InfraStrata Plc: Equity Placing to Raise a Minimum of £6.0 Million Via an Accelerated Bookbuild & Conditional Contract Agreed for the Purchase of Assets of Harland & Wolff

Source Press Release
Company InfraStrata 
Tags Equity Financing, Financing, Asset Deals, Deals, Oil Services
Date November 11, 2019

InfraStrata, (AIM: INFA), the AIM quoted company focused on strategic infrastructure projects, announces a proposed placing of new Ordinary Shares by way of an accelerated bookbuild to raise a minimum of £6.0 million (the "Placing") and that, further to the announcements on 1 October and 1 November 2019, it has entered into a conditional contract to purchase the principal assets of the former Harland and Wolff Heavy Industries Limited and Harland and Wolff Group Plc (together, "Harland & Wolff") from administrator BDO NI (the "Acquisition").

Capitalised terms used in this announcement and not separately defined shall have the meaning given to them in the "Definitions" section below.

Placing highlights:

-      The Company is seeking to raise a minimum of £6.0 million (before expenses), through a placing of new Ordinary Shares by way of an accelerated bookbuild at 0.3 pence per share (the " Issue Price").

-      The proceeds of the Placing will be used to finance the acquisition of the principal assets of Harland & Wolff, repay and/or restructure  the outstanding amounts pursuant to the Bridging Loan (announced on 1 October 2019), progress the Islandmagee Gas Storage Project and for general working capital purposes.

-      The Company's executive directors have indicated that they intend to subscribe in the Placing for Placing Shares at the Issue Price for an aggregate amount of approximately £20,000.

-      Additionally, the Company will draw down the second tranche of  the debt facility provided by YA II PN Ltd and Riverfort Global Opportunities PCC Limited ("Lenders") under the Bridge Loan for a sum of £500,000 (after costs and initial interest payment) in order to pay for the overheads of Harland and Wolff for the month of November 2019. Further details of this advance are set out below.

-      The Placing is to be conducted by way of an accelerated bookbuilding process (the "Bookbuild"), which will commence immediately following this Announcement in accordance with the terms and conditions set out in the Appendix to this Announcement.

-      Completion of the Placing is subject, inter alia, to (i) completion of the Acquisition through the satisfaction (or waiver) of all conditions precedent in the Acquisition Agreement (save for any conditions relating to the Placing Agreement); (ii) at least £6.0 million being raised in the Placing; and (iii) Shareholder approval of certain resolutions to enable the issue of the Placing Shares, which will be sought at a General Meeting of the Company expected to be held on or around 29 November 2019.

-      The Issue Price represents a discount of approximately 11.7 per cent. to the closing mid-market price on 8 November 2019, being the latest practicable date before this Announcement.

-      Arden Partners plc has been appointed as the Company's Joint Broker with immediate effect.

-      The Placing has been arranged by Arden acting as Bookrunner and Sole Broker to the Placing.

-      A Circular containing further details of the Placing and including a notice convening the General Meeting is expected to be despatched to Shareholders following completion of the Bookbuild.

-      It is the intention of the Board for the Company to make an open offer to Shareholders in order to give them an opportunity to subscribe for new Ordinary Shares at the same price as investors under the Placing. Following completion of the Bookbuild the Company will finalise the details of the open offer and prepare the necessary documentation and a further announcement will be made in due course.

Acquisition highlights:

-      The Company and its wholly owned subsidiary, InfraStrata Heavy Industries, entered into an Acquisition Agreement with Harland & Wolff and the Administrators on 8 November 2019 pursuant to which  InfraStrata Heavy Industries has conditionally agreed to acquire the principal assets of Harland & Wolff for an aggregate cash consideration of £5.25 million (the "Consideration").

-      The strategic Harland & Wolff assets acquisition enables InfraStrata to bring in-house a large part of the engineering and fabrication requirements for the Company's Islandmagee Gas Storage Project and proposed FSRU Project (the "Projects").

-      By utilising the Assets, the Company anticipates a material reduction in the capital cost ("capex") of each of its Projects and a reduction in the construction timelines.

-      All the 70 employees of Harland & Wolff who did not opt for redundancy earlier in the year will be retained immediately following completion of the Acquisition.

-      New management team for the Assets anticipated to be employed by Q1 2020 and plans to significantly increase the size of the workforce by several hundred over the next five years as InfraStrata progresses the development of the Projects.

