11 Feb 2013 17:00
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO
11 February 2013
BETTER CAPITAL PCC LIMITED
(the "Company")
Further re: Notice of Extraordinary General Meetings and
Publication of Circular
Further to the previous announcement, the Company confirms that its circular regarding proposed revisions to the investment policy for the 2012 Cell and Fund II - key extracts from which are set out below - is now available to view on the Company's website (www.bettercapital.gg).
Defined terms used in this announcement shall (unless the context otherwise requires) have the same meanings as are set out in the Circular dated 11 February 2013.
Enquiries
Better Capital PCC Limited +44 (0)14 8171 6000
Mark Huntley (Director)
Laurence McNairn (Administrator and Company Secretary)
Better Capital LLP +44 (0)20 7440 0840
Jon Moulton (Chairman)
Mark Aldridge (CEO)
Numis Securities Limited +44 (0)20 7260 1000
Nathan Brown
Oliver Hardy
Powerscourt (Public Relations Adviser) +44 (0)20 7250 1446
Jon Earl
Carmen Murray
RECOMMENDED PROPOSALS TO REVISE THE 2012 CELL INVESTMENT POLICY
1. Introduction
Better Capital PCC Limited (the "Company") has announced today that its Directors are proposing a revision to the investment policy for the 2012 Cell and are convening Extraordinary General Meetings of the 2012 Shareholders and the Company to consider and, if thought fit, approve such change.
In accordance with the Listing Rules and the Company's articles of incorporation and the Prospectus, due to the Company's protected cell structure, such approval is required both at separate meetings of the 2012 Shareholders and of all of the Shareholders (that is, together in one general meeting, the 2009 Shareholders and the 2012 Shareholders).
The proposed revisions to the 2012 Cell investment policy will not in any way impact on or alter the 2009 Cell investment policy. Accordingly, there is no requirement for a separate extraordinary general meeting of the 2009 Shareholders.
2. Background
In January 2012, the Company converted to a protected cell company structure and raised approximately £170 million through the establishment of a separate protected cell, the 2012 Cell.
In accordance with its current investment policy, the 2012 Cell has invested £165.5 million in Fund II, which in turn has committed £70 million through its investments in Everest and Jaeger and has entered into a joint venture with the National Pensions Reserve Fund of Ireland, as announced on 9 January 2013.
3. Current investment policy and restrictions in respect of the 2012 Cell and Fund II
The current investment policy relating to the 2012 Cell and Fund II as set out in the Prospectus:
·; is to invest through Fund II in a portfolio of businesses which have significant operating issues and may have associated financial distress, with a primary focus on investments which have significant activities within the United Kingdom or Ireland; and
·; includes the restriction that Fund II will not invest directly or indirectly an aggregate amount of more than 20 per cent. of the Fund II Total Commitments in (i) the securities of companies which have significant activities outside of the United Kingdom or Ireland, and/or (ii) investments which do not (when taken with the co-investments held by any parallel vehicles) whether by voting rights or otherwise, confer control (directly or indirectly) over the relevant business (the "Relevant Investment Restriction").
4. Proposed revision to the investment policy and restrictions in respect of the 2012 Cell and Fund II
Fund II GP has proposed to the Board a revision to the investment policy of Fund II in order to provide increased flexibility to pursue potential opportunities that current market conditions are presenting for investment in:
·; businesses that have significant activities both in and outside the United Kingdom or Ireland; and
·; businesses without significant activities in the United Kingdom or Ireland which are of a size which may exceed the current limit on such investments.
The revision has been proposed by way of an amendment to the Relevant Investment Restriction.
This would require an amendment to the Fund II Partnership Agreement, which in turn would require the consent of the Company acting in relation to the 2012 Cell. In the Prospectus, the Company undertook to seek approval of the holders of 2012 Shares by way of ordinary resolution before consenting to an amendment to the investment policy set out in the Fund II Partnership Agreement.
The Directors have considered Fund II GP's proposal and are hereby proposing to amend the 2012 Cell's investment policy to reflect the above, and specifically to provide that the Relevant Investment Restriction should instead require that Fund II will not invest directly or indirectly an aggregate amount of more than 30 per cent. (previously 20 per cent.) of the Fund II Total Commitments in (i) the securities of companies which do not, and whose Affiliates do not, have significant activities in the United Kingdom or Ireland (previously companies with significant activities outside of the United Kingdom or Ireland), and/or (ii) investments which do not (when taken with the co-investments held by any parallel vehicles) whether by voting rights or otherwise, confer control (directly or indirectly) over the relevant business.
