21 Dec 2009 07:00
Greenwich Loan Income Fund Limited ("GLIF" or the "Company")
Acquisition of Investment
21 December 2009
The Company today announces the acquisition of a senior secured corporate loan from T2 Income Fund CLO I Ltd. (the "CLO"), an affiliate of the Company which is consolidated for financial reporting purposes (the "Acquisition").
The cash consideration for the Acquisition was US$8.55 million, funding for which was provided by the Company's recent equity capital raise. The loan has paid a cash interest of approximately US$675,000 over the past four quarters, based upon a variable interest rate of 625 basis points over LIBOR.
While on a consolidated reporting basis there is no net impact on the Company's balance sheet, the Acquisition could improve the CLO's likelihood of being in compliance with certain principal coverage ratios and the interest diversion test on the next payment date in January 2010, and will have the effect of increasing the probability of the Company receiving future interest payments from the CLO. However, the probability of receiving any payment remains uncertain.
In the announcement of the CLO collateral coverage and interest diversion test results on 17 November and 14 December ("CLO tests"), it was stated that a downgrade of an investment had resulted in a significantly lower carrying value for the purposes of calculating the CLO tests. The purchase of this investment by GLIF, at a value determined by an independent valuation firm as being fair value, significantly improves the CLO tests. Regardless of this action, there can be no assurances that the Company will continue to receive future interest payments.
The CLO indenture contains a variety of covenants, compliance with which could be made more difficult or impossible should credit markets deteriorate or the loans held by the CLO fail to make expected payments or otherwise not perform, or for a variety of other reasons, and which if violated could result in further principal paydowns and/or interest diversion. Should there be additional downgrades or defaults, the Acquisition may prove to be insufficient to satisfy the collateral coverage and interest diversion tests at that time.
Any cash held within the CLO is generally unavailable to the Company prior to the maturity of the CLO (with the exception of any quarterly interest payments received by the Company). The Board notes that the Acquisition was consistent with the stated objectives of the Company's recent equity capital raise.
The Company will provide an update on current trading and strategic developments when announcing both the results of the CLO tests for the current quarter and the Board's decision on the fourth quarter dividend. This announcement is expected to be made on 20 January 2010.
Contacts:
Geoffrey Miller
Greenwich Loan Income Fund Limited
+353 1 4433 466
Patrick Conroy
Greenwich Loan Income Fund Limited
+1 203 983 5282
Philip Secrett
Nominated Adviser
Grant Thornton Corporate Finance
+44 207 383 5100
Jos Trusted
Singer Capital Markets Limited
+44 (0) 20 3205 7622
Ed Gascoigne Pees
Financial Dynamics
+44 (0) 207 269 7132