Tiimari Oyj Abp - Company Announcement

Tiimari Plc: Tiimari Plc launches a 3 million euro convertible capital loan fully underwritten by major shareholders

Tiimari Plc: Stock Exchange Release 30 December 2010 at 13.48

TIIMARI PLC LAUNCHES A 3 MILLION EURO CONVERTIBLE CAPITAL LOAN FULLY
UNDERWRITTEN BY MAJOR SHAREHOLDERS 

The key elements of the agreement between Tiimari, major shareholders and key
providers of capital are: 

  --  Tiimari launches an EUR 3 million convertible capital loan. The whole
      amount is underwritten by the major shareholders: Virala Oy Ab, Assetman
      Oy, Baltiska Handels Ab, Investo Omaisuudenhoito Oy and chairman H.
      Ryöppönen.
  --  Tiimari has signed a Standstill Agreement with the major providers of
      capital of the group. This solidifies the financial position and
      liquidity. Financing under the Standstill Agreement is not conditional to
      any performance related loan covenants.
  --  The board of directors at Tiimari keep the outlook unchanged that the
      Company has the capability to improve operational profitability and
      achieve a clearly positive operative cash flow.
  --  According to preliminary Christmas sales figures, Tiimari Retail Group's
      operative cash flow and EBITDA will not reach the level required by the
      loan covenants. All the covenant terms for the financial year 2010 are
      interpreted to be fulfilled by signing the Standstill Agreement.
  --  The Group's cash position remains tight despite the convertible loan and
      the Standstill Agreement, and is dependent especially on the Easter
      season's sales success.
  --  Tiimari's management and the board will decide during the first half of
      2011 on the measures taken to improve and develop the group's financial
      position, structure and other measures related to operational improvements
      in order to secure long term financial viability.


Managing Director and CEO Hannu Krook

”The agreement reached between Tiimari, major shareholders and key providers of
capital enables Tiimari to continue the execution of the new strategy and
related structural cost optimization programs. This lays a foundation for
sustainable business development for the long term. I find this solution as a
significant gesture of trust on behalf of our key stakeholders regarding the
chosen strategy and the work that has taken place by the 700 Tiimari and
Gallerix employees in almost 300 locations across Finland, Sweden and the
Baltic States. The first positive signs of our revised product category- and
pricing strategies were already evident towards the latter part of the final
quarter, especially in the largest units. Also, our working capital management
has improved due to the new steering system for the logistics and purchasing
adopted in the last quarter of the year.” 


Further information:

Managing Director Hannu Krook
tel. + 358 (0)3 812911, e-mail hannu.krook@tiimari.fi

Chief Financial Officer Kai Järvikare
tel. +358 (0)44 7129475, email kai.jarvikare@tiimari.fi


Distribution:
NASDAQ OMX Helsinki
Main source of information



Tiimari Plc shares are listed at Nasdaq OMX Helsinki Plc. The Group comprises 
two retail shop concepts, Tiimari and Gallerix. The concepts operate nearly 300
shops in five countries within the Baltic Sea region. Both concepts belong to
the forerunners within their business segments. 




APPENDIX - FACTORS RELATING TO THE STANDSTILL AGREEMENT, ITS BACKGROUND AND
MATERIAL IMPLICATIONS ON TIIMARI 

Tiimari's board has the authorization of the extraordinary general meeting on
19.10.2009 to issue an EUR 3 million convertible subordinated loan, which the
major owners of the company have underwritten as the precondition for the
‘Standstill Agreement' for the group of financial institutions providing
interest-bearing debt financing to Tiimari. The continuity of short-and
long-term financing loans from financial institutions are contractually
guaranteed by this agreement at least up to 12/30/2011 assuming that
contractual conditions are met accordingly. Under the Standstill Agreement an
interest accord, which reduces the Tiimari´s financial costs for the second
half of 2010 by EUR 0.3 million and for the first half of 2011 by EUR 0.3
million, a total reduction of financial costs of EUR 0.6 million, has been
agreed upon. The Standstill Agreement does not affect the interest payments of
the convertible capital loan of 2009, which are carried out as per the original
loan terms. 

The Standstill Agreement was signed in a situation where the outlook of the
board presented in the Interim Report of 1/1/2010 - 30/09/2010, which estimates
that Tiimari's operational profitability (EBITDA before non-recurring items)
improves and a clearly positive operational cash flow (operating cash flow
before financing costs and taxes) in 2010 is estimated to be realized. However,
Tiimari Retail Group's operational cash flow and EBITDA according to
preliminary Christmas sales data will not improve enough in order to meet the
required level of the existing financing agreement covenants. However, with
this Standstill Agreement all year-end covenant terms are interpreted to be
fulfilled. 

According to the Standstill Agreement, financial contracts of Tiimari prevail
in accordance with the financial and checking account credit limits amounting
to EUR 15.5 million, and agreed upon guarantees' and Letters of Credit's limits
will remain for the period of 12/30/2010 - 12/30/2011. Under the Standstill
Agreement Tiimari has agreed to pay-back a total of EUR 2.0 million long-term
financial loans during the fourth quarter of 2010 and a total of EUR 1.0
million between 1/1/2011 - 12/30/2011. Actual Interest payments on the loans
from the financial institutions during the contract period are estimated to
total about EUR 0.1 million and the rest excluding the accord will be
capitalized. Group's financial sustainability during the Standstill contract
period is not conditional to any performance related loan covenants until the
closing of the books for the financial year 2011. After the expiration of the
Standstill Agreement the financing agreements with the loan repayment programs
as well as performance related loan covenants as well as other terms and
conditions shall return to normal. 

The Standstill Agreement was conditional for Tiimari to strengthen its capital
by 1/31/2011 at least by EUR 2.4 million either through a share issue or an
equity loan. As a result, Tiimari's Board of Directors has decided by the
authorization of the extraordinary shareholders meeting of 10/19/2009 to launch
a convertible loan up to EUR 3.0 million directed mainly to professional and
institutional investors. The original issue price is 100%, the subscription
period is 1/17/2011 - 1/31/2011 and the interest rate is 9.0% p.a. The maturity
date of the loan is 03/31/2014. The loan is convertible into shares during the
period of 1/4/2011 - 03/17/2014. The initial conversion rate is EUR 0.96 which
is the company's volume weighted average share price on the Nasdaq OMX Helsinki
during the period of 12/14/2011 - 12/28/2010, increased by about 6 per cent.
The convertible subordinated loan terms are fully described in the separate
appendix 2 to be found in the Finnish version of this stock release. 

The company has received underwritings for full EUR 3 million subscriptions
from its largest owners: Atine Group Ltd's parent company Virala Oy Ab,
Assetman Ltd, Baltiska Handels A.B. as well as from Investo Asset Management Oy
and Chairman of the Board Hannu Ryöppönen. 

The Standstill Agreement secures the continuity of the business of Tiimari. The
launched strategy work regarding maintained gross margin improvement measures
shall concentrate among other things on improving purchasing operations. The
aim is to further decrease the amount of capital tied to the business, and to
reduce operating expenses and seek for additional opportunities of operational
savings. The alternatives will include issuing new shares and / or issuance of
convertible loans and / or other equity linked instruments or the disposal of
some of the Tiimari the Group's operations and / or inventories. Opportunities
to sell receivables are among the available options to decrease the amount of
capital tied, as well.