This agreement comes within the framework of the action plan announced by the Company on February 9th, 2006 implying a program of asset disposals and a renegotiating of the bank debt whose agreement was announced on the April 21st, 2006.
The Company estimates that the achievement of the Plan, whose implementation is subject to conditions described hereafter, will allow to stop the warning procedure engaged by the auditors in accordance to the article 234-1 alinea 3 of the French commercial code (the special report by the auditors is available upon request at the head offices of the Company), to insure the operating continuity of the Company and to provide sufficient means necessary to its financial reversal.
The Company entrusted with Associes en Finances (223 rue Saint Honore, 75001 Paris), acting as independent expert, the mission to confirm the equitable nature of the plan for all the involved parties thereto. Their report will be available prior to the general meeting of the shareholders.
The Plan hinges on 5 steps:
Step number 1: EUR 25m extension and rescheduling of the short term loan
Within the framework of an amendment to the existing bank agreements, Banc of America Securities Limited agrees with the Company:
a EUR 25m increase of the short term loan (the 'Short Term Loan') thus increasing its amount from EUR 20m to EUR 45m
an extension of the maturity from March 31st, 2007 to December 31st, 2008
This loan will be redeemable up to EUR 10m by the Capital Increase mentioned in Step number 4, the balance being repaid on December 31st, 2008.
Step number 2: Modification of certain terms of the 2006/2008 Bonds
The Company convened on September 29th, 2006 the holders of the 2006/2008 bonds (6% coupon, nominal value of EUR 14, maturity on March 15th, 2008 - hereafter the '2006/2008 Bonds' whose value amounts to EUR 33.7m) to approve the postponement of the normal redemption date of the first tranche to February 15th, 2007 and to amend the terms of early repayment.
The main holder of the 2006/2008 Bonds, a fund managed by Boussard et Gavaudan Asset Management LP, holds 75.8% of the 2,403,772 outstanding 2006/2008 Bonds and is committed to vote those resolutions.
Step number 3: Modification of certain terms of the 2003/2009 Oceane
The Company convened on September 29th, 2006 the holders of the bonds maturing on April 1st, 2009 convertible and/or exchangeable into new or existing shares (hereafter the "2003/2009 Oceane" whose value amounts to EUR 124.3m) to approve (i) the postponement of the final maturity from April 1st, 2009 to April 1st, 2020, (ii) the reduction of the coupon from 4.0% to 0.01%, and (iii) the cancellation of the early redemption clause in case of default.
The funds managed by GLG Partners and Bluebay Asset High Yield (Master Fund) (together the 'Investors') holding 67.8% of the 1,185,658 outstanding 2003/2009 Oceane, are committed to vote those resolutions.
Step number 4: Shareholders General Meeting / Share Capital Increase / Early repayment of all the outstanding 2006/2008 Bonds / Free reserved allocation of Warrants
The Company plans to conduct a capital increase amounting to EUR 74m (issue premium included) with maintenance of the preferential subscription right for the existing shareholders at a subscription price of EUR 0.15 per share (the "Capital Increase"). EUR 33.7m of the proceeds will be affected to the repayment of all the outstanding 2006/2008 Bonds, EUR 10m to the partial reimbursement of the Short Term Loan and EUR 30m to the operating financing of the Company.
The main holder of 2006/2008 Bond and the Investors are irrevocably committed to subscribe, respectively up to EUR 33.7m and EUR 40m, the shares which would not be subscribed by the existing shareholders at the end of the subscription period. Those commitments are conditional upon usual terms for this type of transaction and to the granting of an exemption to launch a mandatory Takeover Bid.
In consideration for their contribution to the structuring and to the implementation of the Plan, warrants will be freely attributed to the Investors and the main holder of 2006/2008 Bond following the Capital Increase (the "Warrants"). The Warrants will have a 3-year maturity, and allow subscribing to one new share at EUR 0.15, representing for the Investors and the main holder of 2006/2008 Bond respectively a total of 15% and 3% of the capital post Capital Increase and Exchange Offer as described in Step number 5.
In this respect, the Board of directors of the Company will propose to the shareholders at their annual general meeting - stating on the annual accounts of the Company - convened on September 29th, 2006 (first convening) to vote on the following resolutions:
- reduction of the nominal of the shares to one cent of Euro (0.01 Euro),
- reverse-split of the shares: attribution of one new share with one Euro (1 Euro) nominal for hundred (100) shares with one cent of Euro (0.01 Euro) nominal,
- renewal of the financial authorisations in order to allow the Capital Increase described above and the Exchange Offer on the 2003/2009 Oceane, as described in Step number5,
- issuance of Warrants reserved to Boussard Gavaudan Asset Management LP and The BlueBay High Yield (Master Fund), and
- appointment of two additional directors proposed by Bluebay Asset Management Limited.
Step number 5: Exchange Offer on the 2003/2009 Oceane
Subsequently to the Capital Increase (Step number4), the Company will launch an Exchange Offer ("offre publique d'echange simplifiee") on the 2003/2009 Oceane, where each tendered 2003/2009 Oceane will be exchanged into 32 new shares of the Company. On the basis of a share price of EUR 0.15 (i.e. the subscription price of the Capital Increase), the Exchange Offer represents a price of EUR 4.80 per 2003/2009 Oceane, i.e. a discount of around 37.5% (coupon included) compared to the redemption price of EUR 7.53 per 2003/2009 Oceane.
Investors agreed to tender to the Exchange Offer the 11,185,658 2003/2009 Oceane they hold, i.e. 67.8% of the outstanding Oceane.
Suspensive Conditions
The completion of the Plan (except step number1) is conditional upon the approvals by the holders of 2006/2008 Bond and 2003/2009 Oceane at their respective meetings, on the approval by the shareholders at the extraordinary general meeting and on authorisations and exemptions required from the market authorities.
The agreement provides that the Capital Increase must be launched before December 30th, 2006 or February 15th, 2007 in case a new shareholders extraordinary general meeting has to be reconvened due to the failure to meet the quorum requirements. In addition, the amendment to the terms of the 2003/2009 Oceane is conditional upon the completion of the Exchange Offer on April 30th, 2007 at the latest
All the Board members of the Company voted in favor of these transactions which, if they are successfully put in place, will permit the Company to have a new industrial investment capacity to cope with interactive leisure challenges.