-      Harland & Wolff's highly skilled workforce presents the Company with an opportunity to create secondary revenue streams through the provision of services to the energy, maritime and defence sectors should such opportunities arise in future, which is in-line with the Company's existing strategy of developing and monetising strategic infrastructure projects and physical asset life-cycle management.

-      Completion of the Acquisition is subject to the satisfaction of certain conditions precedent including:

-      completion of the Placing through the satisfaction (or waiver) of all conditions precedent set out in the Placing Agreement (save for any conditions relating to the Acquisition Agreement); and

-      the transfer or assignment of the Properties to InfraStrata Heavy Industries and the variation of the terms of leases of the Properties;

-      Subject to the satisfaction or waiver of the conditions, the target completion date of the Acquisition is 5 December 2019. If completion of the Acquisition is not expected to occur by this date, the Company may elect to extend the completion date to 7 January 2020 (the "Longstop Date") by paying the sum of £600,000 plus VAT to fund the maintenance costs of the Assets for the period of 1 December 2019 until the Longstop Date.

-      The Company has also agreed to fund the maintenance costs of the Assets for the month of November by making a cash payment of £400,000 (plus VAT) on or before 14 November 2019 and a further £100,000 (plus VAT) by 5 December.

-      £500,000 of the Consideration was paid on 2 October 2019, as a non-refundable deposit, with £3.3 million due on completion of the Acquisition and the balance of the Consideration, being £1.45 million, due on or before 30 April 2020.

-      The Company has agreed to guarantee the obligations of InfraStrata Heavy Industries pursuant to the Acquisition Agreement.

Expected timetable of principal events  2019 
Announcement of the Placing; Bookbuild commences  7:00 a.m. on 11 November 
Announcement of the results of the Bookbuild  11 November 
Posting Circular to convene General Meeting  12 November 
Latest time and date for receipt of proxy voting instructions for the General Meeting  11.00 a.m. on 27 November 
General Meeting  11.00 a.m. on 29 November 
Announcement of results of General Meeting  29 November 
Admission and commencement of dealings in the Placing Shares on AIM*  2 December 
Target completion date of Acquisition  5 December 
Long Stop Date  7 January 2020 

*Admission is subject, inter alia, to completion of the Acquisition.

Each of the times and dates above refer to London time and are subject to change by the Company. Any such change will be notified to Shareholders by an announcement on a Regulatory Information Service.  The Circular will contain further details of the expected timetable for the Placing, General Meeting and Admission.

ADDITIONAL INFORMATION

1.    INTRODUCTION

On 8 November 2019, the Company and its wholly owned subsidiary, InfraStrata Heavy Industries, entered into the Acquisition Agreement pursuant to which it has agreed to acquire the principal assets of Harland & Wolff for an aggregate cash consideration of £5.25 million. Of this amount, £500,000 has already been paid by the Company as a non-refundable deposit.

The Board has announced a proposed fundraising to raise a minimum of £6.0 million (before expenses) through the Placing.

The proceeds of the Placing will be used to finance the consideration due under the Acquisition Agreement, repay and/or restructure outstanding amounts pursuant to the Bridging Loan (announced on 1 October 2019) and progress the Islandmagee Gas Storage Project and for general working capital purposes.

The Placing is being arranged by Arden. The Placing is not being underwritten.

It is the intention of the Board that as soon as practicable following completion of the Bookbuild the Company will make an open offer to its Shareholders in order to give them an opportunity to subscribe for new Ordinary Shares at the same price as investors in the Placing. A further announcement in relation to the open offer will be made by the Company in due course.

2.    INFORMATION ON HARLAND & WOLFF AND TERMS OF THE ACQUISITION

Founded in 1861 and historically employing a large number of the city's skilled workforce, Harland & Wolff was a focal point of Belfast's industry and famed for its iconic yellow cranes, nicknamed Samson and Goliath, as well as building the Titanic and its excellence in the maritime and energy sectors. Spread across two nearby sites in the port of Belfast, it includes one of the largest deepwater docks in the UK, the sixth largest dry dock in the world and 30,000 square metres of fabrication halls.  In recent years the facility has been used by the previous occupant to undertake conversion of floating production storage and offloading vessels (FPSOs) including the mechanical process plant.

