XL TechGroup arranges new US$25 million borrowing facility
04 October 2007
XL TechGroup (AIM: XLT), the systematic architect and builder of an ongoing stream of high value new companies, announces that it has arranged a new borrowing facility totalling US$25 million with Laurus Master Fund Ltd (“Laurus”), and affiliates of Laurus, a New York based institutional equity fund that specialises in making direct investments in growing public companies.
This new facility is divided into two tranches. The first is a US$12 million three year loan at the US Prime Rate (currently 7.75%) plus 2% per annum, that will be used to fund the development of XL TechGroup portfolio companies, including PetroAlgae LLC (“PetroAlgae”) which is commercialising environmentally-friendly algae to produce biodiesel. Laurus will receive an option for up to 9% of PetroAlgae's issued shares, and XL TechGroup's equity stake in PetroAlgae would reduce to 85.4% after the fully dilutive effect of this transaction. However, if XL TechGroup repays this tranche within 14 months, Laurus' equity stake in PetroAlgae will reduce to 7%. In addition, XL TechGroup has call options that enable it to buy back 66.7% of Laurus' options in PetroAlgae at varying prices, being US$3 million for the first 22.3%, US$6 million for the next 22.2% and US$12 million for the last 22.2%. All of these options must be exercised no later than six months after any PetroAlgae IPO and prior to the three year maturity of this tranche.
The second tranche is a US$13 million three year loan that will be used to provide XL TechGroup with US$3 million of additional working capital and to refinance, without penalty, US$10 million of the US$35 million Laurus facility that was announced on 3 January 2006. The interest rate on this second tranche is the US Prime Rate, which is currently 7.75% per annum, and compares favourably with the US Prime Rate plus 2% applicable to the original US$35 million facility. At XL TechGroup's election, Laurus is also entitled, on an annual basis, to receive either cash or shares in XL TechGroup's portfolio companies or in XL TechGroup itself, with a value equivalent to 12% of the outstanding principal under this facility at the time.
In line with previous Laurus facilities, collateral for this new facility consists of a charge against XL TechGroup's assets, including shares in portfolio companies. With regard to its holding in TyraTech, XL TechGroup will retain at all times beneficial interest in its TyraTech stock until 1 June 2008. After this date, should Laurus receive TyraTech stock under the terms of this loan, it is bound to adhere to any lock-in restrictions currently in place after that date. The only circumstances under which Laurus could realise on its collateral are in the event of a default by XL TechGroup, and Laurus would in any event be bound by the current terms of the XL TechGroup lock-in restrictions.
This new facility is in line with XL TechGroup's stated business strategy, which has been successfully developed over fourteen years. The Company's aim is to achieve periodic large-scale liquidity events from the managed sale of its interests in XL TechGroup portfolio companies and, as recently advised, it is currently anticipated that the first of a number of significant cash distributions to shareholders would occur during 2008. In the meantime, XL TechGroup raises working capital funds by leveraging its company assets to secure reliable, cost-effective financing for the development and scaling needs of both existing XL TechGroup portfolio companies and future prospects in the pipeline.
John Scott, Chief Executive Officer of XL TechGroup, said: “This is the third facility that we have arranged with Laurus, and we are pleased with their ongoing support for our overall business model and the underlying potential value of our portfolio companies. We are also pleased with the terms of this latest facility which provides both additional working capital for XL TechGroup, as well as specific funding for PetroAlgae, while enabling us to refinance part of our previous Laurus debt on improved terms.”
For further information:
| XL TechGroup Inc. | |
| John Scott / Harold Gubnitsky | Tel: +1 321 409 7403 |
| hgubnitsky@xltg.com | www.XL TechGroup.com |
| Chris Munden, Director of Investor Relations | Tel: +44 (0) 20 7398 7720 |
| cmunden@xltg.com | |
| Nomura Code Securities | |
| Richard Potts, Corporate Finance | Tel: +44 (0) 20 7776 1200 |
| www.nomuracode.com |
XL TechGroup media enquiries:
| Abchurch Communications | |
| Heather Salmond / Gareth Mead | Tel: +44 (0) 20 7398 7700 |
| heather.salmond@abchurch-group.com | www.abchurch-group.com |
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