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If that's what they wanted why would have bothered to allow LDG a bit of the PIK pie? Is LDG more useful than DBay first thought? The thing that stands out is it is listed but there could be others eg 20% to manager fee after LDG return of capital and 8% return on capital.
It will be interesting to see if LDG is allow to acquire more of the PIK pie.
Here is the relevant doc. Section for the fees (the part that mentions 20%) pasted below.
https://www.ldgplc.com/wp-content/uploads/pdfs/AIM26/11%20DBAY-Advisors-IMA.pdf
Section 8.8.1 shows DBays fees as the Manger of LDG. All causes need to be read.
8.REMUNERATION, FEES AND EXPENSES
8.1 In consideration for the services provided by the Manager hereunder, the Manager shall be entitled to receive the following by way of remuneration, in relation to each New Investment:
(a)an annual monitoring fee (the “Monitoring Fee”), accruing daily and payable monthly in arrears, equal to 2% of the amount invested by the Company in the Portfolio Company (or its Affiliates) that is the subject of that New Investment. The Monitoring Fee shall be paid to the Manager directly by the relevant Portfolio Company and thus reduce any amount that may be available for distribution by such Portfolio Company to the Company; and
(b) an amount equal to 20% of all distributions of cash made by the relevant Portfolio Company (or its Affiliates), directly or indirectly, to the Company (the “Profit Share”). In connection with payment of the Profit Share in relation to any given New Investment, the following provisions shall apply in relation to distributions of cash by the Portfolio Company (or its Affiliates):
(i) first, all distributions of cash shall be paid to the Company, until the Company has received an amount equal to the amount invested by the Company in that Portfolio Company together with any costs incurred by the Company in connection with the acquisition of the Company’s Investment in such Portfolio Company (such amount, the “Return of Capital”);
(ii) second, all distributions of cash shall be paid to the Company, until the Company has received an annual compounded return of 8% on the Return of Capital (such amount, the “Preferred Return”);(iii)third, all distributions of cash shall be paid to the Manager, until the Manager has received an amount equal to 20% of the aggregate of (A) the Preferred Return; and (B) amounts paid to the Manager under this clause 8.1(b)
(iii); and
(iv) fourth, thereafter, all distributions of cash shall be shared as to 80% to the Company, and 20% to the Manager.
My summary
In 8.8.1 (b) states all distributions of cash by the relevant Portfolio Company (or its Affiliates), directly or indirectly, to the Company (the “Profit Share”). used for 1st LGD Return of Capital, 2nd LDG “Preferred Return 8% annual compounded on Return of Capital, 3rd DBay 20% of the aggregate of (A) the Preferred Return; and (B) amounts paid to the Manager under this clause 8.1(b)(iii), 4th 80% LGD, and 20% to the Manager.
So 20% to manager after LDG return of capital and 8% return on capital.
Well known about losing the Tesco contract. Thinking was that theTesco contract was every low margin (even for logistics) or loss marking. Replaced by higher margin contracts like NHS covid related distribution ones. It’s all covered in the chat.
Hi Nails21,
Thanks for the summary.
Wondering if you could confirm/answer any of the following as there has been a lot of comment about these points:
https://www.ldgplc.com/wp-content/uploads/pdfs/AIM26/11%20DBAY-Advisors-IMA.pdf
Marcelos Limited is the holding company for GWSA in which DBay has a 51% and LDG a 49% stake.
Section 8.8.1 shows DBays fees as the Manger of LDG.
They are roughly as you say but is Dbay 1st in line for its 20%?
As, In 8.8.1 (b) states all distributions of cash, used for 1st LGD Return of Capital, 2nd LDG “Preferred Return 8% annual compounded on Return of Capital, 3rd DBay 20% of the aggregate of (A) the Preferred Return; and (B) amounts paid to the Manager under this clause 8.1(b)(iii), 4th 80% LGD, and 20% to the Manager.
https://cdn.eddiestobart.com/assets/media/documents/Sale-and-Purchase-Agreement-201119-1.pdf
From the above doc I understand Alpha Cassiopeiae Limited and an entity controlled by DouglasBay Capital III Fund LP was used to organize the PIK of £55m for GWSA. I assume it’s effectively a bridging loan (with no / little security?) hence the 18% fee and they did it this way so if thing went wrong Marcelos Limited would not be liable? Do you think a fee of £9m, whist large, serviceable by GWSA given its other debts given the current (good?) health of the logistics sector?
Thanks