LAVARE HOLDING AB (PUBL)

Transcription

1 LAVARE HOLDING AB (PUBL) PROSPECTUS REGARDING LISTING OF MAXIMUM SEK 700,000,000 SENIOR SECURED CALLABLE FLOATING RATE BONDS 2014/ March 2015

2 Important information This prospectus (the Prospectus ) has been prepared by Lavare Holding AB (publ) (the Company ), registration number , in relation to the application for listing of the Company s maximum SEK 700,000,000 senior secured callable floating rate bonds 2014/2019 with ISIN SE , of which SEK 585,000,000 was issued on 4 April 2014 (the Bonds ) (the Issue Date ) in accordance with the terms and conditions for the Bonds (the Terms and Conditions ) (the Bond Issue ), on the Corporate Bond List at Nasdaq Stockholm ( Nasdaq Stockholm ). References to the Company, Lavare or the Group refer in this Prospectus to Lavare Holding AB (publ) and its subsidiaries, unless otherwise indicated by the context. This Prospectus has been prepared in accordance with the rules and regulations in the Swedish Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument) and Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council, each as amended. This Prospectus has been approved by and registered with the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) in accordance with the provisions in Chapter 2, Sections 25 and 26, of the Swedish Financial Instruments Trading Act. It should be noted that such approval and such registration does not constitute any guarantee from the Swedish Financial Supervisory Authority that the information in this Prospectus is accurate or complete. This Prospectus is not an offer for sale or a solicitation of an offer to purchase the Bonds in any jurisdiction. It has been prepared solely for the purpose of listing the Bonds on Nasdaq Stockholm. This Prospectus may not be distributed in any country where such distribution or disposal requires additional prospectus, registration or additional measures or is contrary to the rules and regulations in such country. Persons into whose possession this Prospectus comes or persons who acquire the Bonds are therefore required to inform themselves about, and to observe, such restrictions. The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), or any U.S. state securities laws and may be subject to U.S. tax law requirements. Subject to certain exemptions, the Bonds may not be offered, sold or delivered within the United States of America or to, or for the account or benefit of, U.S. persons (as defined in Rule 902 of Regulation S under the Securities Act). The Company has not undertaken to register the Bonds under the Securities Act or any U.S. state securities laws or to affect any exchange offer for the Bonds in the future. Furthermore, the Company has not registered the Bonds under any other country s securities laws. It is the investor s obligation to ensure that the offers and sales of Bonds comply with all applicable securities laws. The Prospectus will be available at the Swedish Financial Supervisory Authority s web page ( and the Company s web page ( and paper copies may be obtained from the Company. Unless otherwise explicitly stated, no information contained in this Prospectus has been audited or reviewed by the Company s auditors. Certain financial information in this Prospectus may have been rounded off and, as a result, the numerical figures shown as totals in this Prospectus may vary slightly from the exact arithmetic aggregation of the figures that precede them. This Prospectus may contain forward-looking statements and assumptions regarding future market conditions, operations and results. Such forward-looking statements and information are based on the beliefs of the Company s management or are assumptions based on information available to the Group. The words considers, intends, deems, expects, anticipates, plans and similar expressions indicate some of these forward-looking statements. Other such statements may be identified from the context. Any forward-looking statements in this Prospectus involve known and unknown risks, uncertainties and other factors which may cause the actual results, performances or achievements of the Group to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Further, such forward-looking statements are based on numerous assumptions regarding the Group s present and future business strategies and the environment in which the Group will operate in the future. Although the Company believes that the forecasts or indications of future results, performances and achievements are based on reasonable assumptions and expectations, they involve uncertainties and are subject to certain risks, the occurrence of which could cause actual results to differ materially from those predicted in the forward-looking statements and from past results, performances or achievements. Further, actual events and financial outcomes may differ significantly from what is described in such statements as a result of the materialisation of risks and other factors affecting the Group s operations. Such factors of a significant nature are mentioned in section Risk Factors below. This Prospectus shall be read together with all documents that are incorporated by reference (see section Overview of financial reporting and documents incorporated by reference below) and possible supplements to this Prospectus. The Bonds may not be a suitable investment for all investors and each potential investor in the Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should (i) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and the information contained or incorporated by reference in this Prospectus or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Bonds and the impact other Bonds will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Bonds; (iv) understand thoroughly the Terms and Conditions; and (v) be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. This Prospectus is governed by Swedish law. Disputes concerning, or related to, the contents of this Prospectus shall be subject to the exclusive jurisdiction of the courts of Sweden. The District Court of Stockholm (Sw. Stockholms tingsrätt) shall be the court of first instance.

3 3 Table of Contents Risk factors... 4 Responsible for the information in the Prospectus The Bonds in brief The Company and its operations Board of directors, senior management and auditors Overview of financial reporting and documents incorporated by reference Documents available for inspection Terms and Conditions for the Bonds Addresses... 71

