TIDMTPS
RNS Number : 5318C
Turbo Power Systems Inc
02 May 2012
Notice of AGM, Debt Conversion, Share Consolidation &
Appointment of Directors
Turbo Power Systems Inc ("TPS" or the "Company"), a leading UK
based designer and manufacturer of innovative power solutions,
today announces the posting to holders of common shares of the
Company ("Shareholders" and "Common Shares", respectively) of a
circular (the "Circular") containing proposals which will be put
before Shareholders at the forthcoming annual and special meeting,
to be held at the Company's offices at Unit 3, Heathrow Summit
Centre, Skyport Drive, Hatch Lane, West Drayton, Middlesex, UB7 OLJ
United Kingdom, on 25 May 2012 at 10:00 a.m (the "Meeting).
The proposals include:
-- Conversion of approximately GBP8.5m of its existing loan
agreement with TAO Sustainable Power Solutions (UK) Limited ("TAO")
into Common Shares of the Company at a price of 0.45 pence per
share (the "Conversion")
-- Consolidation of the Common Shares of the Company on a basis
to be agreed by the board of directors ("Board" and the
"Consolidation"), but expected to be in the range of 100 to 300
existing Common Shares for every one new Common Share of the
Company
-- To effect the appointment of Mr Peter Brown and Mr Paul
Newall to the Board (together, the "Proposals")
A copy of the Circular, setting out full details of the
resolutions to be put to Shareholders at the meeting and giving
further details on the Proposals is available on the Company's
website at www.turbopowersystems.com.
The purpose of the Conversion and Consolidation is to strengthen
the Company's balance sheet and address matters raised by the
Toronto Stock Exchange ("TSX") in their review of TPS' compliance
with continued listing requirements, primarily in respect of the
Company's current financial situation and share price, as notified
on 30 January 2012. The TSX imposed a deadline of 29 May 2012 for
the Company to rectify these matters.
Should the Conversion be approved by Shareholders, prior to the
effect of the proposed Consolidation, TAO will hold an aggregate of
2,982,444,445 Common Shares representing approximately 89.4% of the
Company's issued and outstanding Common Shares at the date of this
announcement. The Conversion represents a related party transaction
under the AIM Rules for Companies. Further information in respect
of the Conversion and Consolidation is set out below.
Peter Brown, Chief Executive Officer since May 2011, has 21
years in the engineering and manufacturing industry with Vickers
plc and finally with Rolls-Royce plc. At the Meeting, Mr Brown will
also be appointed as a director of the Company's wholly-owned
operating subsidiary, Turbo Power Systems Limited.
Paul Newall currently finance director of Tao, is proposed to be
appointed as a non-executive director of the Company. Mr Paul
Newall previously worked in a variety of operational and financial
senior management positions within Bentley Motor Cars where Paul
contributed to significant growth. Prior to joining Tao, Paul was
Finance Director for Rolls Royce Plc's DGS division.
James Pessoa, Chairman, said: "As stated at the time of our full
year results, the Board have explored a number of options for
addressing the Company's financial constraints and the issues
raised by the TSX.
We recommend Shareholders to vote in favour of the Conversion
and Consolidation, which addresses the TXS's requirements whilst
establishing a sound financial footing for the Company going
forward.
We are pleased that TAO have continued to demonstrate a high
level of commitment to the Company in agreeing to the Conversion
whilst we continue to seek other routes for financing our expected
growth.
TPS's prospects remain strong and we are pleased to welcome
Peter Brown and Paul Newall to the Board of Directors."
Further information on the Consolidation and Conversion and
disclosures in respect of Mr Brown and Mr Newall pursuant to
Schedule 2(g) of the AIM Rules for Companies, are set out
below.
Enquiries:
Turbo Power Systems Inc Tel: +44 (0)20 8564 4460
Peter Brown, Chief Executive Officer
Kreab Gavin Anderson (financial public Tel: +44 (0)20 7074 1800
relations)
Robert Speed / Georgia Lewis
finnCap (NOMAD, broker and financial Tel: +44 (0)20 7220 0500
advisor)
Marc Young/ Henrik Persson
Further details of the Conversion, the Consolidation and matters
disclosable in respect of Mr Peter Brown and Mr Paul Newall
pursuant to Schedule 2(g) of the AIM Rules for Companies:
The Conversion
In July 2010, TAO completed a significant equity investment in
TPS of GBP6.5 million at a price of 0.6 pence per Common Share.
