NOT FOR DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, HONG KONG OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER OF ANY OF THE SECURITIES DESCRIBED HEREIN.
Reference is made to the stock exchange notice from XXL ASA (“XXL” or the “Company”) regarding its Q4 2019 result on 7 February 2020. Since the Q4 2019 results publication, XXL has investigated different financing alternatives for the Company and concluded that the best alternative in the current market is to strengthen its balance sheet through a NOK 1,450 million refinancing with its existing banks and an underwritten rights issue of approximately NOK 400 million at a subscription price of NOK 5.00 per share (the “Rights Issue”).
Bank refinancing
The new bank financing with DNB Bank ASA and Nordea Bank Abp, filial i Norge (the “Banks”) includes total facilities of NOK 1,450 million (the “New Bank Financing”). The New Bank Financing consists of a 3-year non-amortizing term loan of NOK 500 million, a 3-year revolving credit facility (“RCF”) of NOK 500 million, a 3-year seasonal RCF of NOK 150 million and a 364-day additional RCF of NOK 300 million. The New Bank Financing is subject to liquidity and leverage covenants. The liquidity covenant for 2020 is NOK 100 million in Q2 and Q3 2020 and increasing to NOK 200 million in Q4 2020, and adjusted down to NOK 100 million in Q1 and Q2 2021. The leverage covenant of 3.5x will be in effect from Q3 2021, with semi-annual step-downs of 0.25x, first time with effect from Q1 2022. The New Bank Financing is credit approved by the Banks and will be in effect after the documentation has been finalised. The Banks have agreed that the covenants shall not be tested or reported until the new financing is effective.
Underwritten rights issue
The proposed underwritten Rights Issue will raise gross proceeds of NOK 400 million through issuance of 80,007,247 new shares (the “Offer Shares”).
The subscription price is proposed to be NOK 5.00 per Offer Share (the “Subscription Price”), representing a premium of 6 per cent to the closing price for the Company’s shares on Oslo Børs on 31 March 2020 of NOK 4.70.
Each shareholder will be granted 0.464 subscription right (“Subscription Right”) for every existing share held at the date of the extraordinary general meeting resolving the Rights Issue (the “EGM”), expected on or about 24 April 2020, as registered in the Norwegian Central Securities Depository (VPS) on 28 April 2020 (the record date). Each Subscription Right will, subject to applicable securities laws, give the right to subscribe for and be allocated one Offer Share in the Rights Issue. Oversubscription will be allowed. Subscription without subscription rights will not be allowed.
Altor Invest 5 AS, Altor Invest 6 AS (Altor Invest 5 AS and Altor Invest 6 AS, together “Altor”), Ferd AS (“Ferd”), ODIN Norden and ODIN Norge (Altor, Ferd AS, ODIN Norden and ODIN Norge, together the “Underwriters”) have, subject to customary conditions, committed to subscribe for at least their pro rata portion of the Rights Issue of 11.8 per cent, 11.8 per cent, 9.0 per cent, 6.0 per cent and 3.0 per cent, respectively, in aggregate 41.5 per cent of the Rights Issue. In addition, Ferd has underwritten an additional 22,899 Offer Shares, Nordkronen II AS, a company controlled by Pål Wibe (the new CEO of the Company), has underwritten 4,000,000 Offer Shares and Altor has underwritten the remaining part of the Rights Issue, provided however that Altor shall not be obliged to subscribe for shares that will result in Altor’s ownership in the Company exceeding 33.33 per cent of the votes in the Company and thus triggering a mandatory offer obligation under the Norwegian Securities Trading Act.
In order to secure a full underwriting of the required NOK 400 million, Altor or its affiliates are, in the case that allocation of Offer Shares to Altor under the underwriting would otherwise have resulted in the mandatory offer threshold to be reached, obligated to either: (i) take delivery of the excess Offer Shares and thereby obtaining a shareholding in excess of the mandatory offer obligation threshold, or (ii) provide the Company with 4-year unsecured convertible bonds (the “Convertible Bonds”) for the corresponding subscription amount of the excess Offer Shares.
There is no certainty that Altor will take delivery of the Offer Shares in excess of the mandatory offer threshold even if new regulations regarding the required offer price in mandatory offers that are triggered by the participation of major shareholders in equity issues are adopted as proposed by the Norwegian Government on 27 March 2020.
The Convertible Bonds shall carry an interest rate of 4 per cent per annum, payable in cash at maturity, and together with accrued interest, be convertible to shares in the Company at the Subscription Price of the Rights Issue at any time in the period from 30 September 2020 until 24 months after the EGM.
For illustration, if the Underwriters only subscribe according to their pro rata pre-commitments and are the only subscribers for Offer Shares in the Rights Issue, and Altor decides not to take delivery of Offer Shares that will result in an ownership in excess of the mandatory offer threshold, then the size of the Rights Issue will be NOK 265 million and 52,919,262 Offer Shares, and the remaining NOK 135 million will be raised through the Convertible Bonds provided by Altor.
If all Offer Shares are subscribed by holders of Subscription Rights, then the size of the Rights Issue will be NOK 400 million and 80,007,247 Offer Shares will be issued. In that scenario, there will be no Convertible Bonds.
The Company will call for an EGM to be held on or about 24 April 2020 to resolve the Rights Issue and the Convertible Bonds. Shareholders now representing 61.1 per cent of the shares in the Company have undertaken to vote in favour of the Rights Issue and the Convertible Bonds the EGM.