4 4 Risk factors Investing in the Bonds involves inherent risks. The financial performance of the Group and the risks associated with its business are important when making a decision on whether to invest in the Bonds. A number of risk factors and uncertainties may adversely affect the Group. If any of these risks or uncertainties actually occurs, the business, operating results and financial position of the Group could be materially and adversely affected, which ultimately could affect the Company s ability to make payments of interest and repayments of principal under the Terms and Conditions. In this section, a number of risk factors are illustrated, namely general risks pertaining to the Group s business operations and material risks relating to the Bonds as financial instruments. The risks presented in this Prospectus are not exhaustive and other risks not discussed herein that the Group is currently not aware of, may also adversely affect the Group, the price of the Bonds and the Company s ability to service its debt obligations. Further, the risk factors are not ranked in order of importance. Potential investors should consider carefully the information contained in this Prospectus, including the risk factors below, and make an independent evaluation before making an investment decision. Risks associated with the Company, the industry and the market Individual contracts subject to public procurement represent a large share of the revenue Approximately 85 per cent of the Group s revenue is attributable to contracts within the public sector where the majority (about 71 per cent) 1 stems from contracts with County Councils (Sw. Landsting). Such contracts are subject to the laws and regulations on public procurement (hereafter PP ) foremost being the Swedish Public Procurement Act (Sw. lag (2007:1091) om offentlig upphandling). Furthermore, some key PP contracts represent a relatively high share of the Group s total revenue. If the Group would be unable to renew its existing PP contracts upon their expiry or unable to secure new PP contracts such could have a material adverse effect on the Group s business, financial position and results of operations. PP contracts are awarded through a formal competitive tender process which usually takes up to a year to complete from the initial start-up until the contract is awarded. Any such process is cumbersome, time consuming and costly for both the public authority in question and the bidders. In addition to having to invest time and money a public tender process presents a number of risks including that if any PP contract would be entered into in contravention with applicable public laws, regulations or guidelines such could potentially affect the validity of the contract or impose an obligation on the public authority to terminate or deem parts of the contract unenforceable or invalid. Although rare, if such would occur it could potentially have an adverse effect on the Group s business, financial position and results of operations. Please also see further risks relating to pricing below. Pricing PP contracts The offering price in any public tender process is often a deciding or very important factor for the public authority awarding the PP contract. As such it is important to ensure that a prudent but realistic price is set in any public tender offer so that the Group does not over- or under-price itself compared to its competitors. The Group s pricing policy and profitability depends largely on its 1 Share of sales in 2014 (including lost items).

5 5 ability to ensure efficiency of its operations. The Group s competitiveness and ability to secure PP contracts is therefore closely linked to the efficient management of its textile stock, washing and logistics operations and the operation of existing PP contracts. Any deterioration in the Group s competitiveness could affect its ability to secure new PP contracts, which could, in turn, have a material adverse effect on the Group s business, financial position and results of operations. As a consequence of the above there is a risk that the Group may incorrectly estimate the resources and costs that will be required to service any contract. For example, the Group must determine the lowest price at which it would be prepared to enter into a PP contract and determining the price requires it to make a series of assumptions about the future costs of operating the contract which in turn depends on different factors; some of which are hard to accurately measure or predict. The process of determining price ultimately contains subjective elements and certain predictions, and is as such susceptible to human error and unexpected development of events. If any of the Group s assumptions when determining the price is inaccurate, it may secure contracts with low profit margins or contracts that must be operated at a loss. Such contracts may be unprofitable for a limited period of time or for the life of the contract. In addition, the contracts run for a set number of years (about three to five years) with an optional extension (exercisable by the public authority) for another couple of years, where the pricing terms and price indices are determined at the commencement of the contract. The scope of the operations may also have to be adjusted and varied to cater for the needs of the individual customer. After the commencement of a PP contract there is generally no, or only limited, scope to renegotiate the terms of that contract for the Group. In the event the Group enters into a substantial low-profit or loss-making contract this could have a material adverse effect on the Group s business, results of operations and financial condition. The Company may be unable to secure financing to acquire new inventory, improve its facilities or to fund its other operations The Group s business model includes, inter alia, that the Company provides clean textile products (mostly owned by the Group itself) to its customers where a large part of the business involves laundry activities as well as logistics for distribution. The Company is facing high demands from the customers regarding energy efficiency and low environmental impacts resulting from its operations. Possible substantial investments in the maintenance, improvement or renewal of the Group s facilities or of its textile inventory may require further financing. At present the Group has financed some of its investments in primarily machinery, equipment and textiles through certain leasing arrangements provided by external finance providers. Although the Group estimates that the need for financial leases will be considerable lower in the future, there is a risk that the Group will not be able to meet possible future financing needs in a timely manner, on commercially reasonable terms, or at all. If the Company is unable to secure financing, it may not be able to bid for new contracts, to renew existing contracts or even to perform its obligations under current contracts. This, in turn, may have a material adverse effect on the Company s business, financial condition and results of operations. Price indices in contracts The Group s contracts usually contain price adjustment clauses providing that the prices set out in the contract shall be adjusted according to price indices, to cover increased costs of operation over

6 6 the duration of the contract. Normally, an index for washing and textile services is used. There is, however, a risk that the increased costs for the Group s operations will not correspond to a similar increase in the price indices. There can also be a significant time lag between actual cost and/or indices increases and time at which any given contract is adjusted for the changes in the index. Should price indices in current or future contracts fail to reflect the development of the Company s actual cost structures, changes in the Company s costs that are not reflected in the price indices could have an effect on its operating margins and profitability. The Group is a critical supplier for health care providers A large share of the Group s revenues emanates from contracts for supply of clean textile to different public health care providers. The continuous provision of clean textile to the public health care sector is a critical supply to that sector and health care is in turn a critical function in society. The Group s customers expect that the Group is able to perform its obligations also under severe circumstances including unforeseen events. If serious disturbances of the Group s operations were to occur, the Group might incur substantial costs to maintain operations and avoid material breaches of its contractual obligations. This, in turn, may have a material adverse effect on the Company s business, financial condition and results of operations. Information technology The Group is growing increasingly dependent on information technology for its operations and its customers are requiring certain information technology functions for performance under the contracts. The Group is hence dependent on ensuring the efficient operation of its information technology systems. All technology from time to time fail but should a larger failure or continuous failures occur such could have an adverse effect on the Group s business, financial condition and results of operations. Sub-contractors and suppliers The Group sometimes appoint sub-contractors for certain specialised services that emanate from contracts which the Group does not have capacity to carry out themselves, e.g. in relation to specific ad hoc requirements of the Swedish Armed Forces. Furthermore, the Group uses third party suppliers for certain services and similar relationships as part of the ordinary course of business. If sub-contractors or third party suppliers would not perform their obligations or if the Company would be unable to enter into new contracts with sub-contractors or suppliers on reasonable commercial terms the Company may be unable to fulfil its contractual obligations against its own customers at a commercially reasonable cost, or at all. Such increased costs or inability to fulfil contractual obligations could have an effect on the Company s business, financial condition and results of operations. Employees and labour conflicts The Group s employees are unionised. The Group s operations could be adversely affected and its revenues negatively impacted by labour conflicts or strike activities in the event that the Group is unable to reach agreement with any labour union representing its employees. Furthermore, the Group may have to comply with agreements (signed on behalf of the industry) with a labour union representing its employees that contains, from the Group s point of view, unfavourable terms. The Company may incur a liability towards employees for breaches of agreements or violations of

