EEMS ITALIA SPA 
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• EEMS Italia S.p.A. today signed a debt restructuring agreement with a syndicate of lending banks consisting of Unicredit, Banca Nazionale del Lavoro, Banca Monte dei Paschi di Siena, UBI Unione di Banche Italiane, Banco Popolare and Royal Bank of Scotland.
• The Rieti Court, which has jurisdiction in this situation, will be asked to approve the restructuring agreement, pursuant to and in accordance with article 182-bis, first paragraph, of Royal Decree no. 267 of 16 March 1942 (the Bankruptcy Law).
• Carrying out the restructuring agreement will lead to the strengthening of the capital of EEMS Italia S.p.A., thus resolving the situation in which a company's share capital falls below the legal minimum as the result of losses governed by articles 2446 and
EEMS Italia S.p.A. (hereafter the "Company") announces that a debt restructuring agreement was signed as of today's date (hereafter the "Agreement") with a syndicate of lending banks (hereafter the "Syndicate") consisting of Unicredit, Banca Nazionale del Lavoro (hereafter also "BNL"), Banca Monte dei Paschi di Siena (hereafter also "MPS"), UBI Unione di Banche Italiane (hereafter also "UBI"), Banco Popolare and Royal Bank of Scotland (hereafter also "RBS"), with the intervention of Notary Carlo Marchetti of Milan.
The purpose of entering the Agreement is make an application, which will be filed in the shortest time possible with the Rieti Court which has jurisdiction in this situation, to approve such pursuant to and in accordance with article 182-bis, first paragraph, of the Bankruptcy Law, as among other things the end of the term (set as 10 December 2013), granted by for filing the Agreement with that Court as part of the procedure conducted as per article 182-bis, sixth paragraph, of the Bankruptcy Law, has not yet been reached (see in this respect the press releases of 12 April 2013, 28 May 2013, 25 July 2013, 9 November 2013 and 13 November
2013).
The main information contained in the Agreement and, in general, regarding the operation to restructure the Company's debt and strengthen its capital is summarised and set out in the following.
The Agreement regards the Company's debt towards the Syndicate, which at 30 September
2013 amounted in total to approximately Euro 47.3 million (consisting of the principal, interest and interest on arrears) (hereafter also the "Debt"), originating under the facilities agreement signed by the Company with the Syndicate on 10 May 2007.
From the date (hereafter the "Effective Date") that the conditions precedent included in the Agreement are satisfied (these are discussed in the paragraph below entitled "The conditions precedent of the debt restructuring agreement"), the Agreement shall be the only discipline governing relations between the Company and the Syndicate.
As the result of the signing of the Agreement, the Debt is regulated as follows:
(a) the Company may use part of the proceeds arising from the sale of the assets of EEMS Suzhou and EEMS Suzhou Technology (see the press release of 4 January 2013), up to a total of Euro 6 million, of which:
- Euro 2.427 million has already been drawn by the Company while negotiating the
Agreement,
- Euro 3.573 million may subsequently be drawn, of which Euro 3 million may be drawn from the date of the Agreement and Euro 0.573 million from the Effective Date.
