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Having read through the RNS two or three times I am a bit baffled.
No more lending - but they are maintaining the loan book to return shareholder value. I assumed something like this would happen as there has to be a line in the sand to calculate the long term value of loans to price correctly for a new buyer (Wellesley perhaps).
The second bit about a loan to a directors associated contact is just plain stupid and requires new terms formulating as an informal guarantee is not worth the paper it probably is not written on!
The Loan, made by UE Lendco to UEP, was made in advance of UEP commencing fundraising activities so that UEP could gift the proceeds of the Loan to the Harris Federation in time for the refurbishment of a nursery school in south-east London, and fund ongoing running costs to provide for meals, developmental and education needs for children in a disadvantaged area. Social impact considerations are an important part of the Company's strategy and whilst in 2019 it was determined by the Board that the Company was not in a position to make a substantial gift donation to the project, and accordingly a loan was made instead.
UEP was formed in March 2019 and registered as a charity in September 2019, to support the Company's charitable endeavours. On the basis of charity law advice received at the time of its formation, UEP is not a subsidiary of the Company and instead is owned and controlled by the CEO, Randeesh Sandhu, and his wife Daljit Sandhu who acts as COO. Both Mr Sandhu and Mrs Sandhu are directors of UE Lendco and UE Amco. As it is a charitable company, neither Mr or Mrs Sandhu have any economic interest in UEP. There is a board of four directors of UEP, two of whom are not directors of the Company or its subsidiaries.
In conjunction with the preparation of the Company's audited financial statements for the year ended 31 December 2019 which is currently on-going, the Loan was brought to the attention of Liberum Capital Limited ("Liberum"), the Company's nominated adviser, for the first time by an independent director. UEP is a related party of the Company for the purposes of the AIM Rules for Companies and the Loan is a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. Liberum was not consulted at the time that the Loan was entered into as required by AIM Rule 13. Liberum is unable to advise that the Loan is fair and reasonable insofar as the shareholders are concerned.
As UEP is a connected person of Mr and Mrs Sandhu for the purposes of the Companies Act 2006, shareholder approval should also have been obtained prior to the Loan being made because it is a loan to a person connected with directors of the Company or its subsidiaries under section 200 of the Companies Act 2006. The Company is not currently expecting to take any immediate action to remedy this matter.
The board of directors has decided that an inquiry into the circumstances concerning the making of the Loan should be conducted by an independent third party.
The Loan Agreement provides that the Loan will be repaid out of charitable donations received by UEP. As UEP is a newly formed charity with limited charitable donations to date, Mr and Mrs Sandhu informally agreed at the outset personally to underwrite the balance of the Loan not funded from charitable donations to UEP and voluntary contributions from other employees of the Company, to ensure that the Loan is repaid in full, and this remains the case.
Urban Exposure plc (UEX)
Urban Exposure plc: Update on Strategic Review and Related Party Transaction with Urban Exposure Philanthropy Limited
05-May-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
5 May 2020
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION
Urban Exposure Plc
Update on Strategic Review
Related Party Transaction with Urban Exposure Philanthropy Limited
Update on Strategic Review
Further to the announcement on 17 April 2020 and discussions with shareholders, Urban Exposure plc (the "Company") has reviewed its strategic options for its future business.
In light of current business conditions, including the market uncertainty created by COVID-19, the Company has determined that it will not enter into any new lending opportunities for the foreseeable future.
Instead the Company will focus entirely on the management of its existing loan portfolio to maturity in order to maximise the returns from the portfolio for the benefit of its shareholders.
The Company is continuing to investigate numerous possibilities regarding the potential sale of its loan book with a view to determining whether a sale of all or some of the loan book may be more attractive to shareholders than holding those loans to maturity. Shareholders will be updated in due course on the outcome of those discussions.
In the meantime, the Company wishes to reiterate to its existing borrowers and business partners that it remains fully committed to its current loan portfolio and that the Company will continue to deliver the same high service levels as at present.
Related Party Transaction with Urban Exposure Philanthropy Limited
On 1 October 2019, Urban Exposure Lendco Limited ("UE Lendco"), a wholly owned subsidiary of the Company, entered into a loan agreement with Urban Exposure Philanthropy Limited ("UEP") pursuant to which UE Lendco agreed to grant an interest-free unsecured loan of £701,800 to UEP (the "Loan"). The Loan was novated to Urban Exposure Amco Limited ("UE Amco"), also a wholly owned subsidiary of the Company, in January 2020 and increased to £1,235,646. £907,000 is currently outstanding under the Loan and no further advances will be made. The Loan is repayable by UEP to UE Amco on demand under the terms of the loan agreement.
increased 3.4% to 4.28% on 29/4
With the government pledging to get the building industry moving I can see honeycomb possibly revisiting their previous deal plus Wellesley have made their intentions known
A deal will be done circa 70p minimum in the near future with someone
Loan book worth 80% more than the current SP (73p ish if following Wellesleys offer) and we are sat at 41p. UEX BoD are clearly looking at and considering offers so it cant be long until we get an RNS.
