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The Supervisory Board (the "Board") of Funcom N.V. ("Funcom" or the "Company") hereby announces that it has raised approximately NOK 52.8 million (approximately USD 6.34 million) in gross proceeds through a private placement of 95,970,000 new shares, each with a par value of EUR 0.04, (the "New Shares") at a subscription price of NOK 0.55 per New Share (the "Private Placement"). In order to reduce the dilutive effects of the Private Placement, the Company intends to launch a subsequent offering of approximately 15 million new shares (the "Offer Shares"), pending approval of the proposed additional share issuance authorisation by the Annual General Meeting of Shareholders on 30 June 2016.
Further, the Company has entered into an agreement with KGJ Investments S.A., SICAV-SIF ("KGJI") for the restructuring of the Company's (i) USD 7.95 million Restated and Amended Convertible Loan Agreement dated 13 April 2014 ("Convertible Loan"), and (ii) Convertible Bond Loan from 21 December 2011 ("Convertible Bond"). Pursuant to the agreed debt restructuring, KGJI will convert USD 7.7 million of the principal amount owed by the Company under the Convertible Loan into 42,777,778 new shares (the "Conversion Shares") in the Company at a conversion price of USD 0.18 per share (the "Debt Conversion").
Finally, the Board intends to grant up to 5 million share options to members of the Company's executive management and other key employees.
The Private Placement
The Private Placement took place through an accelerated book building process managed by ABG Sundal Collier ASA (the "Manager") after close of markets yesterday. The Private Placement has been resolved based on the Board authorizations to increase the share capital. The Private Placement was directed towards certain Norwegian and foreign institutional and professional investors.
The proceeds from the Private Placement will be used in connection with development of the upcoming game Conan Exiles and the two other titles to be developed this year, related marketing expenses, repayment of the USD 500 thousand short termloan drawn in April this year and other general corporate purposes.
Notification of allotment for the Private Placement will be sent today through a notification to be issued by the Manager.
The New Shares and the Conversion Shares will initially be issued on a separate ISIN pending approval by the Netherlands Authority for the Financial Markets of a listing prospectus and publication of the same. Such prospectus is expected to be approved and published on or around 10 June 2016. Following approval of the prospectus, the New Shares and Conversion Shares will be converted to the same ISIN as the Company's existing Shares and thus listed on Oslo Børs and made tradable.
The Private Placement deviated from the existing shareholders preferential right for new shares as set out in Article 97 of Book 2 of the Dutch Civil Code (Burgerlijk Wetboek) as the Private Placement was not directed towards all existing shareholders.
The Board and the Manager have explored various possibilities for raising new capital, however the range of funding alternatives has been limited by the Company's existing debt obligations, liquidity constraints and the current valuation of the Company's shares. Following due considerations and deliberations with the Manager, the Board determined that the Private Placement was the best option for raising the necessary capital to be used for the development of Conan Exiles and the other contemplated games and for other general corporate purposes. The Private Placement ensures that the Company has sufficient funds for its operations for at least the coming twelve month period. Together with the Debt Conversion, the Company's financial situation is strongly improved through the Private Placement.
The Board have further decided to propose a subsequent offering to reduce the dilutive effect of the Private Placement.
The Debt Conversion and debt restructuring
The Company is pleased to announce that it has entered into an agreement with KGJI regarding conversion of USD 7.7 million of the principal amount owed by the Company under the Convertible Loan. The Debt Conversion is made at a conversion price of USD 0.18 per share, implying issuance of 42,777,778 Conversion Shares.
The Debt Conversion will strengthen the Company's balance sheet as a significant amount of the Company's debt obligations is settled. The remaining outstanding principal amount of USD 250 thousand will mature on 31 December 2016.
Subject to certain customary terms and conditions, KGJI has also accepted a lock-up undertaking in respect of the Conversion Shares until the earliest of (i) 30 days after the release of Conan Exiles and (ii) 31 December 2016, and not to convert its outstanding debt pursuant to the Convertible Loan and Convertible Bond prior to 31 December 2016.
Finally KGJI has agreed to vote in favour of changing the Convertible Bond in an upcoming bondholders meeting, in which it will be proposed to reduce the interest rate on the Convertible Bond from 5% to 3.5% p.a., and to keep the interest accruing until maturity date.
The Subsequent Offering
As stated above, the Company intends to initiate a subsequent offering of approximately 15 million Offer Shares (the "Subsequent Offering") in order to reduce the dilutive effects of the Private Placement. The Subsequent Offering will be initiated following the completion of the annual general meeting of the Company (to be held on 30 June 2016) and is subject to the general meeting granting the Board a proposed authorisation to issue up to 130 million new shares.
The subscription price per Offer Share will correspond to the subscription price in the Private Placement, being NOK 0.55 per share. The complete terms of the Subsequent Offering will be described in the prospectus to be published on or around 10 June 2016.
The issuance of Offer Shares will be made pursuant to the abovementioned Board authorisation to issue up to 130 million new shares. However, the Board will not issue more than 30 million new shares under this authorisation, of which up to 15 million shares will be Offer Shares and up to 15 million shares may be issued for general company needs, including issuance of shares following exercise of options.
Further information on the Subsequent Offering will be given closer to the commencement of the Subsequent Offering.
Grant of options
As mentioned above, the Board intends to grant up to 5 million share options to members of the Company's management and other key employees. Such option grant is subject to approval of the abovementioned board authorisation to issue up to 130 million new shares.
The contemplated option grant is part of an on-going option program and does not include grant of options to the CEO or members of the Supervisory Board or the Management Board of the Company. The exercise price for the options will be the volume-weighted average price of the shares in the Company in the five trading days following the announcement of the Private Placement.
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ABG Sundal Collier ASA is acting as the Company's financial adviser and Advokatfirmaet CLP DA and Weidema van Tol (Netherlands) B.V. are acting as the Company's legal advisers in connection with Private Placement, Debt Conversion and Subsequent Offering.
Any enquiries may be addressed to: investor@funcom.com
Badhoevedorp, 26 May 2016
Funcom N.V.
This stock exchange notice is published pursuant to the disclosure requirements set out in section 5-12 of the Norwegian Securities Trading Act.