7 7 employment law and similar standards. Such occurrences may adversely affect the Company s business, financial condition and results of operations. Fluctuation in the price or shortage of energy and water Significant changes in the cost of different form of energy sources could materially impact the Group s business, financial condition and results of operations. The Group s business uses relatively large amounts of energy, mainly for the washing operations. The Group has specifically invested to use pellets for heating of the water in its laundry facilities. Energy prices and relative prices of different forms of energy sources are affected by a number of factors, including environmental legislation and global economic and political developments, over which the Group has little to no influence. The Group s energy costs may also be affected by increases in energy taxes, which may only be partially offset by compensation from price indexation. The price of pellets heating may diverge negatively from other sources of energy. Moreover, there may also be a delay from when the Group incurs the increased energy costs and when its revenue is adjusted (see further above under section Price indices in contracts ). This delay, in turn, could negatively affect the Group s cash flow and the balance between its accounts receivable and accounts payable. Despite that the Group enters into long-term contracts and sources for long-term needs, in the event of a shortage of sources of energy (specifically pellets but also substitute energy sources) or water, for example resulting from a disruption in production, import, delivery or otherwise, the Group could face higher prices, the need to suspend operations in its current form, which could have a materially adverse effect on the Group s business, financial condition and results of operations. Interest rate fluctuations The Group s financial leases are generally subject to floating rates (in general STIBOR + margin) and the Group is exposed to interest rate fluctuations. USD interest rates indirectly affect global fuel prices, and therefore impact the price of one of the Group s operating expenses. Taxes and charges The Group conducts its business in accordance with its interpretation of applicable tax regulations and applicable requirements and decisions. However, there is always a risk that these interpretations and applications of laws, provisions and judicial practices have not been, or will not continue to be, correct or that such laws, provisions and practices are changed in the future, potentially with retroactive effect. If such an event should occur, the Group s tax liabilities can increase, which could have a material negative effect on the Group s earnings and financial position. Access to qualified and experienced managers and key employees The Group s success depends partly on its continuing ability to identify, hire and retain qualified and experienced managers and key employees for its business development and management. The Group s ability to hire and retain qualified people depends on a number of factors, some of which are outside of its control, including the competitive environment in the local employment markets in which the Group operate. The loss of a manager or any other key employee due to, for example, such employee leaving to work for a competitor or retiring, may result in a loss of institutional know-how and may significantly delay or prevent the achievement of the Group s development

8 8 objectives or the implementation of its business strategy. If the Group is unable to hire or retain qualified and experienced managers and key employees, this could have a material adverse effect on the Group s business, financial condition and results of operations. Requirements of quality and compliance in the Group s existing and future contracts PP contracts typically require that the supplier meets specific requirements regarding, among other things, environmental impact, corporate social responsibility, labour standards as well as general compliance of the Group and its representatives with their respective public- and criminal law obligations. Compliance with such standards, enhanced standards or further requirements in future requests in any new tender process, may increase the costs of the Group s operations. Failure to meet such requirements may entitle the public authority to terminate the contract for breach or disqualify the Group from obtaining future contracts. Such costs or terminations could materially adversely affect the Group s business, financial condition and results of operations. Environmental risks The Group owns five real estate properties. As an owner, the relevant Group company could be liable for environmental contamination on, under or around the properties. Furthermore, an owner of a real estate may be jointly and severally liable for the costs associated with environmental damage caused by previous owners. The Group has merged with entities that have previously operated within the dry cleaning business, using chemicals which are considered hazardous to health and environment. As the surviving entity after a merger, the Group has a primary liability for such pollution. The Group has two properties where pollution has been identified (PCE and derivatives thereof). The estimated liability share of the Group with respect to the first site, Långsele, is three per cent, and with respect to the second site, Karlskrona, 70 per cent (other liable parties are public entities). The Group has hired consultants to investigate these issues and possible methods of remedying the pollution, and intends to perform the legally required sanitation of the real estate properties. The pollution is not considered as a risk to human health or the surrounding environment. The expected costs for the Group are estimated to approximately SEK 80,000 to SEK 250,000 and SEK 7,000,000 to 17,500,000 in Långsele and Karlskrona, respectively, and are not expected in the near term to have a material adverse effect on the Group s total financial condition. However, should the costs increase above the estimates or any further larger environmental issues be discovered at any of the Group s sites such could have an adverse effect on the Group s profit, financial condition and the results of its operations. The Group s business may be adversely affected by severe weather conditions The Nordic region is periodically exposed to severe weather conditions foremost during the winter months. These adverse weather conditions may result in increased fuel consumption, damage to the Group s vehicles, other equipment or buildings and increased repair and maintenance costs associated with such damage. If the Nordic region experiences severe weather conditions the Group could be exposed to increases in its operating expenses. Extreme weather conditions could consequently have an adverse effect on the Company s business, financial condition and results of operations.