Details of the assets being acquired

The Assets to be acquired by InfraStrata include all plant, machinery, equipment and industrial and intellectual property, as well as the Properties and 79 personnel who are highly skilled in the business of fabricating equipment for the energy infrastructure industry. This will enable  InfraStrata to bring in-house a large part of the fabrication requirements for the Company's Islandmagee Gas Storage Project and proposed FSRU Project. The Assets include:

1.  Gantry cranes

2.  Material handling equipment

3.  Plasma cutters

4.  Welding and joining equipment

5.  Forklifts

6.  Surface carriers to move large pieces of equipment

7.  Stock of materials and supplies

8.  IT equipment

9.  Modular office buildings

10.  Miscellaneous assets utilised in the fabrication of equipment

Terms of the Acquisition

The Acquisition Agreement sets out the terms on which InfraStrata Heavy Industries will acquire the Assets. Completion of the Acquisition is subject, inter alia, to the satisfaction of certain conditions, including: (i) the transfer or assignment of the Properties to  InfraStrata Heavy Industries and the variation of the terms of leases of the Properties; and (ii) the satisfaction (or waiver) of all conditions precedent set out in the Placing Agreement (save for any conditions relating to the Acquisition Agreement); and (iii) the passing of the Resolution numbered 1 at the GM.  The parties to the Acquisition Agreement have agreed to use all reasonable endeavours to satisfy the conditions by the target completion date, being 5 December 2019 or, failing which, the long stop date of 7 January 2020.

The total consideration for the Acquisition of the Assets is £5.25 million, of which a non-refundable deposit of £500,000 was paid on 2 October 2019. The payment of the balance of the Consideration has been phased and is payable as follows:

-      £3.3 million on completion which is scheduled for 5 December 2019 (or no later than the Longstop Date) ("Completion"); and

-      £1.45 million will be payable by 30 April 2020 (with secondary security on the Company's assets until payment).

The Company has agreed to pay the maintenance costs of the Assets for November by making a cash payment of £400,000 (plus VAT) on or before 14 November 2019 and a further £100,000 (plus VAT) by 5 December. If Completion is not expected to occur by 5 December 2019, the Company may elect to extend the completion date to 7 January 2020 by paying the sum of £600,000 (plus VAT) to fund the maintenance costs of the Assets for the period of 1 December 2019 until the Longstop Date. The Company intends for a portion of the EU grant reclaim expected to be received shortly to fund this payment for December. 

The Consideration is a substantial discount on the valuation of the Assets of around £11 million. For the year to 31 December 2018, the business carried on by the Assets reported an unaudited loss of £4.868 million. For the avoidance of doubt, the Company will not be buying the business of Harland and Wolff, rather just certain assets of Harland and Wolff. Consequently, InfraStrata Heavy Industries will not be taking on any business liabilities of Harland and Wolff, save for such liabilities as it will assume as assignee under various leases of the Belfast yard and dock site being acquired, but subject to such variations as will be agreed with the Belfast Harbour including in respect of levels and review of rent, and sharing of the costs of remediation (if required) of certain historic environmental liabilities with the Belfast Harbour Commissioners on a 50/50 basis.

3.    REASONS FOR THE ACQUISITION AND PLACING

Reasons for the Acquisition and strategy

The acquisition of the Assets offers significant commercial benefits to the Company. As an organisation that is focussed on strategic infrastructure projects, the Acquisition offers the Company a substantial degree of flexibility in how it manages its and third-party projects and assets. Management has consistently laid out its strategy of transforming the Company into one that is engaged in multiple projects across their respective life-cycles. The acquisition of the Assets, as a mature asset, provides stability to the Company's asset base and should enable revenue generation in the short term whilst other Company projects evolve through their respective life-cycles before ultimately becoming revenue generating.

Key to this Acquisition are the potential cost savings that the Company can benefit from by bringing fabrication work on its Islandmagee Gas Storage Project and FSRU Project in-house. Additionally, the Company will benefit commercially from in-house fabrication and control by potentially bringing forward the commercialisation dates of its Projects, whilst positioning itself to be better placed to partner in further energy infrastructure project developments.

The Acquisition will have the following benefits for the Company's Islandmagee Gas Storage Project, which, when fully operational, is expected to provide 25 per cent. of the UK's natural gas storage capacity:

·     the construction timeline will be reduced, bringing first revenue from offtake partners forwards; and

·     the capex is anticipated to be materially reduced and the Directors anticipate that the costs savings will be greater than the Acquisition price.

