XXL ASA – Waiver agreement with bank consortium, fully underwritten share issue, trading update and Austria exit

21 Dec 2022 07:30 CET

NOT FOR DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN
OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, HONG KONG OR JAPAN, OR
ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL

XXL ASA – Waiver agreement with bank consortium, fully underwritten share issue,
trading update and Austria exit

XXL ASA (“XXL” or the “Company”) has obtained a waiver agreement with its bank
consortium, following which only liquidity covenants will apply from December
2022 to November 2023 before returning to leverage covenant in December 2023.
The agreement is subject to the Company raising a gross amount of NOK 500
million in new equity where the net proceeds shall be applied to repay loan
facilities.

To facilitate the equity raise, the Company today updates the market on its
fourth quarter 2022 trading. Total operating revenue for the quarter is expected
to be in the range of NOK 2.3-2.4 billion with significantly lower gross margins
as a result of the Company focusing on liquidity, leading to an estimated EBITDA
in the range of NOK 50-100 million. Liquidity reserves by the end of December
2022 are estimated to be around NOK 600 million.

Further, the Board of Directors of the Company (the “Board”) has now concluded
its strategic review process of XXL’s operations in Austria and decided that the
Company shall exit the Austrian market during 2023.

Interim CEO and CFO in XXL ASA, Stein Eriksen, commented: “XXL has taken Norway,
Sweden and Finland by storm, but we have not been able to create the same
success story in Austria. Many people have put in a really good effort during
more than five years, but we have not managed to create a profitable business.
This is unfortunate, but still the reality. We have therefore taken the tough
decision to exit the Austrian market next year. This is sad, but also necessary
for XXL. At the same time, we are pleased to have secured a new financing
solution that is backed by both banks and owners. We will now focus our business
to make sure that XXL is the preferred destination for sports and outdoor
enthusiasts in the Nordics.”

WAIVER AGREEMENT
XXL has agreed with its bank consortium, consisting of DNB Bank ASA and Nordea
Bank Abp, filial i Norge, on new covenants going forward:
- Liquidity covenant only from December 2022 to November 2023, being in the
range of NOK 200-300 million in H1 2023 and NOK 400-600 million in H2 2023.
- The net interest-bearing debt/EBITDA covenant shall be 3x from December 2023
and forward, excluding IFRS 16 effects and adjusted for certain exceptional
items.
- No distribution of dividends or share buy-back during the waiver period ending
November 2023.
The waiver agreement with the bank consortium is subject to the Company raising
new equity in the gross amount of NOK 500 million, where the net proceeds shall
be used to repay loan facilities. After this, the maximum principal amount that
may be outstanding under the loan facilities will be reduced from NOK 1.8
billion to NOK 1.3 billion.

FULLY UNDERWRITTEN SHARE ISSUE
XXL has entered into an underwriting agreement (the “UWA”) securing NOK 500
million in gross proceeds from a private placement of new shares to be conducted
after close of trading on the Oslo Stock Exchange on 21 December 2022 (the
“Private Placement”). The Subscription Price in the Private Placement will be
set by the Board, in consultation with the Managers, following the bookbuilding
for the Private Placement. The Private Placement will be subject to approval by
an extraordinary general meeting of the Company.

Under the UWA, Altor Invest 5 AS and Altor Invest 6 AS (together, “Altor”) have
pre-committed to subscribe NOK 119 million (their pro-rata share of the Private
Placement), Dolphin Management AS to subscribe for NOK 50 million, Arctic AM to
subscribe for NOK 30 million and Funkybiz AS to subscribe for NOK 10 million,
giving a total pre-subscription at the Subscription Price set in the
bookbuilding in the amount of NOK 209 million. Further, the Private Placement
has received support from other large shareholders including Ferd AS who has
indicated that they will subscribe for their pro-rata portion of the voting
shares in the Private Placement. In addition, Altor have guaranteed full
subscription of the Private Placement at a subscription price of NOK 3.70,
setting a floor for the pricing of the Offer Shares.

If Altor by reason of being allotted shares under their underwriting commitment
become the owner of more than 1/3 of the shares in the Company, then they will
receive convertible non-voting class B shares in order for them not to trigger
mandatory offer obligations.

Altor and Dolphin Management AS are represented on the Board. Funkybiz AS is
owned by chairman of the Board Hugo Maurstad.

The timeline and the detailed terms of the Private Placement will be announced
in a separate stock exchange announcement, expected published after 16:30 CET
today.