According to the current timetable, and subject to the approval by the EGM, the share is expected to trade exclusive of subscription rights from 27 April 2020, the record date is expected to be 28 April 2020 and the subscription period for the Rights Issue is expected to commence on or about 4 May 2020 and end on or about 18 May 2020.
The Company will prepare and publish a prospectus for the Rights Issue that will include the full terms and conditions for the Rights Issue and will be subject to approval by the Norwegian Financial Supervisory Authority prior to publication.
All dates and other figures with respect to the Rights Issue included herein remain tentative and subject to change. Any changes will be announced at the EGM or through stock exchange announcements.
DNB Markets, a part of DNB Bank ASA, and Nordea Bank Abp, filial i Norge have been retained as Global Coordinators for the Rights Issue. Advokatfirmaet Thommessen AS is legal advisor to the Company.
For further queries, please contact:
Investor Relations
Tolle O. R. Grøterud
Interim CEO, XXL ASA
Tel: +47 90 27 29 59
E-mail: ir@xxlasa.com
Definitions of alternative performance measures (APM)
Certain financial measures and ratios are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented because they are among the measures used by management to evaluate the cash available to fund ongoing, long-term obligations and they are frequently used by other interested parties for valuation purposes or as a common measure of the ability of a company to incur and meet debt service obligations. These measures may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to profit for the year, total operating revenues, operating income or any other performance measures derived in accordance with IFRS, and they may be different from similarly titled measures used by other companies.
EBITDA
Earnings before interest, tax, depreciation and amortisation (EBITDA) is a key financial parameter for XXL. EBITDA represents operating income plus depreciation.
EBITDA excluding IFRS 16 (EBITDA ex IFRS 16)
IFRS 16 was implemented for the Group 1 January 2019. IFRS 16 have significant impact on XXL’s financial statement, financial position and cash flow. The EBITDA measure for the leverage covenant described below is excluding IFRS 16 effects.
Net interest bearing debt (NIBD)
Net interest bearing debt is defined as non-current interest bearing debt and current interest bearing debt less cash and cash equivalents. Net debt is a measure of the Group’s net indebtedness that provides an indicator of the overall balance sheet strength.
Leverage covenant
Leverage covenant is defined as NIBD/EBITDA ex IFRS 16, a measure for the strength of XXL’s financial position. See NIBD/EBITDA ex IFRS 16 for explanation.
NIBD/EBITDA ex IFRS 16
Leverage covenant is defined as NIBD/EBITDA ex IFRS 16, a measure for the strength of XXL’s financial position. XXL aims to maintain a solid balance sheet through keeping this measure at a relative low level, to ensure financial flexibility and ensure cost efficient funding. This measure is also part of our covenant conditions in our loan agreement. XXL uses 12 months rolling EBITDA ex IFRS 16 (“12M Rolling EBITDA ex IFRS 16”) in this calculation, i.e. in Q3 XXL use Q4 EBITDA ex IFRS 16 from previous year + Q1 EBITDA ex IFRS 16 from current year + Q2 EBITDA ex IFRS 16 from current year + Q3 EBITDA ex IFRS 16 from current year. The 12M Rolling EBITDA ex IFRS 16 can include adjustments for exceptional P&L items, not being part of daily operations.
NIBD / EBITDA ex IFRS 16 = Net interest bearing debt / 12M Rolling EBITDA ex IFRS 16
Liquidity covenant
Liquidity covenant is defined as the minimum available cash and cash equivalents plus available liquidity through overdraft and credit facilities.
Important information
The release is not for publication or distribution, in whole or in part directly or indirectly, in or into Australia, Canada, Japan or the United States (including its territories and possessions, any state of the United States and the District of Columbia). This release is an announcement issued pursuant to legal information obligations, and is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. It is issued for information purposes only, and does not constitute or form part of any offer or solicitation to purchase or subscribe for securities, in the United States or in any other jurisdiction. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "US Securities Act"). The securities may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the US Securities Act.
The Company does not intend to register any portion of the offering of the securities in the United States or to conduct a public offering of the securities in the United States. Copies of this announcement are not being made and may not be distributed or sent into Australia, Canada, Japan or the United States.
Any offering of the securities referred to in this announcement will be made by means of a prospectus. This announcement is an advertisement and is not a prospectus for the purposes of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (as amended) as implemented in any Member State. Investors should not subscribe for any securities referred to in this announcement except on the basis of information contained in the aforementioned prospectus, if a prospectus is published. Copies of any such prospectus will, following publication, be available from the Company's registered office and, subject to certain exceptions, on the websites of DNB Markets, a part of DNB Bank ASA (www.dnb.no/emisjoner) and Nordea Bank Abp, filial i Norge (www.nordeamarkets.com/xxl) (jointly, the "Managers").
The issue, subscription or purchase of shares in the Company is subject to specific legal or regulatory restrictions in certain jurisdictions. Neither the Company nor the Managers assume any responsibility in the event there is a violation by any person of such restrictions. The distribution of this release may in certain jurisdictions be restricted by law. Persons into whose possession this release comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
The Managers are acting for the Company and no one else in connection with the offering and will not be responsible to anyone other than the Company providing the protections afforded to their respective clients or for providing advice in relation to the offering and/or any other matter referred to in this release.
Forward-looking statements: This release and any materials distributed in connection with this release may contain certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect the Company's current expectations and assumptions as to future events and circumstances that may not prove accurate. A number of material factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.