9 9 Permits, licenses and voluntary certification Certain parts of the Group s current or planned operations require or may require permits or licenses, including but not limited to, certain uses of its real estate sites. There is a risk that the Group will not obtain such permits or licenses for developments of its operations, or that any necessary permit or license is not granted, altered or revoked. This could lead to that the Group would not be able to conduct its operations in the most cost efficient manner, or at all. Such limitations may have a material adverse effect on the Group s profit, financial condition and results of operations. Efficiency and customer value initiatives The Group has focused its attention on increasing its profitability by delivering its services more efficiently and with a higher value to the customer, increasing its competitiveness. To that end, the Group has developed methods and technology aimed at improving utilisation of resources, reducing costs and providing a higher value to its customers. The Group may be unable to implement its efficiency initiatives for a number of reasons, including, but not limited to, contract limitations, technological problems or limitations or unanticipated changes to its cost structure. If the Group fails to implement such initiative it will not gain the benefit and/or increased profitability associated with such efficiency initiative. Therefore, failure to implement any of its efficiency initiatives may have a material adverse effect on the Group s profit, financial condition and results of operations. Costs associated with depreciation of the Group s textile stock, vehicles and facilities with machinery The Group s business and operations depend upon its facilities and washing machinery, textile inventory and vehicles. Part of the textile inventory are at any given time physically (not legally) beyond the Group s control. The Group has historical experience of the depreciation of its capital stock through wear or loss, and makes its calculations taking into account estimated depreciation. The Group expects a normal depreciation of its facilities and machinery, its textile inventory and vehicles. Any unexpected increases in the average rate of the depreciation of any of the Group s assets, increased maintenance costs or significant one-off events (which is not recoverable from the customers, through insurance or another third party) could negatively impact its business, results of operations and financial condition and could also have a negative effect on goodwill. New laws and regulations The Group and its operations are subject to both national and EC laws and regulations, including as mentioned above laws regarding PP. Since PP contracts constitute a substantial part of the Group s revenue, such laws are of high importance to the Group. Other laws of potentially high significance to the Group relates to limitations on the use of real property and environmental standards or laws affecting energy intensive operations. Additional laws and regulations or new interpretations of existing laws and regulations which affect the Group may be proposed from time to time which could impose additional costs, requirements or restrictions for the Group s operations.

10 10 Legal disputes and appeals of public tenders Any industry or business involved in public tenders is generally considered as an appeal-friendly industry or business, especially in relation to larger contracts. There have been occasions when public procurements have been appealed to all relevant instances, leading to that a new tender process is ordered by the court. The outcome of any appeal proceeding is difficult to predict. There is a risk that that legal claims are taken or appeals made against the Group or any public procurement decision. Such proceedings and especially a negative outcome of such disputes may have a significant negative effect on the Group's business, its results of operations and financial condition. Lack of insurance coverage The Group s operations may be affected by a number of risks, such as potential damage to its facilities, equipment and inventory, potential damage to third parties caused by the Group s operations or potential future environmental damage at the Group s real estate sites. The Group carries, amongst others, the following types of insurance: general liability including product liability, all risks covering real estate, property, business interruption, theft and other types of losses, directors and officers liability and legal expenses insurance. Depending on the frequency and severity, potential damages may result in losses or expose the Group to liabilities in excess of the Group s insurance coverage or significantly impair its reputation. Moreover, any claims the Group makes under an insurance policy or the occurrence of an event or events resulting in a significant number of claims being made may also affect the availability of insurance and increase the premiums the Group pays for its insurance coverage. There is a risk that the Group s insurance coverage will not be sufficient to cover the loss arising from any or all such events or that the Group will not be able to renew existing insurance cover on commercially reasonable terms, or at all. Competition The Group s market is competitive. The Group faces competition or possible competition from multinational competitors, regional competitors and entities owned and operated by public sector entities (mainly in the form of potential insourcing ). The Group s most significant competitor in Sweden is Berendsen Textil Service AB. The Company estimates that few other competitors in the market can compete with the Group and Berendsen Textil Service AB for the larger County Council PP contracts as smaller competitors may not have the capacity or experience that catering such contracts require. However, should further competitors enter the market or should insourcing materially expand such could have a potential adverse effect on the Group s business, results of operations and financial condition. As price is typically the deciding factor for the public authority in awarding PP contracts, some of the Group s competitors may be inclined to under-price in tender bidding processes in an effort to gain market shares even if it means securing contracts on pricing terms that are below their actual costs. Sustained or increased price competition could hinder the Company s ability to secure or renew contracts in the future and could potentially decrease its market share. If the Group is forced to significantly reduce its prices or if it fails to win new contracts, this could have a material adverse effect on its business, financial condition and results of operations.