The effect of the revision to the Relevant Investment Restriction would be to:
·; redefine the restricted category of businesses in the Relevant Investment Restriction to those which do not have significant activities in the United Kingdom or Ireland, as opposed to the current restriction on companies that have significant activities outside of the United Kingdom and Ireland (not necessarily to the exclusion of significant activities in the UK or Ireland). This would enable Fund II to invest on an unrestricted basis in companies which have significant activities in the UK or Ireland and significant activities outside the UK or Ireland; and
·; increase by 10 per cent. of the Fund II Total Commitments the aggregate limit in the Relevant Investment Restriction. This would enable Fund II to invest a greater proportion than previously in companies with no significant activities in the United Kingdom or Ireland, and/or in investments which do not (when taken with the co-investments held by any parallel vehicles) whether by voting rights or otherwise, confer control (directly or indirectly) over the relevant business.
The proposed investment policy relating to the 2012 Cell is set out in full in Part 2 of this circular.
In addition to the approval of the proposed investment policy for the 2012 Cell, 2012 Shareholders and Shareholders generally (that is, together in one general meeting, the 2009 Shareholders and the 2012 Shareholders) will also be asked to approve such amendments to the investment policy and partnership agreement relating to Fund II as are necessary to reflect the proposed investment policy relating to the 2012 Cell. The Fund II GP has confirmed to the Board that Better Capital 12 SLP LP, being the only other limited partner of Fund II, has confirmed to the Fund II GP that it will approve such amendments to the investment policy and partnership agreement relating to Fund II, as will the Fund II GP.
5. Extraordinary General Meetings
Notices convening the Extraordinary General Meetings of the 2012 Shareholders and of the
Company are set out in Parts 5 and 6.
All 2012 Shareholders and, separately, all Shareholders (that is, together in one general meeting, the 2009 Shareholders and the 2012 Shareholders) are entitled to attend, speak and vote on the Resolutions to be proposed at their respective Extraordinary General Meetings, each of which will be proposed as an ordinary resolution.
6. Weighting of voting at the Company's Extraordinary General Meeting
As at the date of sending this notice, the Company has issued share capital of 376,642,847 Ordinary Shares of nil par value each, of which 206,780,952 are 2009 Shares and 169,861,895 are 2012 Shares. Pursuant to the Company's articles of incorporation, and as explained in the Prospectus, at any general meeting of the Company:
·; each holder of 2009 Shares who is present in person shall have one vote and on a poll the vote shall be weighted where a vote cast in relation to each 2009 Share shall count as 1.1096 towards the total number of votes cast; and
·; each holder of 2012 Shares who is present in person shall have one vote and on a poll the vote shall be weighted where a vote cast in relation to each 2012 Share shall count as 0.9770 towards the total number of votes cast.
7. Action to be taken
You will find enclosed with this document form(s) of proxy for use at the Extraordinary General Meetings. If you only hold 2009 Shares in the Company you will only receive a white form of proxy for use at the Extraordinary General Meeting of all the Shareholders of the Company. If you hold 2012 Shares in the Company, you will receive both (i) a pink form of proxy for use at the Extraordinary General Meeting of 2012 Shareholders and (ii) a green form of proxy for use at the Extraordinary General Meeting of the Company.
Whether or not you propose to attend the Extraordinary General Meetings, you should complete each applicable form of proxy in accordance with the instructions printed on it and return it to the Company's registrar, c/o Capita Registrars Limited, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, as soon as possible, but in any event not later than 12:30 p.m. on 26 February 2013. Completion and return of a form of proxy will not prevent the 2012 Shareholders and the Shareholders from attending and voting in person at their respective Extraordinary General Meetings, should they so wish.
8. Voting intentions of certain Shareholders
Jon Moulton, Mark Aldridge and Nick Sanders, who in aggregate have interests in 19,873,809 2009 Shares and 30,767,629 2012 Shares, have confirmed to the Company that they each intend to vote their entire beneficial holdings in 2012 Shares at the Extraordinary General Meeting of the 2012 Cell, and to vote their entire beneficial holdings of 2009 Shares and 2012 Shares at the Extraordinary General Meeting of the Company, in favour of the Resolutions. Jon Moulton's, Mark Aldridge's and Nick Sanders' aggregate holding of 2012 Shares amounts to 18.11 per cent. of the total issued 2012 Shares and their aggregate holding of 2009 Shares and 2012 Shares amounts to 13.45 per cent. of the total share capital of the Company, as at 6 February 2013 (being the latest practicable date prior to the publication of this document).
