AMTE Power Plc (LON:AMTE), a leading developer and manufacturer of lithium-ion and sodium-ion battery cells for specialist markets, today announced that it has signed non-binding heads of terms to enter into a proposed £5 million convertible bond facility with Arena Investors, LP.
The Proposed Facility follows the recent signing of a production contract with the UK Battery Industrialisation Centre (“UKBIC”), announced on 6th October 2022, for the Company’s six minute re-chargeable Ultra High Power cells, and it is expected that the Proposed Facility would give the Company the financial capability to secure and execute on production contracts for both these, and other cells to be produced at Thurso. The Proposed Facility would also provide general working capital for the Group into the second quarter of 2023, at which point it anticipates producing cells under customer production contracts at the UKBIC.
Use of funding
Further to the uses outlined in the paragraph above, the Proposed Facility would also be used to enable the Group to:
· conclude the development for initial commercialisation of each of its core cells: the Ultra High Power, the Ultra Safe and the Ultra Prime; and
· meet the operating costs and capital expenditure required to produce and sell into the Company’s target markets:
o the Ultra High Power cell, which is expected to commence commercial production at the UKBIC in early 2023;
o the Ultra Safe cell, which is expected to commence commercial production at Thurso in 2023; and
o the Ultra Prime cell, which is expected to be produced for initial supply in 2023, with commercial production anticipated at Thurso in 2024.
Details of the Proposed Facility
Under the Heads of Terms[1], Arena would provide an interest free, unsecured bond facility to the Company for a total amount of up to £5 million, available for drawdown in three tranches: £3 million on completion of the Proposed Facility and two further tranches of £1 million each at least 60 days following drawdown of the previous tranche, provided that no more than £4 million is outstanding under the Proposed Facility at the relevant time. The subscription price payable by Arena would amount to 92 per cent. of the principal value of each tranche. It is further anticipated that the Company would pay an upfront fee equal to 3 per cent. of the Proposed Facility which would be deducted from the first drawdown tranche.
Arena would be entitled to convert outstanding amounts (in minimum instalments of £150,000) under the Proposed Facility into new ordinary shares of 0.5 pence each in the capital of the Company, at a price per share equal to 95 per cent. of the 3-lowest daily volume weighted average prices over a 15-trading day look back period (“VWAP”) prior to the date of its conversion notice. Any amounts not so converted would become repayable on the second anniversary of drawdown.
Arena would be unable to convert any amounts outstanding under the Proposed Facility where such conversion would mean that it would become interested (as defined in the City Code on Takeovers and Mergers) in more than 29.9 per cent. of the Ordinary Shares, save in circumstances where such conversion is conditional upon the Company’s independent shareholders waiving the obligation on Arena to make a mandatory bid for the remaining Ordinary Shares under Rule 9 of the Takeover Code.
In addition, Arena would be entitled to receive warrants, exercisable until the third anniversary of the Proposed Facility, to subscribe for £1.5 million of new Ordinary Shares at a price of 82.04 pence per Ordinary Share, representing a premium of 20 per cent. to the VWAP on 14 October 2022.
The Proposed Facility would be capable of redemption in cash at any time by the Company at 115 per cent. of the principal amount then outstanding.
It is expected that the Proposed Facility will contain certain covenants, representations and warranties and events of default typical for a facility of this type and size.
Under the Heads of Terms, the Company has agreed, subject to limited exceptions, not to solicit, accept or encourage any other debt or convertible financing proposal with respect to the Proposed Facility for a period of 60 days following the entry into the Heads of Terms. Further, the Company, in the event of breaching such exclusivity provision, shall pay Arena’s costs and expenses.
It is intended that definitive and legally binding contractual documentation (the “Definitive Documents”), incorporating the summary terms referenced above, will be entered into as soon as reasonably practicable. Further, the entry into Definitive Documents is conditional upon, amongst other things, the conclusion of due diligence satisfactory to Arena, there being no material adverse change to the Group and Arena remaining satisfied with the financial performance of the Company, the Company’s shareholders approving certain shareholder resolutions (the “Resolutions”) required to implement the Proposed Facility at a general meeting of shareholders (the “General Meeting”) and other conditions which are customary for a facility of this type.
Accordingly, there can be no guarantee that the Definitive Documents will be entered into or that the Proposed Facility becomes unconditional in which event the Company would not receive the funding under the Proposed Facility.
The Proposed Facility will provide funds for the Group as outlined above and will supersede alternative funding options which the Group has been exploring to support its growing commercial cell production requirements.
Shareholder approval and importance of the vote
In order to provide the Company with the flexibility to be able to enter into Definitive Documents as soon as possible, the Company proposes to despatch a shareholder circular (the “Circular”) containing details of the Proposed Facility and convening the General Meeting in order to pass the Resolutions, on or around 17 October 2022. The Circular, once published, will be available on the Company’s website at www.amtepower.com/investors.
Shareholders should be aware that, if for any reason (including the Resolutions not being passed at the General Meeting), the Definitive Documents in respect of the Proposed Facility are not entered into or the Proposed Facility does not become unconditional, the Company would need to consider the options available to it in terms of alternative sources of funding. It may be that such sources would not be available or available on favourable terms. Accordingly, if alternative sources of funding anticipated by the Board could not be secured, the Company expects that it would not have sufficient cash for its current level of activities beyond November 2022.
[1] Which are non-binding save in respect of exclusivity, expenses, governing law, confidentiality and indemnification.
