Fitted kitchens supplier Smallbone has negotiated a financing package of up to £5.9m.
As part of this package Barclays will be granted 1m warrants to subscribe for shares at 5p each, which expire on 31 December 2011.
Barclays will also receive a fee of 6% of Smallbone’s market capitalisation when certain conditions are triggered. These conditions are triggered if the company is sold, Smallbone refinances its outstanding bank debt or at the latest on 31 December 2011.
Shares in Smallbone rose 4p to 26.5p each, which values Smallbone at £6.62m. The Barclays fee would be £397,000 at that market capitalisation.
Smallbone is also issuing £1m of convertible loan stock to Pekak Limited Partnership in return for the purchase of a cash shell with £1m. The loan stock is convertible at 30p a share. If it is not converted it is repayable on 31 December 2011. The interest rate is 16% a year. This interest is not payable in cash until 2011, when it will be paid quarterly. The first two years interest will be repaid with the principal.
Christopher Peacock has been appointed president and chief executive of Smallbone Holdings USA. Peacock is a partner in Pekak.
The warrants and loan stock could dilute the share capital by 14.8% and potentially increase the fee payable.
Smallbone is deferring the payment of £2.9m in tax to the Inland Revenue. This will be paid in 12 monthly instalments.
Turnover rose 10% to £61.8m in 2008 but higher costs and restructuring charges have almost halved profits.
Smallbone has an order book of £39m and management is cutting costs in order to improve cash flow and profitability in 2009.
The financing package puts Smallbone in a more secure position in what is a tough time for consumer product suppliers. However, the package is not cheap.
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