriction of 16.7% of turnover on days when the share price has fallen more than 10%, except when there is strong buying interest in the stock (specifically when volume is 150% greater than the average volume of the 5 prior days);
- A trading volume restriction of 25% on any day (both up and down) during the conversion pricing period; and
- A redemption facility allowing the company to redeem 50% of the intended conversion in cash, thereby protecting the company against being forced to issue equity at unattractive prices. The redemption is at a premium of not less than 15% to the nominal value of the notes. Further, the company can deliver existing stock to satisfy the conversion requirement should it deem the stock too undervalued to issue new equity.
The initial tranche may see a maximum of approximately 30 million YPB shares issued, although the present expectation is that the actual number of shares likely to be issued will be a substantially lower number. Shareholder approval will be required for share issues related to all drawdowns on the facility subsequent to the initial tranche and will be sought as appropriate.
The bonds also carry a detachable warrant in the ratio of one warrant for every two dollars of bond (i.e. a 1-for-2 warrant). The exercise price of the warrant is set at the time of the company's request to drawdown a tranche and thus pricing of the warrant is partly under the company's control. The exercise price of the first tranche of warrants is at a 30% premium to the share price at the time of drawdown and subsequent tranches are at a 15% premium. The warrants have a four year term.
Pierre Vannineuse, Chief Executive Officer & Founder of the Bracknor Investment Group commented:
"Bracknor is extremely proud to start investing in Australia through this long-term partnership with YPB Group. In the numeric era counterfeiting is becoming an ever-growing concern across the globe, we believe YPB is the best possible answer to this situation and a risk adjusted exposure for the growing demand of this market"
Executive Chairman John Houston said: "We welcome Bracknor's endorsement of YPB's strategy and potential. The bond facility offers a flexible, less dilutive, committed funding source that fits well with our future capital needs. We look forward to working closely with Bracknor to maximise YPB's value to the benefit of all shareholders."
About YPB Group Ltd
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