Eniro AB presents a plan for recapitalisation involving an exchange of convertibles and bonds for preference shares of a new series A and calls for an Extraordinary General Meeting on 2 March 2020

This press release may not be announced, published or distributed, in whole or in part, directly or indirectly, in the United States, Canada, Japan, Australia, Hong Kong, New Zealand, Singapore, South Africa or any other country where such publication or distribution would violate applicable laws or rules or would require additional documents to be prepared or registered or require any other actions to be taken, in addition to the requirements under Swedish law. This press release is not a prospectus or an offer to subscribe, acquire or transfer shares, bonds or other securities. For further information, please refer to “Important information” in this press release.

In connection with the quarterly report for the third quarter 2019, the Board of Directors of Eniro AB (publ) resolved to carry out a review of the Group's long-term capital structure. In light of this, the Board of Directors has prepared a proposal for a plan for a new recapitalisation. The plan entails that holders of convertibles and bondholders exchange these instruments for newly issued redeemable preference shares of a new series A ("Preference Shares of series A"):               

• Preference Shares of series A will constitute approximately 90.5% of all shares and votes in Eniro and will carry preferential rights to dividends and to payments due to liquidation in lieu of ordinary shares and existing preference shares up to an amount of approximately SEK 1 billion and an 6.25% annual return on this amount.

• The implementation of the recapitalisation plan is conditioned upon (1) a resolution by bondholders representing at least 2/3 of the bond loan that votes to carry out an exchange for Preference Shares of series A, (2) that holders of convertibles representing at least 90% of the outstanding convertible debt agrees to exchange convertibles for Preference Shares of series A, and (3) a resolution by the Extraordinary General Meeting to amend the Articles of Association and to authorise the Board of Directors to issue Preference Shares of series A.

• Should Eniro fail to implement the recapitalisation, further write-down needs arise as the possibility of carrying out the transformation of the business that is in progress would no longer be considered realistic. In this case, the Board of Directors will have to prepare of a special balance sheet for liquidation purposes and apply for company reorganisation to obtain protection from bankruptcy and enable an orderly reorganisation of the company's debt.
• The plan is supported by shareholders representing approximately 25% of all votes in the company and by bondholders representing approximately 30% of the bond loan, provided that Eniro can also present a new agreement with the Insurance company PRI Pensionsgaranti, mutual ("PRI") which these owners accept.
• Eniro calls for an Extraordinary General Meeting and will shortly request from the agent that the bondholders resolve on the exchange.

Background and motives

Eniro has since 2017 undergone a transformation from being a directory and search company to becoming a leading player on the Nordic market for digital marketing services. In parallel to this transformation, extensive work has been carried out with regard to the liability side of the balance sheet. In 2017, an agreement was reached with the bank consortium regarding the write-down of interest-bearing loans, exchange offers were directed to holders of convertibles and preference shares, and a new issue of ordinary shares was implemented. Through an initiative of major shareholders in 2018, Eniro’s bank loan was replaced with a bond loan.

Implementing the transformation of Eniro into the digital marketing partner of the small and medium-sized businesses has taken longer than expected and the result has been delayed. In connection with the report for the third quarter of 2019, the Board of Directors resolved, taking into account the Group’s earnings performance and taking into account updated earnings trend and with respect to elaborated business plans for a write-down of goodwill of SEK 306 million, which in turn reduced the equity of the parent company and the Group. At the same time, the Board of Directors initiated a review of the company’s long-term capital structure. The Company’s convertible debt of nominally approximately SEK 29 million is due for payment in mid-April 2020. The company’s bond loan, of nominally approximately SEK 989 million, matures at the end of 2021.

In order to recapitalise the company and enable continued operations and realisation of the values that are expected to arise from a development in accordance with the company’s business plan, the Board of Directors has prepared a plan which entails that holders of convertibles and bondholders exchange these financial instruments for Preference Shares of series A. Holders of convertibles and bonds become holders of Preference Shares of series A and are thus entitled to first recover funds corresponding to the converted nominal debt amount and an annual return of 6.25% before owners of ordinary shares and existing preference shares are entitled to receive dividend.