Following completion of the Private Placement, the Board will consider a
subsequent offering of new shares (the “Subsequent Offering”), including size of
such offering, to shareholders not allocated shares in the Private Placement.
The subscription price in any such Subsequent Offering will be equal to the
price in the Private Placement. Shareholders of the Company as of close of
trading on 21 December 2022, as recorded in VPS on 23 December 2022, who are not
allocated shares in the Private Placement and were not contacted during the
wallcrossing event prior to publication of this announcement, and who are not
resident in a jurisdiction where such offering would be unlawful, or would (in
jurisdictions other than Norway) require any prospectus filing, registration or
similar action (“Eligible Shareholders”), will receive subscription rights in
the Subsequent Offering.

The Subsequent Offering will, inter alia, be conditional upon (i) completion of
the Private Placement, (ii) a resolution of the extraordinary general meeting,
expected to be held on or about 17 January 2023, authorizing the Board to issue
the new shares in the Subsequent Offering, (iii) the trading price of the
Company's shares exceeding the subscription price, and (iv) approval and
publication of a prospectus regarding, inter alia, the Subsequent Offering.

The Board has considered the structure of the equity raise in light of the equal
treatment obligations under the Norwegian Public Limited Companies Act, the
Norwegian Securities Trading Act, the rules on equal treatment under Oslo Rule
Book II for companies listed on the Oslo Stock Exchange and the Oslo Stock
Exchange's Guidelines on the rule of equal treatment, and the Board is of the
opinion that the transaction structure is in compliance with these requirements.


The share issuance will be carried out as a private placement in order for the
Company to complete the equity raise in a manner that is efficient and closely
coordinated with the waiver process with its lending banks. Certainty of at
least NOK 500 million in new equity is a condition under the waiver agreement
with the lending banks, and that certainty has been provided by the
pre-commitments and underwriting of the Private Placement. With regards to
timing of the transaction the Company finds it beneficial to execute prior to
year-end in order for the Company's debt not to be reclassified to short term
debt. The subscription price will be set on the basis of a publicly announced
bookbuilding process and thus reflecting market pricing of the shares, with a
minimum price of NOK 3.70 to protect the Company's shareholders against
unexpected results resulting in high dilution.

Further, the Subsequent Offering, if implemented, will secure that Eligible
Shareholders will receive the opportunity to subscribe for new shares at the
same subscription price as that applied in the Private Placement.

Based on overall where inter alia the above factors and the current weak retail
market and equity capital markets, the Board has considered the proposed
transaction structure to be in the common interest of the Company and its
shareholders.

Q4 2022 RESULTS TRADING UPDATE
XXL’s markets have continued to be challenging in the fourth quarter 2022 driven
by low consumer confidence and reduced demand for sporting goods in general. The
market is characterized by high inventory levels in the whole value chain,
resulting in aggressive pricing and excessive campaign activities. Under such
retail conditions XXL is prioritizing strict liquidity with sales and inventory
actions over gross margins. For XXL the sales have been lower than last year,
with October being a slow and weak month. Sales picked up during the Black Week
campaign with growth in all markets but on low gross margins. December started
soft but has improved with better winter conditions, however still with
significant campaign intensity in the market.

XXL estimates total operating revenues for the Group in Q4 2022 to be in the
range of NOK 2.3-2.4 billion (NOK 2.7 billion). High campaign shares and heavy
discounting in the markets have contributed to significantly lower gross
margins. As a result, EBITDA for the quarter is expected to be in the range of
NOK 50-100 million (NOK 403 million) before effects deriving from the exit of
the Austrian market and write-down of inventory, if any, in connection with
completion of the fourth quarter 2022 financial statements.

XXL has continued to focus on reducing the inventory level of the Group and the
inventory is expected to be around NOK 2.7 billion by the end of the quarter. In
the fourth quarter, XXL has chosen not to fully utilize its cash discounts
towards its suppliers and thereby increased the amount of payables compared to
Q4 2021. Liquidity reserves are estimated to be around NOK 600 million (NOK
1,093 million), and net interest-bearing debt estimated to be NOK 1.2 billion
(NOK 707 million).

It should be noted that activities during the remaining trading days in December
2022 are important for the overall performance of XXL in Q4, and uncertainty are
thus attached to the above estimated revenue, EBITDA and liquidity figures. XXL
will present the actual fourth quarter 2022 figures on 8 February 2023.

XXL is accelerating programs to adjust costs and purchasing volumes to sales.
XXL has flexibility in its agreements and is currently reducing the volumes
significantly for the upcoming seasons. Also, XXL will reduce its costs with
less store staffing, increase marketing effectiveness as well as reducing the HQ
cost base. The ambition is at least NOK 120 million in cost savings in 2023, but
this will be partly counteracted by increased energy prices and KPI adjustments
under rental contracts. In addition, XXL targets to reduce CAPEX, expected to be
around NOK 150-200 million per year going forward. The key strategic focus is
still on an ambitious E-commerce growth plan and continue improving category
strategy and plans and exiting the Austrian market. The longer-term target is
“40/30/10” on gross margin, OPEX and EBITDA respectively and when excluding IFRS
16 effects.