The Acquisition provides InfraStrata's management the resources, tools and flexibility to not only further the Company's projects, but to also attract other third-party businesses that wish to utilise the skills, assets and expertise available at the Harland & Wolff facility as opportunities present themselves.   The Assets are by their very nature capable of being utilised for a number of activities ranging from design, construction, fabrication, commissioning, operating and, finally, to decommissioning of energy and marine infrastructure assets, including but not limited to, wind farms, Floating Production Storage and Offloading vessels (FPSOs), sub-sea oil and gas structures and other sea-going vessels including cruise vessels, ferries and defence carriers.  Whilst the Board's key focus is on delivering internal projects, specifically the Islandmagee Gas Storage Project initially, it will also seek to capitalise on the versatility of the Assets as opportunities present themselves over time, and expand the Company's span of projects to keep in line with the overall strategy of creating a portfolio of revenue generating infrastructure assets within the Company. In addition, the Board recognises the need for the Company to start generating revenues as soon as possible. With that in mind, the acquisition of the Assets lends itself to near term revenues from servicing of third-party physical assets whilst preparatory work commences for the formal construction of the Islandmagee Gas Storage project and to support working capital requirements.  The Board has previously had direct related experience of operating facilities similar to the Harland & Wolff facility. Additionally, a separate management team that has been involved for a large number of years in operating such facilities is proposed to be deployed in the next few months.  

Invest NI has advised the Company of numerous forms of support by way of loans and grants that are potentially available for the Assets post Acquisition and the Board will look to take advantage of these in the future. While the Directors anticipate that these grants could be for a significant amount there can be no guarantee that any such funds will be available to the Company.

Reasons for the Placing and use of proceeds

The Company is undertaking the Placing to finance the Acquisition, repay and/or restructure any outstanding amounts pursuant to the Bridging Loan as on the date of Completion, progress the Islandmagee Gas Storage Project and provide the Company with additional working capital.

4.    CURRENT TRADING AND WORKING CAPITAL

The Company announced on 1 November 2019 an update on the Islandmagee Gas Storage Project, which confirmed completion of the October 2019 milestones. With these milestones complete, the Company is working closely with the Northern Ireland Environment Agency and the Department of Agriculture, Environment and Rural Affairs to finalise the timelines for the final activities related to the full marine licence. Once this process has been completed, the Board will release the revised construction tender documents to ensure that they include the most up to date information.

In addition, the Board continues to make progress in its negotiations with equity and debt partners with the aim of taking Final Investment Decision for the Islandmagee Gas Storage Project by the end of the year. In addition, the Board remains confident that the final grant reclaim for EUR1.6 million that is due to be paid to InfraStrata from the EU will be paid in Q4 this year.  The Company continues to progress preparation of the Gas Storage Agreement with  Vitol SA, and to coincide with FID.

Assuming the Placing completes, the Company's business plan and working capital requirement make certain assumptions as to the short term timing of:

·      the EU grant payment of EUR1.6 million;

·      an additional grant from InvestNI;

·      the Company reaching Final Investment Decision ("FID") on the Islandmagee Gas Storage Project by the end of the year, the payment of back costs associated with FID and revenue generation associated with fabrication of the Islandmagee Gas Storage Project ; and

·      ad hoc revenue utilising the Assets on third party projects.

If the timing of any of these is delayed or takes longer than currently expected then it islikely that the Company will require additional finance during the first half of 2020.

5.    DETAILS OF THE PLACING

The Company is proposing to raise a minimum of £6.0 million (before expenses) at the Issue Price, pursuant to the Placing.  The Placing will be conducted by the Company in accordance with the terms and conditions set out in the Appendix to this Announcement. The Placing is being conducted through an accelerated bookbuilding process which will commence immediately following this Announcement. 

The Bookbuild will determine final demand for and participation in the Placing.  The Bookbuild is expected to close not later than 4.30 p.m. (London) on 11 November 2019, but may be closed at such earlier or later time as Arden may, in its absolute discretion, determine.  The allocations will be determined at the absolute discretion of Arden and will be confirmed orally or by email by Arden following the close of the Bookbuild.  A further announcement will be made following the completion of the Bookbuild with final details of the Placing (the "Bookbuild Announcement").

The executive Directors of the Company have indicated that they intend to subscribe in the Placing for Placing Shares at the Issue Price for an aggregate amount of approximately £20,000. Further details will be announced in the Bookbuild Announcement.

On 8 November, The Company entered into a placing agreement with Arden (the "Placing Agreement") under which Arden has, on the terms and subject to the conditions set out therein (including Admission), undertaken to use their respective reasonable endeavours to procure subscribers for the Placing Shares at the Issue Price. The Placing Agreement contains certain warranties and indemnities from the Company in favour of Arden. The Placing is not being underwritten by Arden or any other person.