Following completion of that investment, TAO is interested in
approximately 75.4% of the issued and outstanding Common Shares of
the Company before any dilution, and 56.7% of the Company's issued
and outstanding Common Shares on a fully diluted basis.
As the Company's majority shareholder, TAO has had a significant
interest in the Company's financial well being and ability to meet
its working capital requirements. On 25 October 2010, TAO made an
initial loan of GBP1.9 million to TPSL, the Company's wholly-owned
subsidiary, repayable on or after 2 January 2012 and bearing
interest at a rate of 6% per annum (the "Loan"). The Loan is
secured over the assets of TPSL. Through a series of amendments to
the loaned amount and the repayment date, the Loan, as of 31
December 2011, was outstanding to the amount of GBP8.503 million
(including interest payable). In addition, subsequent to 31
December 2011, TAO has loaned the Company GBP1.02 million in
February 2012, which is repayable on 30 days' notice, and
subsequently GBP1.8 million in March 2012 which has a repayment
date of 1 April 2014.
At the date of this announcement, therefore, the total
outstanding Loan amounts to GBP9.17 million (excluding GBP1.8m
repayable on 1 April 2014) which remains repayable on 30 days'
notice with interest being accumulated onto the principal balance.
It is apparent to the Directors that the Company would not be in a
position to repay the outstanding Loan, with accumulated interest,
if requested by Tao. The Company's current financial forecasts
anticipate no further need for financial support from TAO past 30
June 2013.
It is proposed that GBP8,546,000 (representing the Company's
borrowings from TAO as at 31 January 2012 plus accrued interest to
that date) of the outstanding Loan be converted into Common Shares
by the issue of 1,899,111,111 new Common Shares at a deemed price
of 0.45 pence (CDN$0.007) per Common Share. These 1,899,111,111 new
Common Shares equate to 132% of the current issued and outstanding
number of Common Shares. Should the Conversion be approved by
Shareholders, TAO will hold an aggregate of 2,982,444,445 Common
Shares representing approximately 89.4% of the Company's issued and
outstanding Common Shares on an undiluted basis and 78.7% on a
fully diluted basis. After closing of the Conversion, the Company
will have 3,336,865,922 Common Shares issued and outstanding
(3,816,576,529 Common Shares fully diluted). The above figures are
quoted prior to the effect of the proposed Consolidation.
The Company is also pursuing the Consolidation on the basis of
100 to up to 300 old Common Shares for 1 new common share of the
Company. If the Consolidation is approved at the Meeting, the
effective price of the share issuances under the Loan Conversion
will be a deemed price of between GBP0.45 (CDN$0.72) (at 100:1) and
GBP1.35 (CDN$2.16) (at 300:1) per Common Share of the Company.
After the Consolidation, the number of Common Shares to be issued
to TAO in respect of the Conversion will effectively be 18,991,111
new Common Shares (should the Consolidation be effected at 100:1)
to 6,330,370 new Common Shares (should the Consolidation be
effected at 300:1). The Board has not finalized the precise figures
in the Consolidation, but will do so shortly following approval of
the Consolidation by Shareholders.
Application will be made for the new Common Shares to be issued
on the completion of the Conversion to be listed on the TSX and to
be admitted to trading on the AIM market of the London Stock
Exchange ("AIM").
Related Party Transaction
Pursuant to the rules of the TSX, the Company is required to
receive approval by a "majority of the minority" of shareholders
for the issuance of the Common Shares pursuant to the Conversion as
the Conversion will result in greater than 25% of the Company's
current issued and outstanding Common Shares being issued.
In addition, pursuant to Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special Transactions
("MI 61-101") the Company believes the Conversion will be a
"related party transaction". As such, pursuant to MI 61-101, the
Company is required to obtain minority approval, and in connection
therewith, obtain a Formal Valuation (as defined in MI 61-101).
Pursuant to section 5.5(g) of MI 61-101, the Company is relying on
the financial hardship exemption from the requirement to obtain a
Formal Valuation on the Conversion. In reliance on section 5.5(g)
of MI 61-101, the Company acknowledges that: (i) it is in serious
financial difficulty, (ii) the Conversion is designed to improve
the financial position of the Company, (iii) the Company is not
currently bankrupt or insolvent, and (iv) the Company has one or
more independent directors, who, acting in good faith, have
unanimously agreed that items (i) and (ii) above apply and that the
terms of the Conversion are reasonable in the circumstances to the
Company.