EXITING AUSTRIA
The Board has concluded its strategic review process of XXL’s operations in
Austria. The decision is to exit the Austrian market during 2023 and the Company
is working on several different solutions, including sale of the Austrian
entity. It is already decided to close down 3 of the 8 stores as well as the
central warehouse facility. XXL has an ambition of having no negative cash
effect in 2023 from the Austrian operations and exit.

Consequently, the Austrian operations will according to IFRS 5 be classified as
discontinued operations as of 31 December 2022 and treated as asset held for
sale and not be part of the EBITDA for the Group. YTD Q3 2022 the EBITDA loss
excluding IFRS 16 effects in Austria was NOK 55 million including the central
warehouse facility. XXL will in its Q4 2022 interim financial statements restate
the preceding three quarters to show the effects of the effects of the exiting
the Austrian business segment and closure of the central warehouse facility in
Austria.

Managing Director of Austria, Magnus Kreuger, will step down after April 2023 to
pursue opportunities outside XXL.

ADVISORS
DNB Markets, a part of DNB Bank ASA, and Nordea Bank Abp, filial i Norge act as
managers (the “Managers”) for the Private Placement and the Subsequent Offering.
Advokatfirmaet Thommessen AS is acting as legal advisor to XXL in relation to
the Private Placement and the Subsequent Offering.

For further queries, please contact:
Investor Relations
Tolle O. R. Grøterud
Tel: +47 90 27 29 59
E-mail: ir@xxlasa.com

Press contact:
Andreas Nyheim
Tel: + 47 952 11 779
E-mail: presse@xxl.no

This information is considered to be inside information pursuant to the EU
Market Abuse Regulation and is subject to the disclosure requirements pursuant
to section 5-12 of the Norwegian Securities Trading Act. This stock exchange
announcement was published by Tolle O. R. Grøterud, Investor Relations Officer
at XXL ASA, on 21 December 2022 at 07:30 CET.

ABOUT XXL ASA
XXL is a leading sports retailer with stores and e-commerce in Norway, Sweden,
Finland, Denmark and Austria. It is the largest among the major sports retailers
in the Nordics. XXL pursues a broad customer appeal, offering a one stop shop
experience with a wide range of products for sports, hunting, skiing, biking and
other outdoor activities. XXL’s concept is to have the largest stores with the
best prices and the widest assortment of products, focusing on branded goods.

ALTERNATIVE PERFORMANCE MEASURES (APM)
Certain financial measures and ratios related thereto in this release, including
gross profit / gross margin, EBIT, EBITDA, EBITDA ex IFRS 16 effects, OPEX,
CAPEX, net interest-bearing debt, leverage ratio, liquidity reserve / liquidity
covenant (collectively, the “Non-GAAP Measures”), are not specifically defined
under IFRS or any other generally accepted accounting principles. These measures
are presented in this release because they are among the measures used by
Management to evaluate the cash available to fund ongoing, long-term obligations
and they are frequently used by other interested parties for valuation purposes
or as a common measure of the ability of a company to incur and meet debt
service obligations. These measures may not be comparable to other similarly
titled measures of other companies and are not measurements under IFRS or other
generally accepted accounting principles, and you should not consider such items
as alternatives to profit for the year, total operating revenues, operating
income or any other performance measures derived in accordance with IFRS, and
they may be different from similarly titled measures used by other companies.
Please also see our quarterly reports or annual reports for further information,
reconciliations and historical figures.
1) EBIT
Our EBIT represents operating income.
2) EBITDA
Earnings before interest, tax, depreciation and amortisation (EBITDA) is a key
financial parameter for XXL. Our EBITDA represents operating income plus
depreciation
3) EBITDA ex IFRS 16 effects
IFRS 16 effects affecting EBITDA and EBIT IFRS 16 was implemented for the Group
1 January 2019. EBITDA ex IFRS 16 effects and EBIT ex IFRS 16 effects represent
our EBITDA and EBIT if IFRS 16 had not been implemented, respectively
4) Gross profit / Gross margin
Gross profit represents operating revenue less cost of goods sold. Gross margin
is gross profit in per cent of revenue
5) Net interest-bearing debt (NIBD)
Net interest-bearing liabilities is defined as non-current interest bearing debt
and current interest-bearing liabilities less cash and cash equivalents. NIBD
does not include lease liabilities due to IFRS 16. Net debt is a measure of the
Group’s net indebtedness that provides an indicator of the overall balance sheet
strength
6) OPEX
OPEX is defined as other operating expenses including personnel expenses, but
excluding depreciation and amortization
7) CAPEX
Capital expenditure is the sum of purchases of fixed assets and intangible
assets as used in our cash flow. CAPEX is a measure of investments made in the
operations in the relevant period and is useful to users of XXL’s financial
information in evaluating the capital intensity of the operations
8) Leverage ratio
Leverage ratio is defined as NIBD/EBITDA (ex IFRS 16), a measure for the
strength of our financial position
9) Liquidity reserve / liquidity covenant
Our liquidity reserve is defined as our available cash and cash equivalents plus
available liquidity through overdraft and credit facilities