I imagine the Wellesley proposal was not that clearcut. For instance, it might have involved injecting all or part of W 's operations into U, in exchange for a major shareholding in U, effectively giving W a backdoor listing for its business, which appears quite complementary to U. Such a transaction would not have needed much cash. It would have been difficult for U to evaluate and explains why U decided to send them packing, even if W claim it was worth 73p per share.
U has been informing its major institutional shareholders that it is still committed to some form of break up to return 70p (or thereabouts) to its shareholders.
Exactly, they do have the money. In my opinion the directors are a bit aggrieved that the offer includes the management operations which under the Honeycomb offer was being taken by the directors for a small sum
Surely Wellesley wouldn't make a higher offer for the company if they didn't have the money to do so or am I completely missing something here? It's like going to a jewellery shop and telling them you will buy a million pound diamond when you only have £1000 in your account?!
Watch out for the large trades that have been appearing
Wellesley know the business well and already hold 10% - they will have canvassed other shareholders for support in my opinion
This is my understanding also, the deal was meant to go through and upon there being doubt, counter offers came in from other parties, at and above the initial offering price. Irrespective of whether the deal goes ahead it is quite clear that the market views the fair value of the asset to be at around 72p a share. So the SP should really be reflecting that considering there hasn't been any real change just the market being a bit more jumpy than usual
Simon Thompson Investors Chronicle 1/4/20
Honeycomb attempts to abort loan book purchase
Shareholders in specialist residential development finance company and asset manager Urban Exposure (UEX:33p) have voted in favour of the £113.8m (71.7p a share) disposal of the company’s loan book to Honeycomb Holdings, a subsidiary of Pollen Street Capital, a specialist finance lender. They have also approved the sale of its asset management company to the founders for £1.6m (1p a share).
The loan book sale was meant to complete today and the proceeds then distributed to shareholders by way of a first capital distribution of 72p a share on 7 May 2020, and a final distribution of 1p a share by April 2021. However, in light of current market conditions, Honeycomb no longer wants to proceed with the purchase on the terms it agreed in the share purchase agreement dated Tuesday, 10 March 2020 and has issued a notice of termination to Urban Exposure. Clearly, Urban Exposure’s shareholders want Honeycomb to fulfil its obligations, as do the directors who “consider that the termination is without merit and reserve their position to take all measures to enforce the company's rights under the purchase agreement”.
Honeycomb does have the right to terminate the acquisition between exchange and completion if there is a material adverse change in the financial condition of Urban Exposure’s loan book (defined as a reduction in NAV in excess of £10m), or if there is a material breach of the purchase agreement. There is a consideration adjustment mechanism incorporated into the purchase agreement under which Urban Exposure could have to reimburse Honeycomb (including by way of deduction from the consideration payable) up to £10m (6.3p a share) in the event of a deterioration in the loan portfolio due to a default on any of Urban Exposure’s loans.
Bearing this in mind, it’s unlikely that Urban Exposure’s loan portfolio has deteriorated ‘markedly’ since the parties announced the purchase agreement only a few weeks ago, suggesting that the company is in a far stronger position than the market gives it credit to enforce Honeycomb to complete the purchase.
So, having previously advised voting in favour of the disposals, and after taking into account that Urban Exposure’s loan book is worth more than double its market capitalisation of £52m, I would strongly advise holding on and awaiting further developments. Hold.
This company does not make any money for their shareholders. All operating profits are gobbled up by inflated wages and bonuses, that's their business model. Talk of Billions in loans and future profit is as I have said before, just smoke and mirrors to entice more innocent buyers/ funds. The delisting from AIM and the break up of the company could see shareholders recover some of their losses.
The delisting was predicated on them selling their loan book, their major asset. They are now suing for breach of contract so maybe they will get something for that. But the loan book does have student accommodation and hotels so perhaps that’s why the purchaser got cold feet. Long term these shares should generate a good return but see management’s view that a short term sale is unlikely.
Even if they walk away... They were going to delist the company for 72p so surely still a win?
They will go back to 32p from whence they came. Sure, if a takeover materialises they will go up, but management seem sceptical of this at least in the short term.
Also here they still have that as an asset value, so even if they walk away it shouldn't fall far......as it's already at half that,
whereas it's usually a big bid premium....
I understand their bid now, they've done no business so far in 2020. Will be good for them if they get the order book. Hopefully will have something on the cards in the next few weeks.
My thoughts exactly. Looks like the Hoard are currently smashing the trades on HEMO. I still don't fully understand how that company has the "inflated" value it has.
Here is a no brainer, if the t/o company have the funds, they will buy at 76.9p - pretty simple. I think there is something in UK regulation which states if you want to take more than 51% stake you have to make an offer for the remainder of the shares which can either be accepted or declined - personally I would be more than happy with that.
Hopefully we will be in for a good day today after yesterday's MM games.
Given 2 independent organisations have made offers for the loan book at a value of 80% more than the current SP it's pretty incredible we are still in the 40's!
trades on*
thanks but the traders in LSE are shown as O, unless i missed the N's
N: Non Protected Portfolio - A non-protected portfolio transaction or a fully disclosed portfolio transaction. Normally a transaction of a number of stocks dealt with by one market maker at an agreed discount to the market price.
how do you work out if its a discounted buy?