11 11 Risks relating to the Bonds Credit risks An investment in the Bonds carries a credit risk relating to the Company. The investor s ability to receive payments under the Terms and Conditions is therefore dependent on the Company s ability to meet its payment obligations, which in turn is largely dependent upon the performance of the Company s business, operating results and financial position, which in turn are affected by several factors, a number of which have been discussed above. An increased credit risk may cause the market to charge the Bonds a higher risk premium, which would have an adverse effect on the value of the Bonds. Another aspect of the credit risk is that any deterioration in the financial position of the Company may entail a lower credit-worthiness and the possibility for the Company to receive debt financing may be impaired when the Bonds mature. Refinancing risk The Group may be required to refinance certain or all of its outstanding debt, including the Bonds. The Group s ability to successfully refinance its debt obligations is dependent upon the conditions of the capital markets and the Group s financial position at such time. Even if the markets and the Company s financial position improve, the Group s access to financing sources may not be available on acceptable terms, or at all. The Group s inability to refinance its debt obligations on acceptable terms, or at all, could have a material adverse effect on the Company s and the Group s business, financial position and results of operations and on the bondholders recovery under the Bonds. Interest rate risks The value of the Bonds is dependent on several factors, one of the most significant being the market interest rates. Investments in the Bonds carry a risk that the market value of the Bonds may be adversely affected by an increase in market interest rates. Liquidity risks The Company has undertaken to apply for listing of the Bonds on Nasdaq Stockholm. However, it is not certain that the Bonds will be admitted to trading. Even if securities are admitted to trading on a regulated market, there is not always active trading in the securities. Hence, there may not always be a liquid market for trading in the Bonds or, if a liquid market develops, that such liquidity will be maintained, even if the Bonds are listed. This may result in the bondholders being unable to sell their Bonds when desired or at a price level which allows for a profit comparable to similar investments with an active and functioning secondary market. Lack of liquidity in the market may have a negative impact on the market value of the Bonds. Furthermore, the nominal value of the Bonds may not be indicative compared to the market price of the Bonds if the Bonds are admitted for trading on Nasdaq Stockholm. It should also be noted that during a given time period it may be difficult or impossible to sell the Bonds (at all or at reasonable terms) due to, for example, severe price fluctuations, close down of the relevant market or trade restrictions imposed on the market. The market price of the Bonds may be volatile The market price of the Bonds could be subject to significant fluctuations in response to actual or anticipated variations in the Company s and the Group s operating results and those of its

12 12 competitors, adverse business developments, changes to the regulatory environment in which the Group operates, changes in financial estimates by securities analysts and the actual or expected sale of a large number of Bonds, as well as other factors. In addition, in recent years the global financial markets have experienced significant price and volume fluctuations, which, if repeated in the future, could adversely affect the market price of the Bonds without regard to the Company s and the Group s operating results, financial position or prospects. Structural subordination and insolvency of subsidiaries and affiliated companies All assets are owned by and all revenues are generated in subsidiaries and affiliated companies of the Company. The subsidiaries and affiliated companies are legally separated from the Company and have no obligation to make payments to the Company of any surpluses generated from their business. The subsidiaries and affiliated companies ability to make payments is restricted by, among other things, the availability of funds, corporate restrictions and local law. Furthermore, in the event of insolvency, liquidation or a similar event relating to one of the subsidiaries or affiliated companies, all creditors of such subsidiary would be entitled to payment in full out of the assets of such subsidiary before any entity within the Group, as a shareholder, would be entitled to any payments. Thus, the Bonds are structurally subordinated to the liabilities of the subsidiaries and affiliated companies. There is a risk that the Group and its assets would not be protected from any actions by the creditors of any subsidiary of the Group, whether under bankruptcy law, by contract or otherwise. In addition, defaults by, or the insolvency of, certain subsidiaries and affiliated companies of the Company could result in the obligation of the Company to make payments under parent company financial or performance guarantees in respect of such subsidiaries or affiliated companies obligations or the occurrence of cross defaults on certain borrowings of the Group. Risks relating to early redemption, voluntary prepayment and equity claw back Under the Terms and Conditions, subject to certain conditions, the Company has reserved the ability to redeem all outstanding Bonds before the final maturity date. If the Bonds are redeemed or prepaid before the final maturity date, the bondholders have the right to receive an early redemption amount which exceeds the nominal amount (except on the date falling 57 months after the Issue Date up to the final maturity date, where the call option amount is 100 per cent of the nominal amount of each Bond). The Company may repay an amount not exceeding SEK 100,000 of principal debt outstanding per Bond at one occasion per each twelve month period during the first three years after the Issue Date (without carry-back or carry forward), in which case all outstanding Bonds shall be partially repaid by way of reducing the nominal amount of each Bond pro rata. The repayment per Bond shall equal the repaid percentage of the nominal amount together with a premium and accrued but unpaid interest on the repaid amount. The Company may also at one occasion, in connection with an initial public offering of shares in a Group Company, repay up to 30 per cent of the total initial nominal amount (provided that at least 70 per cent of the total initial nominal amount per Bond remains outstanding after such repayment), in which case all outstanding Bonds shall be partially repaid by way of reducing the nominal amount of each Bond pro rata (the Equity Claw Back ). The repayment per Bond shall equal the repaid percentage of the nominal amount together with accrued but unpaid interest on the repaid amount, plus a premium.