IMPORTANT NOTICE:
These materials do not constitute or form a part of any offer of securities for
sale or a solicitation of an offer to purchase securities of the Company in the
United States or any other jurisdiction. The securities of the Company may not
be offered or sold in the United States absent registration or an exemption from
registration under the U.S. Securities Act of 1933, as amended (the "U.S.
Securities Act"). The securities of the Company have not been, and will not be,
registered under the U.S. Securities Act. Any sale in the United States of the
securities mentioned in this communication will be made solely to "qualified
institutional buyers" as defined in Rule 144A under the U.S. Securities Act. No
public offering of the securities will be made in the United States.

In any EEA Member State, this communication is only addressed to and is only
directed at qualified investors in that Member State within the meaning of the
EU Prospectus Regulation, i.e., only to investors who can receive the offer
without an approved prospectus in such EEA Member State. The expression "EU
Prospectus Regulation" means Regulation (EU) 2017/1129 of the European
Parliament and of the Council of 14 June 2017 (together with any applicable
implementing measures in any Member State).

In the United Kingdom, this communication is only addressed to and is only
directed at Qualified Investors who (i) are investment professionals falling
within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (as amended) (the "Order") or (ii) are persons falling
within Article 49(2)(a) to (d) of the Order (high net worth companies,
unincorporated associations, etc.) (all such persons together being referred to
as "Relevant Persons"). These materials are directed only at Relevant Persons
and must not be acted on or relied on by persons who are not Relevant Persons.
Any investment or investment activity to which this announcement relates is
available only to Relevant Persons and will be engaged in only with Relevant
Persons. Persons distributing this communication must satisfy themselves that it
is lawful to do so.

The Target Market Assessment is without prejudice to the requirements of any
contractual, legal or regulatory selling restrictions in relation to the
Transaction. For the avoidance of doubt, the Target Market Assessment does not
constitute: (a) an assessment of suitability or appropriateness for the purposes
of MiFID II; or (b) a recommendation to any investor or group of investors to
invest in, or purchase, or take any other action whatsoever with respect to the
Company's shares. Each distributor is responsible for undertaking its own Target
Market Assessment in respect of the Company's shares and determining appropriate
distribution channels.

Matters discussed in this announcement may constitute forward-looking
statements. Forward-looking statements are statements that are not historical
facts and may be identified by words such as "anticipate", "believe",
"continue", "estimate", "expect", "intends", "may", "should", "will" and similar
expressions. The forward-looking statements in this release are based upon
various assumptions, many of which are based, in turn, upon further assumptions.
Although the Company believes that these assumptions were reasonable when made,
these assumptions are inherently subject to significant known and unknown risks,
uncertainties, contingencies and other important factors which are difficult or
impossible to predict and are beyond its control. Such risks, uncertainties,
contingencies and other important factors could cause actual events to differ
materially from the expectations expressed or implied in this release by such
forward-looking statements. The information, opinions and forward-looking
statements contained in this announcement speak only as at its date, and are
subject to change without notice.

This announcement is made by and, and is the responsibility of, the Company. The
Managers are acting exclusively for the Company and no one else and will not be
responsible to anyone other than the Company for providing the protections
afforded to their respective clients, or for advice in relation to the contents
of this announcement or any of the matters referred to herein.

Neither the Managers nor any of their respective affiliates makes any
representation as to the accuracy or completeness of this announcement and none
of them accepts any responsibility for the contents of this announcement or any
matters referred to herein.

This announcement is for information purposes only and is not to be relied upon
in substitution for the exercise of independent judgment. It is not intended as
investment advice and under no circumstances is it to be used or considered as
an offer to sell, or a solicitation of an offer to buy any securities or a
recommendation to buy or sell any securities of the Company. Neither the
Managers nor any of their respective affiliates accepts any liability arising
from the use of this announcement.

The distribution of this announcement and other information may be restricted by
law in certain jurisdictions. Persons into whose possession this announcement or
such other information should come are required to inform themselves about and
to observe any such restrictions.

More information:
Access the news on Oslo Bors NewsWeb site