At the completion of the recapitalisation, debt that is currently booked up to a total of nominally approximately SEK 1,018 million is converted into equity in the parent company. In addition, there is a positive one-off effect on earnings of approximately SEK 64 million net due to the reversal of capitalized borrowing costs and balanced interest costs. Through the exchange of bond debt and convertible debt for Preference Shares in series A, the company's hitherto interest costs will decrease by approximately SEK 60 million on an annual basis.             
 

The Board of Directors currently assesses that the recapitalisation plan is feasible and reasonable for existing shareholders, bondholders and holders of convertibles. The Board of Directors therefore intends to base the valuations and assessments in the year-end report on the implementation of the plan. If the recapitalisation plan proves unsuccessful, the company will not be able to carry out the projects that are planned and which were used as the basis for the forecasts, which in turn were used the basis for the impairment test carried out in connection with the report for the third quarter 2019. If Eniro fails to implement the recapitalisation, further write-down needs will arise since the possibility of carrying out the transformation of the business that is in progress would no longer be considered realistic and a special balance sheet for liquidation purposes must be prepared. Then, the company’s subsidiaries, who must consider their responsibility under the guarantee of the parent company’s debt to the bondholders, cannot provide liquidity to the parent company through group contributions or loans so that a repayment of the convertible debt in April 2020 can be made. In such case, the Board of Directors must apply for company reorganisation to obtain protection from bankruptcy and enable an orderly restructuring of the company’s debts.

The recapitalisation plan in brief

Bondholders and holders of convertibles exchanges, under certain conditions, see “Conditions for the recapitalisation plan” below, bonds and convertibles against Preference Shares of series A as follows:

1. The Preference Shares of series A are issued against the nominal amount[1] of the bonds and the convertibles:
   1. A total of approximately SEK 29 million regarding the convertibles (ISIN SE0006789830, short name: Eniro KV 1)
   2. A total of approximately SEK 989 million regarding the bonds (ISIN: SE0011452440, short name: ENIRO01).
2. The issue price is SEK 1.60 per Preference Share of series A.  This means that for each nominal loan amount SEK 1,000 (bond and convertibles), 625 Preference Shares of series A are issued.
3. Preference Shares of series A have preferential right to an annual dividend of SEK 0.10 corresponding to 6.25% of the issue price per preference share, as follows:

1. From the first annual payment after the Preference Shares of series A were registered at the Swedish Companies Registration Office (Sw. Bolagsverket), the dividend per Preference Shares of series A amounts to SEK 0.10 per annum.
2. Preference Shares of series A shall have preferential rights over ordinary shares and existing preference shares for repayment, upon redemption and liquidation, up to the issue price of (SEK 1.60) with addition of a right to any accrued and unpaid dividend, which is adjusted upwards by a factor corresponding to an annual interest rate of 20 per cent per annum.
3. Holders of ordinary shares and existing preference shares may decide to redeem Preference Shares of series A. Before all Preference Shares of series A are redeemed, no dividend or redemption of ordinary shares or existing preference shares can be resolved.
4. Holders of Preference Shares of series A may by resolution of the a General Meeting, if supported by 2/3 of the holders of Preference Shares of series A represented at the Meeting, be converted into ordinary shares of series A. Proposals for such conversion shall be made by the Board of Directors or shareholders representing at least one-tenth of all Preference Shares of series A.

4. Preference Shares of series A have one vote, i.e. the same number of votes as the ordinary share.
5. The implementation of the recapitalisation plan means that, if all outstanding bond debt and convertible debt are exchanged for Preference Shares of series A the company’s share capital will increase by approximately SEK 509 million through the issue of approximately 636 million Preference Shares of series A, corresponding to approximately 90.5% of the votes and shares in the company after the issue. If all outstanding bond debt, but only 90% of outstanding convertible debt, are exchanged for Preference Shares of series A, the company’s share capital will increase by approximately SEK 507 million through the issue of approximately 634 million Preference Shares of series A, corresponding to 90.5% of the votes and shares in the company after the issue.

