The Cabinet has decided to approve the final negotiation and completion of the financial restructure package for AN Ltd Group

URL: https://northumberland.moderngov.co.uk/ieDecisionDetails.aspx?ID=381

Decision Maker: Cabinet

Outcome:

Is Key Decision?: Yes

Is Callable In?: Yes

Purpose: A report relating to the financial restructure of AN Ltd was consider by Council in March 2025. The report recommended that any outstanding matters which required further work would be overseen by Cabinet and a further report would be brought back to Cabinet for consideration in due course. The purpose of this report is to consider those remaining matters and to approve the financial restructure of AN Ltd to be implemented. The aim of the proposed financial restructure is to enable AN Ltd to be more effective and efficient in delivering regeneration, housing and environmental benefits for the county, in line with the Council’s corporate plan, while achieving better value for money from public expenditure.?

Content: RESOLVED that:- (3.1) Cabinet notes that it has oversight of the development of the proposed implementation of the resolutions of Council taken on 26 March 2025 concerning the financial restructure of AN Ltd subject to the requirement to revert to Council should there be material departure from the underlying assumptions supporting the envisaged financial measures approved in principle by Council; (3.2) Cabinet notes that the Executive Director of Transformation and Resources and Executive Director of Place and Regeneration, following consultation with the Director of Law and Corporate Governance confirm to Cabinet that they are satisfied that at present there has not been a material departure from the underlying assumptions supporting the envisaged financial measures approved in principle by Council on 26 March 2025; (3.3) Cabinet notes the progress which has been made in relation to the following to date: 3.3.1. The incorporation of the new subsidiary company within the AN Ltd Group; Advance Manor Walks Ltd (“AMWL”), 3.3.2. The approval by Council’s Shareholder Cabinet Committee and subsequent incorporation of the new subsidiary company within the AN Ltd Group; Advance Green Futures Ltd (“AGFL”), 3.3.3. The advice from the Executive Director of Transformation and Resources regarding the proposed changes to the remaining maturity loans identified within the report to Council dated 26 March 2025 of £182.15 million (currently £171.09 million following exclusion of those recent loans which have their own repayment schedule (“Schedule 3 Loans”) to an annuity basis, including the issuance by the Council to AN Ltd of a variation in relation to the loan documentation for this and the reduction in loans of £83.30 million due to the debt for equity swap will be accounted for in line with the requirements of IFRS9, 3.3.4. The steps taken to date by the Executive Director of Transformation and Resources and Executive Director of Place and Regeneration with the Director of Law and Corporate Governance to determine the operational parameters and security arrangements associated with the implementation of the Revolving Credit Facility (“RCF”) for Cabinet approval and the legal review of the proposed establishment of the RCF of up to £35 Million, 3.3.5. The consideration of the implications of the subsidy control requirements and the outcome of recent work to consider compliance with those requirements by both council officers together with external independent financial and legal advisors, 3.3.6. Tax advice received by AN Ltd from its tax advisors Robson Laidler in relation to the financial restructure on 19 May and 10 June 2025, 3.3.7. Ongoing development of an effective Governance Agreement to replace the existing Operating Agreement in place between NCC and the AN Ltd Group to record and details working practices and the relationship between the parties, 3.3.8. An independent valuation of Manor Walks Shopping Centre and Westmorland Retail Park commissioned by the Council to verify / confirm the figures used within the Grant Thornton calculations / assumptions / proposal, and 3.3.9. Ongoing review / development of a suitable data sharing / processing agreement to ensure data is shared in a lawful and appropriate manner in accordance with data protection principles. (3.4) Cabinet notes that further due diligence work, is required prior to implementation of the recommendations set out in paragraph 3.5, specifically, but not limited to, the outstanding matters which are detailed within the report as follows: 3.4.1. Independent future valuation of Manor Walks Shopping Centre and Westmorland Retail Park to be considered by the Council’s Strategic Estates function (paragraphs 6.8 & 7.1.3), 3.4.2. AN Ltd provide updated asset