13 13 However, there is a risk that the market value of the Bonds is higher than the early redemption amount, voluntary prepayment amount or the Equity Claw Back and that it may not be possible for bondholders to reinvest such proceeds at an effective interest rate as high as the interest rate on the Bonds and may only be able to do so at a significantly lower rate. No action against the Company and bondholders representation In accordance with the Terms and Conditions, the agent will represent all bondholders in all matters relating to the Bonds and the bondholders are prevented from taking actions on their own against the Company. Consequently, individual bondholders do not have the right to take legal actions to declare any default by claiming any payment from or enforcing any security granted by the Company and may therefore lack effective remedies unless and until a requisite majority of the bondholders agree to take such action. However, the possibility that a bondholder, in certain situations, could bring its own action against the Company (in breach of the Terms and Conditions) cannot be ruled out, which could negatively impact an acceleration of the Bonds or other action against the Company. To enable the agent to represent bondholders in court, the bondholders may have to submit a written power of attorney for legal proceedings. The failure of all bondholders to submit such a power of attorney could negatively affect the legal proceedings. As stipulated in the Terms and Conditions, the agent will in some cases have the right to make decisions and take measures that bind all bondholders. Consequently, the actions of the agent in such matters could impact a bondholder s rights under the Terms and Conditions in a manner that would be undesirable for some of the bondholders. Bondholders meetings The Terms and Conditions include certain provisions regarding bondholders meetings. Such meetings may be held in order to resolve on matters relating to the bondholders interests. The Terms and Conditions allow for stated majorities to bind all bondholders, including bondholders who have not taken part in the meeting and those who have voted differently to the required majority at a duly convened and conducted bondholders meeting. Consequently, the actions of the majority in such matters could impact a bondholder s rights in a manner that would be undesirable for some of the bondholders. Restrictions on the transferability of the Bonds The Bonds have not been and will not be registered under the Securities Act, or any U.S. state securities laws. Subject to certain exemptions, a bondholder may not offer or sell the Bonds in the United States. The Company has not undertaken to register the Bonds under the Securities Act or any U.S. state securities laws or to effect any exchange offer for the Bonds in the future. Furthermore, the Company has not registered the Bonds under any other country s securities laws. Each potential investor should read the information under section Important information above for further information about the transfer restrictions that apply to the Bonds. It is each bondholder s obligation to ensure that its offers and sales of Bonds comply with all applicable securities laws. Risks relating to clearing and settlement in Euroclear s book-entry system The Bonds are affiliated to Euroclear s account-based system, and no physical notes have been, or will be, issued. Clearing and settlement relating to the Bonds is carried out within Euroclear s book-entry system, as are payment of interest and repayment of principal. Investors are therefore

14 14 dependent on the functionality of Euroclear s account-based system for timely and accurate payment. Amended or new legislation The Terms and Conditions are based on Swedish law in force at the issue date of the Bonds. The impact of any possible future legislative measures or changes or modifications to administrative practices may give rise to risks which are not possible to foresee. Amended or new legislation and administrative practices may adversely affect the investor s ability to receive payment under the Terms and Conditions. Security arrangements As continuing security for the due and punctual fulfilment of the Company s and/or its relevant subsidiaries obligations under the Finance Documents, the Company (and the relevant subsidiaries and shareholders, as the case may be) has pledged (i) all present and future money claims under the Intercompany Loans pursuant to the Intercompany Loans Pledge Agreements and the Issuer Intercompany Loans Pledge Agreement, (ii) all shares in Textilia Group AB and the Pledged Group Companies pursuant to the Textilia Group Share Pledge Agreement or the Share Pledge Agreements (as applicable), (iii) all interests in the Pledged Limited Partnerships pursuant to the Limited Partnership Pledge Agreements, (iv) all Business Mortgage Certificates issued by Textilia Tvätt & Textilservice AB pursuant to the Business Mortgage Agreement and (v) the Mortgage Certificate relating to the real estate Karlskrona Svarvaren 6 pursuant to the Pledge over Mortgage Certificate Agreement (capitalised terms used in this paragraph, that are not defined elsewhere in this Prospectus, have the meaning set forth below in section Terms and Conditions for the Bonds ). There is a risk that the pledged assets will not be sufficient for the bondholders should the pledges be enforced. Save for the security created under the abovementioned pledges, the Bonds represent unsecured obligations of the Company. This means that in the event of bankruptcy, reorganisation or winding-up of the Company, the holders of the Bonds normally receive payment after any priority creditors have been paid in full. Each investor should be aware that there is a risk that an investor in the Bonds may lose all or part of their investment if the Company or the Group is declared bankrupt, carries out a reorganisation or is wound-up.

15 15 Responsible for the information in the Prospectus The Company issued the Bonds on 4 April This Prospectus has been prepared in relation to the Company applying for admission to trading of the Bonds on Nasdaq Stockholm, in accordance with the Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council and the rules and regulations in Chapter 2 of the Swedish Financial Instruments Trading Act, each as amended. The Company is responsible for the information given in this Prospectus. The Company confirms that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of the Company s knowledge, in accordance with the actual conditions and that no information has been omitted which may distort the picture of the Company. The information in the Prospectus and in the documents incorporated by reference which derive from third parties has, as far as the Company is aware and can judge on basis of other information made public by the respective third party, been correctly represented and no information has been omitted which may serve to render the information misleading or incorrect. The board of directors is responsible for the information given in this Prospectus only under the conditions and to the extent set forth in Swedish law. The board of directors confirms that, having taken all reasonable care to ensure that such is the case, the information in this Prospectus is, to the best of the board of directors knowledge, in accordance with the facts and contains no omissions likely to affect its import. Stockholm on 25 March 2015 LAVARE HOLDING AB (PUBL) The board of directors

