REFINANCING OF DEBT FACILITIES AND COMPANY UPDATE-EQTEC PLC

REFINANCING OF DEBT FACILITIES AND COMPANY UPDATE-EQTEC PLC

 

Proposed restructuring of existing debt facilities and entry into new facilities for additional funding of up to £3,000,000, with reductions in operating expenditure

 

Gardanne Project update

Proposed share consolidation

Director resignation

Director remuneration update

Broker appointment

 

EQTEC plc (AIM: EQT), a global technology innovator powering distributed, decarbonised, new energy infrastructure through its waste-to-value solutions for hydrogen, biofuels, and energy generation, is pleased to announce a proposed financial restructuring, in collaboration with its existing funders and certain key shareholders, to enable the Company to transition to revenue-led growth and regain momentum with execution of its business strategy.

 

The proposed restructuring includes refinance or repayment of existing debt facilities with various lenders, supported by wholesale review and reduction of the Company's operational expenditure. Supported by existing lenders, the Company will redeem existing debt facilities with Altair Group Investment Limited ("Altair"), refinance outstanding debt with YA II PN Ltd and Riverfort Global Opportunities PCC Limited (the "YA-RF Lenders") and settle an amount due to Pitcole Limited ("Pitcole"), a shareholder in EQTEC Italia MDC Srl ("Italia MDC") (the YA-RF Lenders, Pitcole and Altair together being the "Refinance Investors").

 

In alignment with the new funding, the Company has undertaken and will continue to pursue reduction of its operating expenditure. Although the Company regularly reviews and targets cost reduction, it has over the past six months taken additional steps to reduce the use of third-party services and advisors, reduce director and staff costs and maximise the application of costs to projects with secure revenue and protected margins. As part of these reductions, the Company will reduce or defer its total remuneration payable to directors and staff in the near term, over and above the reductions to director remuneration previously announced. In total, the Company is advancing operating cost reduction measures to save the Company, together with measures already implemented, in excess of £1.5 million per year, from the beginning of 2023, until revenues and cash flow are sufficient to support a return to growth and accommodation of a larger portfolio of projects.

 

In addition, the Company is taking firm steps to recover accounts receivable, including legal action where necessary. The Company is pursuing a number of outstanding monies payable to the Company amounting to approximately £5 million, including £3.95 million being claimed from Logik Developments as announced on 20 September 2023.

 

Overview of new financing and settlement of existing agreements

 

The Refinance Investors are providing up to a total of £3.0 million in new financing for the Company, with an initial, aggregate advance of £950,000 being provided immediately (the "New Syndicated Facility").

 

The £3.5 million existing debt facility with Altair announced on 9 December 2022 (the "Altair Facility"), which has an outstanding balance of £900,000, will be redeemed through the issue of EQTEC shares to the value, as calculated below, of £1,125,000, which is 125% of the aforementioned outstanding balance.

 

EQTEC Holdings Limited ("EQTEC Holdings"), a wholly owned subsidiary of the Company, has agreed to purchase all of Pitcole's participation in Italia MDC, for a total payment of €736,765. The Company has agreed with Pitcole, which has been a shareholder in the Company since 2020, to settle EQTEC Holding's payment obligation to Pitcole of €736,765 through a payment in EQTEC shares to the value of £800,000, as calculated below, which is 125% of the aforementioned amount due to Pitcole. As a result of this transaction, once concluded, the Company's share of ownership in Italia MDC will increase from 38.3%, as announced on 6 November 2023, to 49.0%.

 

It has been conditionally agreed that the £10 million debt facility with the YA-RF Lenders announced on 29 March 2022 (the "YA-RF Facility"), which has an outstanding balance of c. £4.5 million, will be cancelled and replaced with a new £10 million secured loan facility (the "YA-RF Secured Facility"). The initial advance under the YA-RF Secured Facility will have a six-month repayment holiday, following which it will be repaid in 24 monthly instalments.

 

Gardanne project update

 

Further to the Company's announcement on 26 September 2023 that it had, with partners, successfully completed a technical and commercial feasibility toward deployment of EQTEC solutions at the site of the former Gardanne power station, toward what is expected to be a waste-to-renewable natural gas ("RNG") facility enabled by EQTEC's advanced syngas technology, the Company announces that it expects pre-FEED work worth c. €186,000 to commence immediately and complete in early Q1 2024, to be followed soon thereafter by FEED work estimated to be worth c. €900,000, which would be delivered through partnership between EQTEC and Wood for an integrated, feedstock-to-syngas-to-RNG solution.

 

The Company anticipates that FEED work will start as soon as possible after completion of the pre-FEED subject to obtaining the requisite funding. The Company will continue to provide updates as this work moves forward.

 

Director resignation

 

Further to the Company's announcement on 28 September 2023, Executive Director and CFO Nauman Babar's resignation from the Board of Directors of EQTEC plc has been formally accepted by the Board with effect from 17 November 2023. Mr Babar's responsibilities are being assumed by an expanded Finance team while the Company progresses the appointment of a new CFO. The Company will make further announcements in due course.

 

Broker appointment

 

The Company is pleased to announce the appointment of Global Investment Strategy UK Ltd and Fortified Securities as joint brokers with immediate effect.

 

Proposed General Meeting and Share Capital Reorganisation

 

Certain aspects of the refinancing are subject to Shareholders passing resolutions to provide the Company with authority to issue new Ordinary Shares and the implementation of a share capital reorganisation. Therefore, the Company proposes to hold an Extraordinary General Meeting (the "EGM") on 18 December 2023 to seek approval from its shareholders to implement a share capital reorganisation, to reduce the nominal value of its Ordinary Shares and to refresh the Company's authority to allot shares. The Company will publish a notice to convene the EGM in due course.

 

David Palumbo, Group CEO, commented: 

 

"Despite our healthy pipeline of projects with solid clients, strong partners and reliable revenue, EQTEC, like many other companies, is taking decisive and prudent steps to ensure that the Company has sufficient funding in place to capitalise on opportunities ahead of it. This year has been for us a year of shifting away from legacy business dealings to ones that support our target business. The shift has not been easy, but we are making hard choices to secure our near-term resilience, toward delivering the long-term strategy we have committed to our shareholders. The funding arrangements we announce today, coupled with the cost reduction efforts and operational disciplines we have applied, will strengthen the Company's balance sheet and cash position, providing the opportunity to build good revenues with strong margins to support our growth plans. Our shift away from legacy business dealings continues but is mostly behind us, as we look forward to devoting the majority of our time and attention on building the future."

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