In order to approve the ordinary resolution, a majority of the
votes cast at the Meeting by disinterested Shareholders must be
voted in favour of the resolution. For the purposes of this
resolution, disinterested Shareholders include all Shareholders
other than TAO or its associates or affiliates. The number of votes
attached to Common Shares held by TAO which will be excluded in
determining whether minority approval has been obtained is
1,083,333,334 which means that the majority of the remaining
354,421,477 Common Shares (being a 12.3% +1 of the voting shares of
the Company) must vote FOR the resolution for it to pass.
If Shareholders do not approve the Conversion, the Company's
ability to maintain its listing on the TSX will be in serious
jeopardy. The Company cautions Shareholders that the TSX will not
make a determination regarding the Company's ongoing listing until
after the Meeting, and there can be no assurance that they will
allow the Company to remain listed on the facilities of the
TSX.
Furthermore, the Directors note that if Shareholders do not
approve the Conversion, the Company would not be in a position to
meet a request for repayment of the Loan if demanded by TAO.
The independent members of the Board have approved the
Conversion and related transactions, and unanimously recommend that
Shareholders vote in favour of the proposed resolution to approve
the Conversion.
TAO is a related party for the purposes of the AIM Rules for
Companies ("AIM Rules") and the entry into the agreement as set out
above with Tao therefore constitutes a related party transaction
for the purpose of the AIM Rules.
The Company's independent directors consider, having consulted
with finnCap Ltd, the Company's nominated adviser, that the terms
of the Conversion being entered are fair and reasonable insofar as
the Company's shareholders are concerned.
The Consolidation
At the Meeting, Shareholders will be asked to consider and, if
thought fit, approve an amendment to the articles of the Company to
effect the consolidation of the Common Shares on a basis to be
agreed on by the Board, but expected to be between a 100 and up to
300 for one (1) basis.
Pursuant to the Consolidation, and prior to the issue of new
Common Shares pursuant to the Conversion, if completed, between 100
to 300 Common Shares will be consolidated into one (1) Common Share
in the capital of the Company. The Company currently has
1,437,754,811 Common Shares issued and outstanding. If the Common
Shares are consolidated on a 100 for one (1) basis, the Company
will have 143,775,481 Common Shares issued and outstanding and if
the Common Shares are consolidated on a 300 for one (1) basis, the
Company will have 4,792,516 Common Shares issued and
outstanding.
The Board believes that the anticipated higher share price
resulting from the consolidation may assist in generating investor
interest and will alleviate the TSX's concerns regarding the market
price of the Common Shares as expressed in the TSX's listing review
received by the Company and announced on 30 January 2012.
There can be no assurance that any increase in the market price
per Common Share will result from the consolidation and there is no
assurance that a higher share price will generate increased
investor interest.
Disclosures required pursuant to Schedule 2(g) of the AIM Rules
for Companies:
Mr Peter Brown and Mr Paul Newall
Name: Peter Brown (aged 43) Paul Newall (aged 55)
Current directorships: None. None.
--------------------------- ------------------------------ ----------------------
Former directorships Rolls-Royce Power Engineering JRM Websites Limited
held in the last 5 years: Ltd
Rolls-Laval Ltd
Rolls Wood Ltd
Rolls Royce Industrial
Power Engineering (Overseas
Projects) Limited
There are no further matters to be disclosed pursuant to
Schedule 2(g) of the AIM Rules for Companies.
A copy of the Circular posted to Shareholders today is available
on the Company's website, www.turbopowersystems.com
Notes to Editors
About Turbo Power Systems
Company Website: www.turbopowersystems.com
Turbo Power Systems Inc (TSX:TPS.TO AIM:TPS.L) is a leading UK
based designer and manufacturer of innovative power solutions.
TPS's products are all based on its core technologies of power
electronics and high speed motors and generators and are sold into
a number of market sectors including aerospace, rail, and various
industrial sectors. The Company's products provide improved
efficiency and reduced energy consumption compared to existing
technologies.
Turbo Power System's existing third party customers include blue
chip companies such as Bombardier Transportation, McQuay
International and Eaton Aerospace. The Company also has commercial
contracts with its ultimate parent company, Vale Solucoes em
Energia S.A. ("VSE"), the Brazilian energy solutions company, and
with Tao Sustainable Power Solutions (UK) Ltd ("TAO UK"), which is
a VSE wholly owned subsidiary and TPS's parent undertaking.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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