16 16 The Bonds in brief This section contains a general and broad description of the Bonds. It does not claim to be comprehensive or cover all details of the Bonds. Potential investors should therefore carefully consider this Prospectus as a whole, including the documents incorporated by reference (see below section Overview of financial reporting and documents incorporated by reference ) and the full Terms and Conditions for the Bonds, which can be found in section Terms and Conditions for the Bonds, before a decision is made to invest in the Bonds. Concepts and terms defined in section Terms and Conditions for the Bonds are used with the same meaning in this section unless otherwise is explicitly understood from the context or otherwise defined in this Prospectus. The Bonds are debt instruments (Sw. skuldförbindelser), intended for public market trading, which confirm that each Holder has a claim against the Company. The Company resolved to issue the Bonds on 25 March The purpose of the Bond Issue was to (i) repay the Refinancing Debt, (ii) recapitalise the Group and (iii) finance the Company s acquisition of all of the shares in Textilia Group in accordance with the Share Sale and Subscription Agreement and the Transfer Notes. Any remaining Net Proceeds shall be applied towards payment of Transaction Costs and for general corporate purposes. The proceeds from any Subsequent Bond Issue (after deduction has been made for any Transaction Costs) shall be used for general corporate purposes. The Issue Date for the Bonds was 4 April The Bonds will mature on 4 April The aggregate nominal amount of the Bonds is maximum SEK 700,000,000 represented by Bonds denominated in SEK with ISIN SE , each with a Nominal Amount of SEK 1,000,000. The Bonds were issued at a price equal to 100 per cent of the Nominal Amount. As of the date of this Prospectus, SEK 585,000,000 of the bond loan has been issued. The Bonds have been issued in accordance with Swedish law and are connected to the accountbased system of Euroclear. This means that the Bonds are registered on behalf of the Holders on a securities account (Sw. VP-konto). No physical notes have been or will be issued. Payment of principal, interest and, if applicable, withholding of preliminary tax will be made through Euroclear s book-entry system. The Bonds constitute direct, general, unconditional, unsubordinated and secured obligations of the Company and shall at all times rank pari passu and without any preference among them. The Bonds are secured by the security provided pursuant to the Security Documents. The Company shall redeem all outstanding Bonds at 100 per cent of the Nominal Amount together with accrued but unpaid interest on the Final Maturity Date, unless previously redeemed, repurchased or cancelled in accordance with section 11 Redemption and repayment of the Bonds or section 15 Termination of the Bonds of the Terms and Conditions. The Company may choose to redeem all, but not only some, of the Bonds on any Business Day at a redemption price equal to the Make Whole Amount or the relevant Call Option Amount, in both cases together with accrued but unpaid interest (see further section 11.3 Early voluntary redemption by the Issuer (call option) of the Terms and Conditions). The Company may repay an amount not exceeding SEK 100,000 of principal debt outstanding per Bond (rounded off to a multiple of SEK 1,000) at one occasion per each twelve month period during the first three years after the Issue Date (without carry-back or carry forward), in which

17 17 case all outstanding Bonds shall be partially repaid by way of reducing the Nominal Amount of each Bond pro rata (see further section 11.4 Voluntary partial repayment of the Terms and Conditions). Payment of the Nominal Amount and/or interest will be made to the person who is a Holder on the Record Date immediately preceding the relevant payment date. Payments shall be made in SEK. The right to receive payment of the Nominal Amount is time-barred and becomes void ten years from the relevant Redemption Date, unless the limitation period is duly interrupted. The Bonds bear interest from, but excluding, the Issue Date up to, and including, the relevant Redemption Date at floating rate of STIBOR (3 months) per cent. The interest is paid quarterly in arrears on each Interest Payment Date and is calculated on the basis of the actual number of days in the Interest Period in respect of which payment is being made divided by 360 (actual/360-days basis). The Interest Payment Dates are 4 January, 4 April, 4 July and 4 October each year (with the first Interest Payment Date on 4 July 2014 and the last Interest Payment Date being the Final Maturity Date). The right to receive payment of interest is time-barred and becomes void three years from the relevant due date for payment. Nordic Trustee & Agency AB (publ) is initially acting as Agent and Security Agent in relation to the Bonds, and, if relevant, any other matter within its authority or duty in accordance with the Finance Documents. Even without a separate authorisation from the Holders and without having to obtain any Holder s consent (if not required to do so under the Terms and Conditions), the Agent/Security Agent, or a person appointed by the Agent/Security Agent, is entitled to represent the Holders in every matter concerning the Bonds and the Finance Documents. The Agent/Security Agent is authorised to act on behalf of the Holders whether or not in court or before an executive authority (including any legal or arbitration proceeding relating to the perfection, preservation, protection or enforcement of the Bonds). Each Holder shall immediately upon request by the Agent/Security Agent provide the Agent/Security Agent with any such documents, including a written power of attorney (in form and substance satisfactory to the Agent/Security Agent), as the Agent/Security Agent deems necessary for the purpose of carrying out its duties under the Finance Documents. The Agent/Security Agent is under no obligation to represent a Holder which does not comply with such request of the Agent/Security Agent. Each of the Company, the Agent and Holders representing at least 10 per cent of the Adjusted Nominal Amount, may request that a Holders Meeting is convened (see further section 18 Holders Meeting of the Terms and Conditions) or request a Written Procedure (see further section 19 Written Procedure of the Terms and Conditions). Such Holders Meeting or Written Procedure may, upon votes representing a relevant majority of Holders eligible for voting, cause resolutions to be validly passed and binding on all Holders. An agreement was entered into between the Agent/Security Agent and the Company on or before the Issue Date regarding, inter alia, the remuneration payable to the Agent/Security Agent. If the Bonds have been duly declared due and payable due to an Event of Default, the available funds shall firstly be applied towards payment of all costs and expenses incurred by and any remuneration payable to the Agent/Security Agent under the Finance Documents, secondly towards payment of accrued but unpaid Interest under the Bonds, thirdly towards payment of any unpaid principal under the Bonds and fourthly, towards payment of any other costs or outstanding amounts unpaid under the Finance Documents. Any excess funds shall be paid to the Company.