Of these drawdowns, Euro 3 million, secured by pledges on the securities representative of the share capital of EEMS Asia, EEMS Suzhou, EEMS Suzhou Technology and Solsonica S.p.A. (hereafter also the "Remaining Debt"), shall be repaid to the Syndicate in a lump sum on 30 November 2017 (with mechanisms existing for earlier repayment in the event of any availability of cash exceeding specified thresholds or in the event of extraordinary proceeds deriving from the sale of specified assets);
(b) an amount of Euro 10.280 million shall be repaid to the Syndicate within 3 working days of the Effective Date, at the time that Unicredit, BNL, MPS, UBI and RBS subscribe to the Participating Financial Instruments or - if one or more of those banks fails to subscribe to the Participating Financial Instruments - at the end of the term for subscribing to the Participating Financial Instruments;
(c) an amount of Euro 3.333 million shall be repaid to the Syndicate within 3 working days of the earlier of the Effective Date (at the time that Unicredit, BNL, MPS, UBI and RBS subscribe to the Participating Financial Instruments or - if one or more of those banks fails to subscribe to the Participating Financial Instruments - at the end of the term for
subscribing to the Participating Financial Instruments) and the date on which the funds deriving from the process of liquidating EEMS Suzhou Technology become available. In all cases the Company must pay the amounts to the Banks by and no later than 31 March
2014;
(d) subject to the satisfaction of the Conditions Precedent, the difference between the Debt (Euro 47.3 million plus the interest that accrues between 30 September 2013 and the Effective Date), the sums repaid under paragraphs (b) and (c) above (USD 13.932 million and Euro 3,333 million), and the Remaining Debt (Euro 3 million) (hereafter the "Difference") shall be governed as follows as far as the Syndicate is concerned:
- Unicredit, BNL, MPS, UBI and RBS shall use the amount relating to each of them separately to subscribe to convertible participating financial instruments (hereafter also the "Conversion") which will be issued by the Company as part of the capital strengthening operation and for which details may be found in the relevant paragraph of this release; a summary of their features may also be found in the relevant paragraph of this release;
- Banco Popolare will waive the repayment of its portion on a definitive and irrevocable basis.
As the result of making the repayments as per paragraphs (b) and (c) above, the Company shall be entitled to request the release of the mortgages established on 26 March 2010 on the buildings it owns situated in Viale delle Scienze 5, Cittaducale (Rieti).
The settlement of the Debt may therefore be summarised in the following illustrative table
(stated merely for simulation purposes) (amounts in millions of Euros).
Table 1 - Simulation of the settlement of the Debt.
Debt Remaining PFIs Description Date (Euros) debt (Euros) (Euros) |
- debt: facilities agreement 30.9.2013 47,298,427 - de bt: facilities agree ment Effective Date 48,713,254 - agreed use prov. China Signing of Agreemt. -3,000,000 3,000,000 - partial repayment Effective Date -10,279,919 - final repayment Liquid. Suzhou -3,333,334 - waived by Banco Popolare Effective Date -3,070,435 |
- conversion Effective Date -29,029,435 29,029,566 |
Indicative final situation 0 3,000,000 29,029,566 |
The effectiveness of the Agreement is subject to the satisfaction of the following conditions precedent:
(a) formalisation of the decree approving the Agreement by the Court having jurisdiction by and no later than 26 March 2014;
(b) issue by Consob, by and no later than 26 March 2014, of the provision stating that there will be no requirement for the banks in the Syndicate - pursuant to article 106, fifth and/or sixth paragraph of the Consolidated Finance Law - to make a public tender offer for the Company's shares after the conversion of the participating financial instruments into ordinary shares of the Company in the event that the banks exceed a participation threshold of 30% (as is likely), pursuant to article 106, first paragraph, of the Consolidated Finance Law; a ruling will be asked of Consob in this respect;
(c) the adoption by the Company's extraordinary shareholders' meeting of the resolutions provided by the Agreement, as summarised in paragraph 3 below (today's meeting of the Board of Directors has instructed the Chairman to call an extraordinary shareholders' meeting on the 27th, 28th and 29th in first, second and third call respectively);
(d) if the withdrawal right pursuant to article 2437 of the Italian civil code is not exercised by the end of the term established in article 2437-bis of the Italian civil code by one or more of the Company's shareholders holding a number of shares representing more than 2% (two per cent) of the Company's share capital, in relation to the resolutions provided by the Agreement and summarised in paragraph 3 below, without prejudice in all cases to the Company's right to waive that condition with the agreement of all the Banks.
During the period up to the satisfaction of the Conditions Precedent, the banks of the Syndicate in any case undertake not to demand payment of the Debt, not to exercise their rights to payment of such and not to activate any of the remedies provided in the facilities agreement of
10 May 2007.
If the Conditions Precedent are satisfied within the terms indicated, the Agreement shall be effective from the date of signing (today 27 November 2013).
If the Conditions Precedent are not satisfied within the terms indicated, it is agreed that the
Agreement shall lack effectiveness between the parties.
