Watford FC's parent company releases statement to stock exchange

12:57pm Wednesday 23rd December 2009

By Frank Smith

Watford Leisure announces that on 21 December 2009 Fordwat Limited (“Fordwat”) paid approximately £4.93 million to Valley Grown Salads (“VGS”) in full and final settlement of VGS’ demand of 15 December 2009 for full repayment of approximately £4.88 million in loans previously made available to the Company. The sum of £4.93 million paid by Fordwat included accrued interest and a contribution to the legal fees of VGS (in accordance with its right to demand such a contribution and interest under the loan agreement between VGS and the Company).

In connection with the above payment, on 21 December 2009 Watford Leisure signed an agreement with Fordwat for a loan to the Company of approximately £4.93 million (the“Fordwat Loan”), repayable on demand and accruing interest at the rate of 4.5 per cent above the base rate of Barclays Bank plc (except in default when the rate rises to base rate plus 7.5%). Furthermore, it is the understanding of both Watford Leisure and Fordwat that security over the Vicarage Road Stadium for the Fordwat Loan, replacing that of VGS, will be put in place in due course. The purpose of the Fordwat Loan was to prevent the Company being placed in administration by VGS.

As Fordwat holds approximately 37.16 per cent. of the issued share capital in Watford Leisure it is considered to be a “Related Party” under the AIM Rules for Companies. Accordingly the directors of the Company consider, having consulted with Strand Hanson Limited, that the terms of the Fordwat Loan are fair and reasonable insofar as the Company’s shareholders are concerned.

The board of Watford Leisure (“Board”) estimates that the Company now requires £4.7 million to cover its projected cash flow requirements for the period to 30 June 2010. As previously announced the Board supports a proposal from Fordwat to underwrite a £7.5 million rights issue of a debt instrument with either warrants or conversion rights, offered to all shareholders (“Rights Issue”). This proposal will take time to refine and put in place. As such the Board has determined to utilise all available funds currently held by the Company to cover the Company’s working capital requirements until the end of January 2010. This includes the funds received from ticket sales from the “Playing for Players” concert to be held in June 2010 but with the expectation that these funds will be restored on completion of the Rights Issue. At the end of January further short term funding will be needed to cover working capital requirements until the Rights Issue can be finalised.

Trading in Watford Leisure’s shares resumes on AIM with immediate effect. Further announcements will be made in due course.