9. Recommendation
The Board considers that the proposed changes to the investment policy of the Company's 2012 Cell are in the best interests of both the 2012 Shareholders and of the Shareholders as a whole (that is, of the 2009 Shareholders and the 2012 Shareholders together). Accordingly, the Board unanimously recommends all 2012 Shareholders and all Shareholders (that is, both 2009 Shareholders and 2012 Shareholders together) to vote in favour of the Resolutions to be proposed at the Extraordinary General Meetings.
The Directors, who in aggregate have interests in 340,000 2009 Shares and 650,000 2012 Shares, intend to vote their entire beneficial holdings in 2012 Shares at the Extraordinary General Meeting of the 2012 Cell, and to vote their entire beneficial holdings of 2009 Shares and 2012 Shares at the Extraordinary General Meeting of the Company, in favour of the Resolutions. The Directors' aggregate holding of 2012 Shares amounts to 0.38 per cent. of the total issued 2012 Shares and the Directors' aggregate holding of 2009 Shares and 2012 Shares amounts to 0.26 per cent. of the total issued share capital of the Company, as at 6 February 2013 (being the latest practicable date prior to the publication of this document).
PART 2: PROPOSED 2012 CELL INVESTMENT POLICY
The text below is unchanged from 2012 Cell's investment policy and Fund II's investment objective and policy and investment restrictions, as set out in the prospectus published by the Company on 19 December 2011, save that the text below which is in UPPER CASE reflects the extent of the proposed changes to the investment policy relating to the 2012 Cell. Where only a number has changed, the new number is set out in words in UPPER CASE below for ease of identification. Some of the text in UPPER CASE below reflects what is now the case in contrast to what was anticipated at the time of the Prospectus."
2012 Cell
The Company implements its investment policy in relation to the 2012 Cell by attributing its current investment in Fund II to the 2012 Cell. Its investment policy is implemented through Fund II managed by Fund II GP in accordance with the following:
Better Capital Fund II investment objective and policy
Fund II SEEKS to invest in a portfolio of businesses which have significant operating issues and may have associated financial distress, with a primary focus on investments in businesses which have significant activities within the United Kingdom or Ireland.
Uninvested or surplus capital or assets may be invested on a temporary basis in cash deposits or other high interest accounts. The Board HAS a cash management policy. The aggregate amount deposited or invested with any single bank or other counterparty (including their associates) other than at the launch of Fund II shall not exceed £50 million.
Fund II seeks to spread investment risk by constructing a portfolio diversified by the number of investments and by sector exposures. Specifically, it is intended that Fund II will invest in a minimum of six companies or groups of companies.
Fund II investment restrictions
Fund II must, at all times, invest and manage its assets in a way which spreads investment risk and in accordance with the following:
Fund II will not:
·; invest directly or indirectly (excluding any Bridging Investments) an aggregate amount representing, at the time of investment, more than:
- 30 per cent. of the Fund II Total Commitments in the securities of any single company or group of companies; or
- THIRTY per cent. of the Fund II Total Commitments in (I) the securities of companies which DO NOT, AND WHOSE AFFILIATES DO NOT, have significant activities IN the United Kingdom or Ireland, and/or (ii) investments which do not (when taken with the co-investments held by any parallel vehicles) whether by voting rights or otherwise, confer control (directly or indirectly) over the relevant business;
·; invest more than 10 per cent. of the Fund II Total Commitments (at the time of investment) in quoted companies or securities representing or convertible into quoted securities, provided that such restriction shall not apply to:
- quoted positions in companies in respect of which there is an intention to become unquoted, or which become quoted after investment by Fund II;
- the short term investment of monies pending deployment into turnaround opportunities; or
- investments that have (in the opinion of the Fund II GP) the character of a private equity investment (which would generally include the ability to exert significant influence over value creation and/or the strategic direction of such entity);
·; engage in speculative investment in activities such as commodities, commodity contracts or forward currency contracts (provided however that this shall not prevent Fund II from entering into investment activities which are regarded by the Fund II GP as being protective of the interests of Fund II);
·; enter into any transaction where a security is sold short or where Fund II has an uncovered position (other than for the purposes of hedging in connection with an investment); or
·; other than as required for the purposes of efficient portfolio management, invest at any time in any option, futures contract, total return swap, derivative, contract for difference or other similar instrument (excluding convertible securities or similar arrangements).
