The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain
Tanfield Group Plc
("Tanfield" or the "Company")
Loan Subscription & Legal Proceedings Update
· Tanfield is a 49% shareholder in the equity of Snorkel International Holdings LLC ("Snorkel") following the joint venture between the Company and Xtreme Manufacturing LLC ("Xtreme") (the "Contemplated Transaction"), a company owned by Don Ahern of Ahern Rentals Inc, relating to Snorkel, in October 2013.
· The Snorkel investment is valued at £19.1m. The outcome of the US and UK Proceedings referenced below could have an impact on this valuation.
· On 22 October 2019, the Company announced that it had received a Summons and Complaint, filed in Nevada by subsidiaries of Xtreme, relating to the Contemplated Transaction (the "US Proceedings").
· On 24 October 2019, the Company announced it had become necessary to issue and serve a claim in the English High Court against Ward Hadaway (the "UK Proceedings"), the solicitor acting for the Company at the time of the Contemplated Transaction, in order to fully protect the Company's rights pending the outcome of the US Proceedings.
Further to the update on 30 July 2020, in which the Company announced that it had put in place a second loan note instrument (the "Loan") of up to £1m with £500,000 initially being subscribed to, the Board of Tanfield (the "Board") is pleased to announce that an additional £200,000 of the Loan has been subscribed to, taking the total subscription value to £700,000. The additional Loan will be used for the purpose of providing the necessary funding for the ongoing US and UK Proceedings and other day to day costs.
The additional Loan is unsecured, carries annual interest of 10% which is to accrue and is repayable on the earlier of (i) 28 February 2025 or (ii) receipt of sufficient funds relating to either the US Proceedings or the UK Proceedings. Should repayment take place prior to 28 February 2025, a 20% early redemption premium shall apply.
A number of existing shareholders have subscribed to the additional Loan of £200,000, which constitutes a related party transaction under Rule 13 of the AIM Rules as a result of OTK Holding A/S and Zoar Invest Aps, which each hold approximately 14% of the issued shares of the Company, subscribing £75,000 each to the Loan. The Directors of the Company, having consulted with WH Ireland Limited, the Company's nominated adviser, consider the terms of the transaction to be fair and reasonable.
Following discussions with the existing shareholders, the Board are of the opinion that further subscriptions to the Loan will take place as necessary to ensure the Company can continue to protect its investment in Snorkel.
On 22 October 2019, the Company announced it had received a Summons and Complaint in relation to the US Proceedings, regarding the purported call option notice announced by the Company in November 2018. As reported, despite the Board seeking to resolve the dispute amicably, Snorkel and Xtreme, by filing the Summons and Complaint, continued in their attempt to take ownership of Tanfield's 49% investment in Snorkel for an overall nil consideration, having not paid any consideration to Tanfield for Xtreme's initial 51% of the joint venture and purporting that no consideration is due to Tanfield before it can compel the Company to transfer its remaining 49% investment to Snorkel / Xtreme. The Board notes that Snorkel / Xtreme make this claim despite declaring in various K-1 US tax declarations that Tanfield, via its subsidiary HBWP Inc, contributed properties with a net fair market value of $45,476,730 to Snorkel International Holdings LLC in October 2013. The Board continues to believe that the contractual agreements require that the preferred interest (valued at £19.1m) is paid prior to, or in conjunction with, a call option notice.
On 30 March 2020, the Company announced that despite ongoing attempts to resolve the dispute amicably, Snorkel and Xtreme filed a motion in favour of their claims and against claims brought by Tanfield, without a trial, claiming that there were no genuine issues of material fact (the "Motion"). The Board vehemently disagreed with the Motion and believed that it was without merit and subsequently, on 3 April 2020, the Company announced that the judge took the Motion under advisement and, after a review and consideration of the record and the contract, the court determined that there appears to be genuine issues of material fact pertaining to the contract, its terms, and its execution and therefore the Motion brought by Snorkel and Xtreme was denied.
The parties have been producing documents as part of the ongoing discovery process. Despite the Board's best efforts to keep procedural matters to the agreed timetable, there have been delays relating to any meaningful productions of documents by Snorkel / Xtreme. However, the Board is pleased to update that some progress has now been made and, following exchanges between respective counsels, further documents have recently been produced, as well as assurances given that further document productions will soon be forthcoming. Whilst document production is still ongoing, as a result of the assurances received, the Board are hopeful that the proceedings will soon proceed to the taking of depositions from those involved in the Contemplated Transaction. The matter is currently expected to continue to trial later in the year.
On 24 October 2019, the Company also announced it was necessary to issue and serve a claim in the English High Court against Ward Hadaway, the solicitor acting for the Company in 2013, in order to fully protect the Company's rights pending the outcome of the US Proceedings. Those proceedings seek to ensure that the Company can, if necessary, hold Ward Hadaway to account for the firm's role in and/or advice to Tanfield in relation to the Contemplated Transaction.
Whilst the Board vehemently deny the claims made by Snorkel and Xtreme in the US Proceedings, a major part of the UK Proceedings is premised on the Company losing the US Proceedings. If that were to happen, the UK Proceedings are, in summary, that Ward Hadaway were retained to advise and assist the Company in connection with the Contemplated Transaction, in particular the preparation of the Circular and the process of obtaining the required Shareholder and Board approval before the Contemplated Transaction could be entered into, and that the firm was negligent and/or acted in breach of contract in carrying out that role, the result of which has led to the Company suffering substantial financial loss.
The parties recently agreed to amend their respective statements of case and are currently working towards a trial later in the year. One of the steps in the court timetable is the preparation of expert forensic accountancy evidence which seeks to value the Snorkel division and assets which were contributed to the joint venture as part of the Contemplated Transaction. The Board believe that value to have been substantial.
The Board remain hopeful that a positive outcome to either/both the US Proceedings and UK Proceedings is possible and, so far as it is necessary, the Company will continue to vigorously defend and advance its position in both proceedings, whilst continuing to seek advice. Further updates will be provided to Shareholders as and when appropriate.
For further information:
Tanfield Group Plc 020 7220 1666
WH Ireland Limited - Nominated Advisor / Broker
James Joyce / Lydia Zychowska 020 7220 1666