disposal valuation to the Council for the remaining commercial assets identified for disposal within their 5 year Business Plan where it has not yet been possible to verify the valuations(paragraph 7.1.1), 3.4.3. Updated loan agreements incorporating the change from maturity (interest only) to annuity (principal and interest) repayments, 3.4.4. Finalisation of the terms of the RCF, Debt for Equity Swap, and deed of novation for Westmorland Retail Park (paragraphs 7.1.7 & 8.4.3), 3.4.5. Finalisation of the tax advice from AN Ltd in relation to the Debt for Equity swap and return on investment to the Council (paragraph 6.28), and 3.4.6. Establishing appropriate governance arrangements (including the RCF), through the Governance Agreement, between the Council and AN Ltd Group (paragraph 8.5), 3.4.7. Upon completion of the due diligence detailed above, council officers will provide a report to Executive Director of Transformation and Resources and Executive Director of Place and Regeneration with the Director of Law and Corporate Governance to summarise and confirm whether any of the points above would have a material impact on the financial assumptions and / or CMO assessment. (paragraph 10.15); (3.5) Authority be delegated to the Executive Director of Transformation and Resources and Executive Director of Place and Regeneration, following consultation with the Director of Law and Corporate Governance, and subject to: i. The Executive Director of Transformation and Resources being satisfied that the outstanding matters set out at 3.4 above have been appropriately dealt with, ii. The requirement to revert to Council should there arise, when undertaking any further due diligence, a material departure from the underlying assumptions supporting the envisaged financial measures approved in principle by Council on 26 March 2025, the final negotiation, authorisation and completion of the relevant documentation required for implementation of the financial restructure package for the AN Ltd Group on 1 October 2025, or as near thereto as practical, the following (and for the avoidance of doubt this is a package of support that has been assessed in its entirety with each element being entered into together), 3.5.1. The conversion of £83.30 million of loans provided to Advance Northumberland (Commercial) Limited in respect of Manor Walks Shopping Centre ultimately into ordinary shares as investment into Advance Northumberland Ltd (debt for equity swap), 3.5.2. The transfer of the Net Book Value (“NBV”) of the Manor Walks Shopping Centre and Westmorland Retail Park assets (£74.38 million at 31 March 2025), and the residual loans in relation to Westmorland Retail Park of £38.00 million into Advance Manor Walks Limited subject to legal charge being entered into in favour of the Council, 3.5.3. The conversion of those remaining maturity loans identified within the report to Council dated 26 March 2025 to an annuity basis (the value of which is now £171.09 million following the exclusion of the more recent Schedule 3 Loans) (March 2025 Council report £182.15 million, inclusive of Schedule 3 Loans), including the issuance by the Council to AN Ltd a variation in relation to the loan documentation for this and the reduction in loans of £83.30 million due to the debt for equity swap, noting confirmation in this report by the Executive Director of Transformation and Resources that the proposed changes are accounted for in line with the requirements of IFRS9, 3.5.4. The establishment of the Revolving Credit Facility (“RCF”) of up to £35 million for Advance Northumberland (Developments) Ltd, with associated security arrangements, subject to satisfactory legal review and to take all steps necessary to determine the operational parameters and security arrangements associated with the implementation of the RCF, 3.5.5. The Governance Agreement, setting out the relationship between the Council and the AN Ltd Group including but not limited to assurance, governance arrangements, performance management / monitoring and Council funding, and 3.5.6. Any ancillary agreement required to give effect to the recommendations above including but not limited to any Data Sharing / Processing Agreement as advised; and (3.6) Cabinet notes the progress outlined in the report and that the Executive Director of Transformation and Resources (Section 151 Officer) and the Director of Law and Corporate Governance (Monitoring Officer) will produce, in consultation with the Leader of the Council and the Cabinet Member for Corporate Services, and submit a report to a future Council meeting setting out the proposed scheme of governance and reporting for oversight of the ongoing performance and financial management of AN Ltd.

Date of Decision: September 3, 2025