Hearts unveil debt for equity conversion plan

Mon 25th Oct 2010 | Money & Finance

Over a quarter of Hearts debt to be removed in the form of considerable short term liabilities of the company.

Conversion of £10 million of debt into capital will strengthen the financial position of Hearts in preparation for UEFA's pending regulations regarding the professional football clubs in Europe.

Improvements forecast to the company's cashflow by removal of associated £500,000 of interest per annum.

Conversion plan accelerates the point at which Hearts may return to profitability.

Heart of Midlothian plc (Hearts) shareholders will vote at an Extraordinary General Meeting (EGM) on 11 November 2010 on plans that would see the club’s debt reduced by £10 million in a proposed 'Debt for Equity' Conversion. UBIG has agreed to convert £10 million of the debt due to it by Hearts into Ordinary Shares at a price of 10 pence per Ordinary Share.

If the associated Resolutions are passed, £10 million of the debt due to ultimate parent undertaking UAB Ukio Banko Investicine Grupe (UBIG) by Hearts will be deemed to have been repaid in consideration for the allotment and issue to UBIG of 100,000,000 Ordinary Shares at 10 pence per Ordinary Share.

The debt for equity plan provides further evidence of UBIG’s aim to continue to develop Hearts on and off field and, together with continued cost efficiencies, help the club reach profitability.

The Conversion allows Hearts to benefit from a much stronger capital position. The Directors of Hearts are also exploring what additional measures may be taken to further improve the financial situation of the company.

Hearts shareholders will retain their existing number of shares and continue to be part of the club by retaining their rights to attend, speak and vote at general

meetings of the company.

Roman Romanov, chairman, said: "The Directors of Hearts are pleased to inform shareholders that an agreement has now been reached with UBIG, conditional upon passing of the Resolutions, to remove a further £10 million of the current debt owed to UBIG by converting it into Ordinary Shares.

“As before, in 2008 when the company reached an agreement with UBIG to convert £12 million of debt into equity, this will strengthen the company’s capital position in keeping with UBIG’s strategy for Hearts, whilst removing a considerable amount of the company’s short term liabilities.”

If approved, the conversion would see the shareholding in the club be as follows:

                 Number of Ordinary Shares                     Percentage of Issued Share Capital

UBIG                138,063,747                                       93.97%

HoM                 2005 6,541,662                                    4.45%

Others              2,313,941                                            1.58%

UBIG currently owns directly, and controls indirectly via HOM 2005, 44,605,409 Ordinary Shares representing 95.07% of the Existing Ordinary Shares.

The EGM is scheduled for 12 noon on 11 November 2010 and will be held in the Gorgie Suite at Tynecastle Stadium.

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