What shareholders have been told
from circular to shareholder (see rule 26 section in Silverjets investors pages on website)
Reasons for the Loan Facility and Subscription and use of proceeds
On 23 November 2007, Silverjet raised gross proceeds of £22.0 million, comprising a placing of Ordinary Shares to raise £12.0 million and a £10.0 million convertible loan from TFB (the “2007 Fund Raising”). TFB subsequently elected not to convert the loan, which continues to attract interest at 2 per cent over LIBOR and is repayable on 17 December 2009.
On 5 February 2008, Silverjet announced that the growth in passenger statistics had not been as high as hoped and that subsequent bookings were unlikely to make up the shortfall in the financial year ended 31 March 2008. Since then, in light of the airline sector becoming increasingly challenging, a rival all business class airline filing for bankruptcy and negative research being published on Silverjet, a number of travel agents and customers have temporarily suspended booking with Silverjet. Against this background, the Board now estimates that revenue between the 2007 Fund Raising and 31 March 2008 was approximately £7.3 million lower than projected at the time of the 2007 Fund Raising. The Group has also been impacted by increases in maintenance, marketing, fuel and other costs relative to its earlier projections.
Also, Silverjet incurred final expenditure of approximately £2.0 million in closing the Flyjet operation in excess of that included in the projections.
In addition to the above, following the recent press coverage of Silverjet and the significant decline in its share price, the Group has been under pressure to pay its suppliers increasingly promptly and has been impacted by the tightening of credit conditions in the airline industry. This, together with a number of other working capital items, has increased calls on the Company’s cash as at 31 March 2008 by approximately £4.4 million, relative to the projections at the time of the 2007 Fund Raising.
On 30 April 2008, Silverjet announced that, following recent material increases in fuel prices and tightening of credit conditions in the airline industry, its working capital had deteriorated and its working capital reserves were limited.
Against this background, the Directors believe that the Subscription and Loan Facility announced today will provide Silverjet with the necessary finance to restore its working capital and enable it to continue to develop its business.
On 2 May 2008, Silverjet delivered a notice of draw down for approximately £2.5 million under the Loan Facility.