Terms for the recapitalisation plan

1. Resolution by bondholders representing at least 2/3 of the bond loan voting to carry out an exchange for Preference Shares of series A.
2. Resolution by holders of convertibles representing at 90% of the convertible debt to carry out an exchange for Preference Shares of series A.
3. Resolution at the Extraordinary General Meeting to amend the Articles of Association and to authorise the Board of Directors to issue Preference Shares of series A.

Extraordinary General Meeting

Eniro gives notice of an Extraordinary General Meeting on 2 March 2020 in order to allow the shareholders to decide on the proposals for necessary amendments to the Articles of Association for the introduction of Preference Shares of series A and authorisation for the Board of Directors to resolve to issue of Preference Shares of series A, see separate notice.

For a valid decision, the resolution is required to be supported by shareholders with at least two-thirds of both the votes cast and the shares represented at the Annual General Meeting.

Bondholders voting

Eniro will shortly request from the agent that the bondholders shall decide on the exchange for Preference Shares of series A on the terms stated above.

For a valid resolution, at least one-fifth of the total bond loan must participate and at least two-thirds of the participating bond loan must vote in favour of the exchange. A valid resolution means that all bonds are exchanged for Preference Shares of series A.

Acceptance from holders of convertibles

The proportion of holders of convertibles who have accepted an exchange under the recapitalisation plan is expected to be announced around 17 March, 2020.

Admission to trading

Eniro intends to apply to Nasdaq Stockholm for admission to trading of Preference share of series A in connection with them being issued.

Dividend and dividend policy

The Board of Directors of Eniro does not intend to propose for the Annual General Meeting 2020 to resolve on dividend for any share class, neither Preference Shares of series A nor existing ordinary shares or preference shares. The company’s future earning capacity shall show when dividends can be paid. Provided that the recapitalisation plan is implemented, only the company’s new Preference Shares of series A will be entitled to dividends until these have been redeemed or converted.

The Board of Directors’ considerations 
When the Board of Directors has prepared the recapitalisation plan, it has taken into account that the bondholders are the company’s by far largest creditors, and are secured by pledges in the shares of the company’s subsidiary Eniro Treasury AB, which in turn owns all of the company’s operational companies and the guarantees from Eniro’s operational subsidiaries. This means that the bondholders have better preferential rights than holders of convertibles in the event of a corporate reorganisation or bankruptcy. This also means that bondholders have the right, through enforcement, to receive payment from the company’s sole significant assets, the subsidiaries, before other creditors or shareholders receive payment (but after the right of PRI to an amount of SEK 35 million). Consequently, the fact that the bondholders exchange their bonds into Preference Shares of series A is, in comparison to a corporate reorganisation, bankruptcy or enforcement, a remission from the bondholders in favour of the holders of convertibles and the existing shareholders.

The condition that holders of convertibles corresponding to at least 90% of outstanding convertible debt agree to exchange convertibles for Preference Shares of series A has been made at the request of some bondholders on the basis of this remission from the bondholders.

Shareholders representing approximately 25 % of all the votes in the company and bondholders representing approximately 30% of the bond loan have stated that they support the plan and undertaken to vote in favour of it, provided that Eniro also presents a new agreement with PRI which they can accept.

In light of the above, the Board of Directors considers that the presented plan is balanced and attractive to shareholders, bondholders and holders of convertibles alike. The Board is also of the opinion that the plan is the best opportunity to reach a settlement that gives Eniro a sustainable capital structure and conditions for continued operations and value development.

