Pyrrho Investment Limited Statement re. Press Comment (0073S)

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RNS Number : 0073S

Pyrrho Investment Limited

26 November 2012

Pyrrho Investments Limited comments on unnecessary failure of

MWB Group Holdings

Pyrrho Investments Limited ("Pyrrho") a Hong Kong based investment fund with a 24.5% interest in MWB Group Holdings Plc ("MWB" or the "Company") and a 11.57% interest in MWB Business Exchange ("Business Exchange"), notes recent press comment suggesting that Pyrrho is in some way responsible for putting MWB into administration. Pyrrho categorically denies this. As a shareholder, Pyrrho has experienced significant losses.

Pyrrho has been informed that a number of holders of MWB's unsecured loan stock 2016 (the "Loan Stock") now say they intend to seek a regulatory enquiry by the FSA to look into the events leading up to the appointment of administrators. Pyrrho would welcome such an enquiry.

Since July of this year, Pyrrho has been trying to understand the full nature of the intercompany cash flows between MWB and Business Exchange and in particular the nature of the contractual payments being made by Business Exchange to MWB, payments that had not been publicly disclosed. Pyrrho was provided with some information and explanations; however it eventually became clear to Pyrrho that these payments did not make commercial sense and were not in the interests of Business Exchange or its minority shareholders.

Pyrrho discussed these matters with the directors of Business Exchange who then took their own legal advice and came to their own conclusions. This is consistent with Pyrrho's approach over the years where Pyrrho has frequently made suggestions to the boards of both MWB and Business Exchange.

According to MWB's own announcement, it owes at least GBP8m to Business Exchange. Pyrrho would argue that an unsecured intercompany balance of this size lent to a company with the weak balance sheet of MWB is prejudicial to the interests of Business Exchange, and in particular to Business Exchange's minority shareholders. Pyrrho and other minority shareholders will consider what legal action should be taken in respect of this balance and the possible oppression of the rights of minority shareholders in Business Exchange. For the avoidance of doubt, at no point had Pyrrho agreed to the accounting treatment of the inter company flows by either MWB or Business Exchange.

On a number of occasions, Pyrrho had suggested to MWB directors that if they need cash from Business Exchange to fund MWB, they should ask Business Exchange to pay dividends so that all shareholders can benefit, rather than extract payments from Business Exchange that prejudice the rights of Business Exchange's minority shareholders. Pyrrho understands that such dividends could have been paid had some simple tidying up of Business Exchange's distributable reserves taken place in the past year.

Since MWB's share placing in January 2010, Pyrrho has repeatedly questioned the actions of the directors of MWB and corporate actions taken by the Company, both publicly via a number or announcements and privately in meetings and correspondence. However, shareholder resolutions, which were controversial, in Pyrrho's view, were capable of being passed because management was able to amass irrevocable undertakings from a majority of holders of MWB shares. In particular Pyrrho refers to the sale of Liberty Plc at a 30% discount to the then share price, the failed attempt to privatise Business Exchange due to MWB's refusal to increase the share exchange ratio to a more reasonable level and the costly debt refinancing in September 2011. Pyrrho believes these events highlighted the poor corporate governance, the conflict of interest and serious strategic errors of the board of MWB since the January 2010 placing. In Pyrrho's view, it is these actions which have led to the eventual appointment of administrators to MWB.

Pyrrho has for a long time felt that MWB required additional equity capital to strengthen its capital structure and called on MWB's directors to carry out a capital raising as early as February 2011. An equity fund raising was always resisted by management because, Pyrrho would submit, of the dilutive effect this would have had on the overall shareholding of certain of MWB's management. Even as recently as September 2012, Pyrrho told the MWB directors and their financial advisor Hawkpoint that Pyrrho was prepared to provide additional equity funding. This funding was subject to five conditions that any reasonable investor would ask for, including, inter alia, getting MWB's senior creditors to roll over facilities for a longer period, cutting costs at the MWB Group level and negotiating with junior creditors for a significant reduction of their principal and interest. The MWB board failed to meet any of these conditions and, as far as Pyrrho can tell, made limited effort to meet them.

Ownership of certain of the shares in MWB has also been unclear and Pyrrho notes the lack of clarity around the 15% interest in MWB until recently owned by Audley Capital Developments Ltd and Audley Investments Portfolio Limited (the "Audley Investors"). Control of the Audley Investors changed in December 2010 and the new owners or managers are two previously undisclosed Swiss individuals. However no announcement of the change in ownership was made until 18 months later, in breach of FSA regulatory requirements. Pyrrho reported its concerns regarding the true ownership and control of these MWB shares held by the Audley Investors to the relevant regulatory authorities earlier this year.

In summary Pyrrho believes that the appointment of administrators is the culmination of actions taken by the MWB board since MWB's share placing in January 2010. It therefore welcomes any enquiry into the events surrounding the appointment of administrators and indeed any other matter relating to MWB or Business Exchange. Pyrrho also reserves its rights to take legal action against current and former directors over the failure of MWB.

Contacts:

Maitland

020 7379 5151

Neil Bennett

This information is provided by RNS

The company news service from the London Stock Exchange

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