Fund II may make investments in collective investment schemes (including unregulated collective investment schemes and collective investment schemes operated or advised by the Fund II GP or its associates) but will not be permitted to make any investment in any fund or collective investment scheme which involves paying any additional management fees or carried interest (or equivalent) to any fund or investment manager.
Fund II Borrowings
As part of its investment policy, no borrowings can be made by the Company in relation to the 2012 Cell.
Fund II is permitted to borrow, on a short term basis, for any purpose, up to an aggregate amount limited to an amount equal to 10 per cent. of Fund II Total Commitments. It is not expected that Fund II will borrow and Fund II is not permitted to incur long term borrowings. There shall be no restriction on borrowings at levels below that of Fund II. However, the Directors anticipate that, in line with the practice followed for Fund I, only modest levels of borrowings will be made by portfolio companies.
Amendments to the Fund II Investment Policy
The Company acting in relation to the 2012 Cell ENSURES THAT at all times the Fund II GP COMPLIES with the investment objective, policy and restrictions of Fund II under the terms of the Fund II Partnership Agreement. In order to achieve an appropriate level of certainty for holders of the 2012 Shares, the investment policy and restrictions of Fund II have been entrenched in the Fund II Partnership Agreement and cannot be varied without an amendment to the Fund II Partnership Agreement, which would require the consent of the Company acting in relation to the 2012 Cell. The Company will seek approval of the holders of 2012 Shares by way of ordinary resolution before consenting to an amendment to the investment policy set out in the Fund II Partnership Agreement.
Fund II Investment Period and Reinvestment of Proceeds
The Fund II Investment Period is the period from 13 JANUARY 2012 to 31 December 2014. Such period may be extended by up to 12 calendar months by the Fund II GP with the consent of the Company acting in relation to the 2012 Cell, and may be terminated earlier following an Executive Departure (as described in THE PROSPECTUS). In the event that the 2012 Cell increases its commitment to Fund II following a Follow-on Fundraising or any parallel vehicle is established the Fund II Investment Period may be extended by such additional periods as the Company acting in relation to the 2012 Cell and the Fund II GP may agree. During the Fund II Investment Period, the Fund II GP may apply amounts committed to Fund II or reinvest the proceeds of any realised investments into new investment opportunities in accordance with the investment objective, policy and restrictions, or otherwise apply such commitments or proceeds in the pursuit of the business of Fund II.
Following the expiry of the Fund II Investment Period, the Fund II GP will not be able to make any new investments, or otherwise apply amounts committed to Fund II or reinvest proceeds received other than in the following limited circumstances, namely:
·; for the purpose of paying any obligation of, or any of the expenses and liabilities of, Fund II;
·; for the purpose of paying the Fund II GP's Share (including advances or loans in respect thereof);
·; for the purpose of making investments or completing contracts committed or entered into before that date; and
·; for the purpose of making Follow-On Investments.
PART 3: RISK FACTORS
Risks relating to investment in overseas companies
The revised investment policy for Fund II would permit a greater, but still limited, proportion of the Fund II Total Commitments to be invested in businesses which do not have significant activities within the UK or Ireland. Laws and regulations of foreign countries may impose restrictions that would not exist in the UK or Ireland giving rise to risks of a different nature potentially from those arising in the UK or Ireland. Investments in foreign entities have their own economic, political, social, cultural, business, industrial and labour context and may require significant government approvals under corporate, securities, exchange control, foreign investment and other similar laws and may require financing and structuring alternatives that differ significantly from those customarily used in the UK or Ireland. These added complications could add time and cost to any investment process which could have a material adverse effect on Fund II's performance and returns to the 2012 Cell. In addition, foreign governments may unusually from time to time impose restrictions intended to prevent capital flight, which may, for example, involve punitive taxation (including high withholding taxes) on certain securities or transfers or the imposition of exchange controls, making it difficult or impossible to exchange or repatriate foreign currency. These and other restrictions may make it impracticable for the Company to distribute the amounts realised from such investments at all or may force the Company to distribute such amounts other than in Sterling and therefore a portion of the distribution may be made in foreign securities or currency. It also may be more difficult in some jurisdictions to obtain and enforce a judgment in a court than in the UK. This could have an impact on the time and cost required to achieve the investment outcome which could therefore have a material adverse effect on Fund II's performance and returns to the 2012 Cell.