18 18 The Bonds are freely transferrable and trading can occur from the Issue Date. Holders may, however, be subject to purchase or transfer restrictions with regard to the Bonds, as applicable from time to time under local laws to which a Holder may be subject (due to, e.g., its nationality, its residency, its registered address or its place(s) for business). Each Holder must ensure compliance with local laws and regulations applicable at their own cost and expense. All Bond transfers are subject to the Terms and Conditions and the Terms and Conditions are automatically applicable in relation to all Bond transferees upon the completion of a transfer. To simplify trading in the Bonds, the Company intends to apply for listing of the Bonds on Nasdaq Stockholm in connection with the Swedish Financial Supervisory Authority s approval of this Prospectus. The number of Bonds being admitted to trading if the application is approved by Nasdaq Stockholm is 585. The earliest date for admitting the Bonds to trading on Nasdaq Stockholm is on or about 27 March Subsequent Bonds issued within the framework amount of SEK 700,000,000 under the Terms and Conditions may be admitted to trading pursuant to this Prospectus within one year after the approval of this Prospectus by the Swedish Financial Supervisory Authority. The fact that an application regarding listing of the Bonds on Nasdaq Stockholm has been submitted does not mean that the application will be approved. The total expenses of the admission to trading of the Bonds are estimated to amount to SEK 240,000. The Terms and Conditions include an undertaking by the Company to ensure (i) that the Bonds are listed on the corporate bond list of Nasdaq Stockholm or, if such admission to trading is not possible to obtain or maintain, admitted to trading on another Regulated Market within 12 months after the Issue Date, (ii) that the Bonds, once listed on the corporate bond list of Nasdaq Stockholm (or any other Regulated Market, as applicable), continue being listed thereon for as long as any Bond is outstanding and (iii) that upon any Subsequent Bond Issue, the volume of Bonds listed on the corporate bond list of Nasdaq Stockholm (or any other Regulated Market, as applicable) promptly, but not later than 10 Business Days after the relevant issue date, is increased accordingly.

19 19 The Company and its operations Introduction Lavare Holding AB (publ) is a public limited liability company registered in Sweden with registration number , having its registered address at c/o Textilia, P.O. Box 1544, SE Örebro, Sweden. The Company was formed on 9 October 2013 and registered with the Swedish Companies Registration Office on 9 January The Company is governed by Swedish law including, but not limited to, the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)) and the Swedish Annual Accounts Act (Sw. årsredovisningslagen (1995:1554)). Share capital, shares and ownership structure According to its articles of association, the Company s share capital shall be no less than SEK 500,000 and not more than SEK 2,000,000 divided into no less than 500,000 shares and not more than 2,000,000 shares. The Company s current share capital amounts to SEK 567,034 divided among 567,034 shares. Accentseven 2012 Holding Ltd holds 82.5 per cent of the shares in the Company. The remaining shares are, directly or indirectly, held by current (16.6 per cent) and previous (0.9 per cent) management executives and board members. The Company is the parent company in the Group. All of the Group s assets and revenues relate to the Company s subsidiaries. Accordingly, the Company is dependent upon receipt of sufficient income related to the operation of and the ownership in such entities to enable it to make payments under the Bonds. The structure of the Group, including the owners of the Company, is set out in the schedule below. All subsidiaries are wholly-owned unless otherwise indicated. Accentseven 2012 Holding Ltd 82.5% Management and board of directors 17.5% Lavare Holding AB (publ) Textilia Group AB Textilia AB 57.3% Tvättlången KB Tvättkarlen KB Textilia Tvätt & Textilservice AB Texi AS (Norway) Simören KB Texi AB SimRim KB

20 20 To ensure that the control over the Company is not abused, the Company complies with the Swedish Companies Act. In addition, the Company acts in accordance with the rules of procedure of the board of directors and the instructions for the managing director adopted by the Company. Business and operations According to the Company s articles of association, adopted on 19 March 2014, the objects of the Company s business is to, directly or indirectly, hold and manage shares and interests in subsidiaries and provide administrative services for these companies and any other activities compatible therewith. Thus, the Company conducts its business through holdings in its subsidiaries. The Group primarily conducts its business in Sweden, but also in Norway. The Group is a leading textiles services provider in Sweden, primarily for the health & social care sector. Approximately 78 per cent of the Group s sales are derived from Swedish county councils and municipalities. The Group is a full service provider of textile services and products, of which bed linen and personnel clothes together account for more than 60 per cent of the deliveries. In Sweden, the Group has five full service facilities where it carries out its production, except for a small share of specialty goods which is being outsourced to subcontractors. The Group offers nationwide textile services business in Sweden based on local management of customer relationships together with strong support from the operational facilities. As of 31 December 2014, the Group had approximately 439 of employees. Litigation The Group currently has identified contamination at its facilities in Långsele and Karlskrona where contamination of PCE and its derivatives have been detected in the ground. The contamination stems from previous dry-cleaning operations no longer carried out at the facilities. In both cases, the environmental and technical reports carried out conclude that there is no direct health hazard for the employees or for surrounding inhabitants, neither from the water nor the air. Sanitation of the ground is, however, deemed necessary at both facilities but the method to be used is not yet decided upon by the relevant authorities. In Långsele the Group s allocated share of any sanitation costs is three per cent (the rest is attributable to public authorities). In Karlskrona the Group s allocated share of any sanitation cost is 70 per cent (the rest is attributable to public authorities). The management of the Group cannot at this stage provide an expected date when the sanitation works will commence or when an agreement may be reached. Both matters have been ongoing for some time but the Group are cooperating with the authorities in relation to the contaminations and investigations in order to reach the best possible result and to avoid any future claims. For further information, please see above under section Environmental risks. Save for the above, during the previous twelve months, the Company has not been, and is not aware of any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened) which may have, or have had in the recent past, significant effects on the Company s and/or the Group s financial position or profitability.