Preliminary timetable

The preliminary timetable may change

Instruments issued by Eniro

For more information, please contact:

Arne Myhrman, Chairman of the board of directors, tel +46 73 383 64 67

Magdalena Bonde, Group President and CEO, tel +46 8 553 310 00, magdalena.bonde@eniro.com

Anne Langbraaten, Group CFO, tel +46 8 553 310 00, anne.langbraaten@eniro.com

This information is information that Eniro AB (publ) is obliged to make public pursuant to EU market abuse regulation. The information was submitted for publication, through the contact persons above, for publivation on 29 January 2020 at 01.00 CET.

Eniro is a Nordic company that helps small and medium-sized companies with digital marketing. Eniro also has a search service that aggregates, filters and presents information to help individuals find and come into contact with each other and with companies. The company has about 1,000 employees and operates in Sweden, Norway, Denmark and Finland through the local domains eniro.se, gulesider.no, krak.dk and degulesider.dk, and each week, Eniro Group's digital services have about 5.1 million unique visitors. Eniro is listed on Nasdaq Stockholm [ENRO] and its head office is located in Stockholm.

This translation is for convenience only.

Important information

This press release does not contain or constitute an invitation or an offer to acquire, sell, subscribe for or otherwise trade in shares, subscription rights, bonds or other securities in Eniro. Invitation to subscribe for preference shares in Eniro will only be made through the prospectus that Eniro may publish on its website, following the approval and registration thereof by the Swedish Financial Supervisory Authority and only to the persons to whom the prospectus is addressed. The prospectus contains, among other things, risk factors, financial statements as well as information regarding Eniro’s board of directors. This press release has not been approved by any regulatory authority and is not a prospectus. Accordingly, investors should not subscribe for or purchase any securities referred to in this press release except on the basis of information provided in the prospectuses which may be published.

In certain jurisdictions, the publication or distribution of this press release may be subject to restrictions according to law and persons in those jurisdictions where this press release has been published or distributed should inform themselves about and abide by such restrictions.

This press release is not directed to persons located in the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada, Japan, Australia, Hong Kong, New Zealand, Singapore, South Africa or in any other country where the offer or sale of the subscription rights, paid subscribed shares, new shares, bonds or other securities is not permitted. This press release may not be announced, published or distributed, directly or indirectly, in or into the United States, Canada, Japan, Australia, Hong Kong, New Zealand, Singapore, South Africa or any other country where such action is wholly or partially subject to legal restrictions or where such action would require additional prospectuses, other offer documentation, registrations or other actions in addition to what follows from Swedish law. The information in this press release may not be forwarded, reproduced or disclosed in such a manner that would contravene such restrictions or would require such additional prospectuses, other offer documentation, registrations or other actions. Failure to comply with this instruction may result in a violation of the United States Securities Act of 1933, as amended (the “Securities Act”) or laws applicable in other jurisdictions.

No subscription rights, paid subscribed shares or new shares, bonds or other securities have been or will be registered under the Securities Act, or with any other securities regulatory authority of any state or other jurisdiction of the United States and no subscription rights, paid subscribed shares or new shares, bonds or other securities may be offered, sold, resold, transferred, delivered or distributed, directly or indirectly, into or within the United States or on the account of such persons other than pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable securities laws of any state or jurisdiction of the United States. No public offering of subscription rights, paid subscribed shares or new shares, bonds or other securities is made in the United States. There is no intention to register any securities referred to herein in the United States or to make a public offering in the United States.

This press release contains forward-looking statements which reflect Eniro’s current view on future events and financial and operational development. Words such as “intend”, “will”, “expect”, “anticipate”, “may”, “plan”, “estimate” and other expressions than historical facts that imply indications or predictions of future development or trends, constitute forward-looking statements. Forward-looking statements inherently involve both known and unknown risks and uncertainties as they depend on future events and circumstances. Forward-looking statements do not guarantee future results or development and the actual outcome could differ materially from the forward-looking statements.

The information, opinions and forward-looking statements in this press release speak only as of its date and are subject to change without notice.

[1] Accrued unpaid interest and any receivable that does not correspond to an entire share are abandoned by the respective holders.