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Guinness Peat Group plc

Notes to Financial Statements - Guinness Peat Group plc

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40 GUINNESS PEAT GROUP PLC • ANNUAL REPORTNotes to Financial Statements – continued21. Convertible Subordinated Loan Notes - continuedIn June 2000, GPGUKH issued 38.6 million CLNs of 50p each, and in July 2003, a further 26,047,862 CLNs were issued. The 2003issue costs amounted to £0.2 million, and these costs are being charged to the profit and loss account over the outstandingterm of the CLNs. At 31 December 2004 the unamortised balance of these costs was £0.1 million.The CLNs are convertible into ordinary shares of GPGUKH. However, under the terms of the 2002 reverse acquisition,“Step-upRights” were inserted into GPGUKH’s Articles of Association with the result that upon any future requirement to issue shares inthat company, for example on conversion of CLNs, those shares are automatically transferred to GPG in exchange for the issueinitially of an equal number of fully paid shares in GPG. This ratio will be subject to adjustment in future to reflect certaincapital events (such as capitalisation issues by the Company).In addition, GPG has entered into a deed of guarantee pursuant to which it has guaranteed (on a subordinated basis) theobligations of GPGUKH in respect of the payment of principal and accrued interest on the CLNs in the event of, and followingcompletion of, a liquidation of GPGUKH.Also under the terms of the reverse acquisition, holders of CLNs were given the option to convert their entire holdings intoordinary shares in GPGUKH which, in accordance with the “Step-up Rights”, were automatically transferred to GPG in exchangefor an issue of an equal number of fully paid GPG shares. On 14 February 2003, 4,378,034 CLNs were converted in this manner.The CLNs are subordinated, unsecured obligations of GPGUKH and bear interest at 8% per annum. The residual principalamount of 10p (2003: 20p) is redeemable in one instalment (2003: two equal instalments of 10p per CLN per annum) on30 June 2005 (2003: 30 June 2004) or, at the option of the holder, the instalment due for redemption then may be converted toOrdinary Shares on the effective basis of one Ordinary Share for every 47.7p in principal of CLNs.Any Ordinary Shares issued will rank pari passu with those already in issue, save that they will not rank for dividends or otherdistributions declared,made or paid in respect of financial periods or parts of financial periods ending on or prior to 30 June 2005.Conversion prices are subject to adjustment for capitalisation and rights issues and in certain other circumstances.22. Capital Notes<strong>Group</strong>Company2004 2003 2004 2003Year ended 31 December £m £m £m £mRepayable between one year and two years 92.9 – – –Repayable between two and five years 79.1 166.5 – –172.0 166.5 – –Between 2 August 2001 and 11 September 2001, the <strong>Group</strong> issued NZ$250 million of unsecured, subordinated fixed interestCapital Notes (“the 2001 Notes”). The issue costs amounted to NZ$9.3 million, and these costs are being charged to the profitand loss account over the initial five year term of the debt. As at 31 December 2004, the unamortised balance of these costswas NZ$3.2 million. The 2001 Notes bear interest at a fixed rate of 9.0% per annum, payable on a quarterly basis.The 2001 Notes have an initial election date of 15 November 2006, prior to which GPG Finance <strong>plc</strong>, being the issuing subsidiary,will provide terms and conditions on which noteholders may elect to rollover their 2001 Notes. Noteholders may then elect toretain some or all of their 2001 Notes for a further period on the new terms and conditions and/or to convert some or all oftheir 2001 Notes into Ordinary shares. The 2001 Notes are initially convertible into ordinary shares of GPGUKH. However, underthe terms of the 2002 reverse acquisition,“Step-up Rights” were inserted into GPGUKH’s Articles of Association with the resultthat upon any future requirement to issue or transfer shares in that company on conversion of 2001 Notes, those shares will beautomatically transferred to GPG in exchange for the issue of an equal number of fully paid shares in GPG. Conversion of the2001 Notes will be into such number of GPGUKH shares as is equal to the number of GPG shares having a value equal to theaggregate of the principal amount of, and any accrued interest and unpaid interest on, the 2001 Notes being converted, suchGPG shares being valued for this purpose at a price of 97% of the weighted average sale price of an Ordinary Share in GPG oneach of the five business days prior to the election date. These elections are subject to GPGUKH’s over-riding right (at itsoption) to purchase for cash some or all of the 2001 Notes for their principal amount, together with any accrued interest andunpaid interest.

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