Media Square plc

Renewal of Banking Facilities

Media Square plc (AIM: MSQ), the international marketing communications group, is pleased to announce that the Group has entered into a conditional new banking facilities agreement with Bank of Scotland plc (BoS), part of Lloyds Banking Group (LBG).

The new facility will become effective immediately following the upcoming Annual General Meeting (AGM), assuming certain resolutions are passed at the AGM as set out below.

Media Square's current facility was established in 2005 to fund an ambitious acquisition program.  Since that time, the Board has repaid nearly £25m of this bank debt. The new three year facility will replace the current facility and provide management with the platform to further improve business performance.

The new facility, which runs until June 2013, will have the following key terms:

§ Facility limit of £26.6m comprising:

o  Senior term loan facility of £9.1m with an annual interest rate of 3% plus LIBOR;

o  Property loan facility of £1.89m with an annual interest rate of 3% plus LIBOR (mortgaged on the Group's freehold commercial property);

o  Mezzanine loan facility of £11.6m with an overall annual interest rate of 7% plus LIBOR, of which 1.5% p.a. plus LIBOR is payable at the end of the relevant interest period and 5.5% p.a. plus LIBOR will be capitalised into the principal amount of the loan; and

o  Revolving credit facility of £4m with an annual interest rate of 3% plus LIBOR. 

§ Subject to shareholder approval at the AGM, LBG will be granted warrants (Warrants) pursuant to which LBG may subscribe for such ordinary shares (Shares) which represent 10%  of  Media Square's fully diluted issued Shares, such calculation to be performed on the basis of the fully diluted Shares in issue as at the date of exercise of the Warrants. The Warrants have an exercise price of 10p per Share and will be capable of being exercised on or before 10 years from the date of grant of their grant

§ The new facility includes customary covenant obligations which, amongst other things, require the Group to maintain minimum ratios of EBITDA to interest payable, net debt to EBITDA and cash flow to funding costs 

§ The property loan facility (and, if the property loan facility is repaid, the senior facility) requires a minimum quarterly repayment of £95,000, with the balance of the facility being repayable at the end of the term as a bullet repayment

§ The Group will be able to make voluntary prepayments against the facilities, 100% of which can be applied against the mezzanine loan facility subject  to the property loan being repaid first, in the event of a future sale of Media Square's freehold commercial property. In addition, the facility will be subject to a cash sweep, with 75% of any excess cash flow less £0.25m (calculated annually) being applied to reduce the facility.

§ There is a 1% arrangement fee, payable on a phased schedule over the next 8 months.

The Group's existing security arrangements will be updated to ensure that BoS' security net represents at least 90% of Group EBITDA.

At the same time, LBG has agreed to renegotiate Media Square's existing £18.75m interest rate hedge (fixed rate: 4.78%) with a new hedge, covering a minimum of £15m, at a reduced overall swap rate over the facility duration (the rate will increase annually, however the exact rates will be agreed as of the effective date subject to market interest rate movements in the intervening period).

The granting of the new facility is conditional on (a) each of the Directors of Media Square remaining in place in their existing positions following the AGM, at which certain of the Directors will be required to retire and stand for re-election by the shareholders pursuant to the Articles of Association; and (b) shareholders approving the grant of the Warrants to LBG at the AGM.  Further details will be provided in the Notice of AGM and accompanying letter from Media Square to be sent to shareholders shortly.

Roger Parry Chairman of Media Square comments: "I am delighted that we are able to report to shareholders that we have agreed with the bank a new three year facility which will run until July 2013 which will provide the company with a long term debt capacity of £22.6 million and a short term revolver of £4 million. The facility provides the Group with the flexibility to rebuild operating results and key ratios over the next three years to acceptable industry levels."

Lloyds Banking Group comments: "We are supportive of Management who in our opinion have done a great job in delivering the turnaround programme against the backdrop of difficult economic conditions. The provision of new facilities for a further 3 years demonstrates our support of Management's business plan and UK businesses through the cycle."

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