The Agreement provides that the Company shall undertake to call an extraordinary
shareholders' meeting for a date not later than 31 January 2014 to adopt resolutions on the following:
- to eliminate the nominal value of the Company's shares;
- to absorb the losses reported through 30 September 2013 through the use of all the Company's available equity reserves, through the use of the whole of the corresponding amount entering the Company's equity from subscription to the EEMS Participating Financial Instruments convertible into ordinary shares (hereafter also the "PFIs") and then through the reduction of the Company's share capital to Euro 1 million;
- the issue, to service the Conversion of the Debt, of up to 99,205,680 participating financial instruments convertible into the Company's ordinary shares at an issue price of 0.292620 each, determined on the basis of the criteria set in article 2441, paragraph 6 of the Italian civil code, hence corresponding to a maximum of Euro 29.030 million, by means of a resolution for the corresponding paid increase in share capital and with the exclusion of option rights, as the effect of the conversion of the PFIs;
- to approve the regulations for the PFIs;
- to approve the resulting amendments to the Company's bylaws.
The above-mentioned resolutions shall be subject to the satisfaction of the Conditions
Precedent.
The banks in the Syndicate involved in the Conversion shall subscribe to the PFIs and pay the price concerned by converting the portion of the Difference relating to them as soon as the Conditions Precedent are satisfied (whose whole operation, taken overall, is also referred to as the "Capital Strengthening" in the following). It should be noted that if the Banks fail to exercise their subscription right and/or in any case if they fail to subscribe to the Participating Financial Instruments within the above-mentioned terms, this will be equivalent to an irrevocable and definitive waiving by the Banks to obtain repayment from the Company of the amount equal to their portion of the Difference.
It should also be noted that this press release shall not act as a substitute for the information documents required by laws and regulations relating to the extraordinary shareholders' meeting that is to be called, which will accordingly be issued by the Company over the coming period as the above-mentioned corporate documents are gradually adopted.
In this way, with definitive effect from the Effective Date (hence on the satisfaction of the Conditions Precedent), the Company shall eliminate the situation whereby its share capital has fallen below the legal minimum due to losses or whereby it would have to be wound up for the same reason, which arose for the first time as the consequence of the losses reported in the Company's financial statements for the year ended 31 December 2012 and was then confirmed
in the interim financial reports as of 31 March, 30 June and 30 September 2013.
Main features.
The PFIs are participating financial instruments, issued in accordance with article 2346, final paragraph, of the Italian civil code, governed by a regulation to be approved by an extraordinary meeting of the Company's shareholders, which will have the following features:
- they are not debt securities;
- the contribution received by the Company for subscription to the PFIs shall be classified in a reserve account in equity available for absorbing losses last before the legal reserve;
- ownership to such shall not assign any rights other than those expressly governed by the relative regulations, and in particular shall not assign any rights to the repayment of the contribution made under the subscription;
- they shall be freely transferable, and in order to facilitate their circulation the Company and the shareholders Marco Stefano Mutti and Paolo Andrea Mutti will be involved in identifying financial and/or business investors interested in buying the PFIs owned by the banks in the Syndicate, by instructing for this purpose an independent advisor who can identify parties who are potentially interested in this respect.
In this way, as provided by article 2346, final paragraph of the Italian civil code, the PFIs will hold "equity rights or also administrative rights, excluding the right to vote at a general shareholders' meeting" and will also hold a "conversion right".
Equity rights.
As far as equity rights are concerned, the holders of PFIs will be entitled to participate in the distribution of profits and in the allocation of the Company's residual assets on liquidation on the same basis as the holders of the Company's ordinary shares.
Administrative rights.
The holders of PFIs will be entitled to appoint an independent member of the Board of Directors and to approve resolutions at the Company's shareholders' meetings which impair the rights of the PFIs.
Conversion rights.
The PFIs shall be issued at a price of Euro 0.292620, determined on the basis of the criteria stated in article 2441, sixth paragraph, of the Italian civil code (and therefore also taking into
account the movements in quoted prices over the past half year), and shall be subscribed by the banks of the Syndicate involved by contributing the portion of the Difference which relates to them (as a mere indication see table 1 of this press release in this respect).
The PFIs shall be convertible into ordinary shares of EEMS Italia at the simple request of their holders on the basis of one ordinary share for each PFI, starting from the second year from the date on which the bylaws as amended as a result of the resolutions of the extraordinary shareholders required by the Capital Strengthening become effective, up to the seventh year following that date. Any PFIs which have not been converted by the end of the conversion period shall be extinguished on a definitive basis, losing all their rights.
Early conversion will however be possible, at any time, on the occurrence of events such as extraordinary corporate operations or the admission of the Company to insolvency proceedings.
The conversion of PFIs into the Company's ordinary shares is simulated in the following table
(amounts in Euros).
Table 2 - Simulation of the conversion of PFIs.
Debt Price / Ord. Description Date (Euros) Conv . PFIs (#) shares (#) Ratio* |
- debt to be converted Effective Date 29,029,566 - price of issue / 1 PFI Ext. shs' meeting 0.292620 - no. of PFIs issued Ext. shs' meeting -29,029,566 99,205,680 Post issue PFIs 0 99,205,680 |
- PFI / share conversion ratio Conv. period 1 - no. of ordinary shares due Conversion -99,205,680 99,205,680 Post conversion PFIs 0 99,205,680 |
*indicative conversion ratio being the average of quoted prices over the last half year
Given that the Company's current share capital consists of 43,597,120 ordinary shares and that this will remain unchanged even after the suppression of the nominal value of these shares, anyconversion of the PFIs into the Company's ordinary shares will lead to a significant dilution ofthe present share capital, with a significant reduction in the interests of the current shareholderspost conversion (on the basis of Table 2 the dilution would be approximately 69% and hence a shareholding which at present represents 2% of the whole of the Company's capital would end up representing approximately 0.61% as a proportion of the share capital post PFI conversion).
5. Other items included in the debt restructuring Agreement.Shareholders' agreement.
As part of the Agreement, the Company's shareholders Marco Stefano Mutti and Paolo Andrea Mutti, parties of the first part (hereafter the "Reference Shareholders"), and the Syndicate, parties of the second part, have agreed to enter a shareholders' agreement, effective from the Effective Date and having a three year term or for as long as at least one of the banks in the Syndicate owns the PFIs or a part of these, which assigns to each bank in the Syndicate the right of co-sale in the event of the change of control of the Company (understood as the sale, in whole or in part, of the interests of the Reference Shareholders), by which the Reference Shareholders may only sell their interests if the third party buyer will also purchase, under the same terms and conditions, the shares and/or the PFIs in relation to which the banks have exercised such co-sale right.
Other commitments.
The Agreement provides among other things for the following main commitments and terms:
- the issue by the Company to the Syndicate of certain specified statements and guarantees that are common practice in agreements of this nature;
- requirements for disclosures that the Company must make to the Syndicate;
- the requirement for certain financial covenants to be respected;
- restrictions on carrying out extraordinary, and in any case significant, operations or making sizable disposals;
- the commitment not to cease or make substantial changes to the activities performed;
- the commitment not to assume any new financial debt beyond the limits permitted by the
Agreement;
- the commitment not to distribute dividends and/or reserves until the Remaining Debt has been repaid;
- the commitment to merge Solsonica Energia s.r.l. into Solsonica S.p.A..
Termination of the Agreement.
The Agreement may be terminated for non-performance and in addition an explicit termination clause is included for the case of the failure to pay any amount due under the Agreement (unless the non-performance is remedied within a certain period of time).
Termination conditions.
The Agreement may be terminated pursuant to article 1353 of the Italian civil code without
retroactive effect (and in any case save the effects of the Capital Strengthening) in various possible circumstances (e.g. the issue of sizable injunctions or a sizable seizure order against the Company, the occurrence of reasons for winding up the Company, a negative opinion expressed by the legal auditor on the Company's financial statements, the assumption of any new financial debt above the limits permitted by the Agreement, the breaching of the co-sale right provided in favour of the banks, the reduction of share capital below the legal minimum for the type of company as the result of losses, the failure to abide by the financial covenants provided by the Agreement, etc.).
The Company is being assisted in the operation by Lucciola & Partners as financial advisors and Bonelli Erede e Pappalardo as legal advisors. The banks are being assistant by the legal firm Clifford Chance.
Cittaducale (Rieti), 27 November 2013.
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