The Placing is conditional, inter alia, upon shareholder approval of the Resolution numbered 1 at the forthcoming General Meeting, at least £6.0 million being raised in the Placing, the Acquisition Agreement becoming unconditional in all respects, Admission and the Placing Agreement not being terminated prior to Admission (and in any event no later than 8.00 a.m. on 7 January 2020). Further details of the terms and conditions to the Placing are set out in paragraph 6 below.

The Placing Shares, when issued and fully paid, will rank pari passu in all respects with the Company's existing Ordinary Shares, including the right to all dividends or other distributions declared, made or paid after the date of issue of the Placing Shares.

The Placing Shares will be in registered form and will be capable of being held and traded in either certificated or uncertificated form (i.e. in CREST).

The ISIN number of the Ordinary Shares and Placing Shares is GB00B28YMP66. The TIDM is INFA.

The Appendix (which forms a part of this Announcement) contains the detailed terms and conditions of the Placing.

6.    DETAILS OF THE SHORT-TERM LOAN

The Company will draw down the second tranche of the debt facility provided by YA II PN Ltd and Riverfort Global Opportunities PCC Limited ("Lenders") under the Bridge Loan for a sum of £500,000 (after costs and initial interest payment) in order to pay for the overheads of Harland and Wolff for the month of November 2019. This tranche of the debt facility is non-convertible and carries a fixed interest amount of £40,000, half of which is deducted from the advance of the loan with the balance repaid on the first repayment date. The loan will enjoy an initial three-month debt repayment holiday and will be repayable thereafter in three equal monthly tranches on the first day of each month starting in March 2020. The Lenders will only have the right to convert this tranche of the loan in the event of a default by the Company in repaying the loan on the dates mentioned above. Any conversion would be at the lower of 0.598 pence per share and 90 per cent of the volume weighted average price ("VWAP") of the Ordinary Shares on AIM for the previous ten trading days. The Lenders will also be entitled to warrants over new Ordinary Shares having a value equal to £150,000. The number of Ordinary Shares subject to the warrants will be calculated as the quotient of the drawdown amount divided by the closing price of Ordinary Shares on the trading date immediately prior to drawdown and the exercise price on such warrants will be 150% of such closing price. The warrants will be exercisable for a period of 24 months from the date of issuance or 12 months if the daily VWAP, during the first 12 months, is at or above 1 pence for 20 consecutive days at any time during that period.

7.    CONDITIONS AND OTHER INFORMATION RELATING TO THE PLACING

The Placing has not been underwritten and is conditional, inter alia, upon:

(a)  the passing of the Resolution numbered 1 at the General Meeting or any adjournment thereof;

(b)  the Acquisition Agreement becoming unconditional in all respects (save in respect of any inter-conditionality with the Placing Agreement and Admission) and, in particular, the transfer or assignment of the Properties to InfraStrata Heavy Industries and the variation of the terms of the leases of the Properties;

(c)   at least £6.0 million being raised in the Placing;

(d)  the Placing Agreement becoming unconditional in all respects (other than Admission) and not having been terminated in accordance with its terms; and

(e)  Admission occurring by not later than 2 December 2019 (or such later time and/or date as the Company and Arden may agree, being not later than 7 January 2020).

Accordingly, if the conditions to which the Placing is subject are not satisfied or, if applicable, waived the Placing will not proceed, the Placing will lapse and each Placee's rights and obligations hereunder shall cease and determine at such time and no claim may be made by a Placee in respect thereof. Neither the Company, Arden, nor any of their Affiliates shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision as to whether or not to waive, or to extend the time and/or date for the satisfaction of, any condition to which the Placing is subject.

Whilst the parties to the Acquisition Agreement and Placing Agreement have agreed to use all reasonable endeavours to satisfy the conditions respectively set out in those agreements by the target completion date, being 2 December 2019 or, failing which, the long stop date of 7 January 2020, there is no guarantee that the conditions can or will be met and therefore no guarantee that the Acquisition, Placing will ultimately proceed. The Acquisition and Placing are inter-conditional as set out in paragraph 2 above and earlier in this paragraph 7.

8.    CIRCULAR AND NOTICE OF GENERAL MEETING

The Placing is conditional upon, inter alia, the passing of a Resolution to be put to Shareholders of the Company at a General Meeting of the Company expected to be held on 29 November 2019 (the "GM") to provide authority to the Directors to issue and allot the Placing Shares on a non-pre-emptive basis, whereby such authority will be utilised by the Directors to enable completion of the Placing. A Circular containing a notice of the General Meeting will be posted to Shareholders shortly.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd