CHARTER plc Trading update and settlement of loan note dispute
03/02/2004
Charter is pleased to announce that:
- The trading performance was encouraging during the second half of 2003 and for the year as a whole is expected to be ahead of the Board’s expectations.
- Some £40 million has been realised through asset and business disposals in the second half of 2003.
- The group’s net debt has been successfully reduced to less than £140 million as at 31 December 2003 (£194.3 million: 30 June 2003).
- The Company has resolved the dispute with the 2007 and 2009 US loan note holders who brought an action against the Company in New York alleging default under the loan notes.
Charter and its legal advisers have consistently maintained that no default has occurred under the US loan notes. Notwithstanding this, the directors now consider that removing the uncertainties created by this legal dispute is in shareholders’ best interests.
The terms of the settlement agreement provide that the litigating loan note holders discontinue the proceedings and release Charter from and waive any and all claims arising out of the lawsuit. Under the settlement, Charter has agreed, effective from today, to increase the annual coupon rate payable on all of the 2007 and 2009 loan notes by 0.5 per cent and to make a contribution, up to a maximum amount of £600,000, towards the note holders’ litigation costs. The average annual cost to Charter of the increased coupon over the remaining life of these notes will be £250,000. The terms of the loan note agreement remain unchanged in all other respects.
David Gawler, Chairman and Chief Executive of Charter, said:
“I am pleased that the US loan note dispute has been settled and during the latter half of 2003 the group’s net debt was reduced by more than £55 million.
I am also encouraged by the recent improvement in the trading performance of Esab and Howden, both of which have experienced some recovery in their markets and are also beginning to benefit from their earlier restructuring programmes.”
Contact
Andrew Fenwick; Pamela Small, Brunswick +44 (0) 20 7404 5959
Notes
- On 22 April 2003 certain holders of the loan notes due in 2007 and 2009 initiated legal proceedings in New York against the Company and its subsidiary, Charter Central Finance Limited, seeking a declaratory judgement that a default had arisen under their loan notes. Charter has consistently maintained that no such breach has occurred, and as part of this settlement agreement, no admission of default has been made by Charter.
- On 22 July 2003 Charter renewed its syndicated revolving credit facility in an initial amount of £120 million. Under the terms of the facility, which expires on 31 March 2005, inter alia, the amount of the facility was reduced by £20 million on 30 November 2003, and will be reduced by a further £26 million on 10 March 2004. On this date, the group is also scheduled to repay US$72 million (£40 million) of its loan notes.
- The 2007 loan notes of US$85 million and the 2009 loan notes of US$35 million are scheduled for repayment on the 21 October 2007 and 21 October 2009 respectively and, prior to the settlement, the respective coupon rates payable were 6.88 per cent and 6.96 per cent.
- As at 31 December 2003 the facility amount was £100 million, of which £76 million had been drawn down.
- For the purposes of this announcement an exchange rate of £1 = US$1.8 has been used.