7 Nov 2012 07:00
Greenwich Loan Income Fund Limited
7 November 2012
Greenwich Loan Income Fund Limited
("GLIF" or the "Company")
Acquisition of BMS Finance AB and Publication of CISX Listing Documentation
GLIF, a Guernsey-domiciled authorised closed-ended investment company, investing principally in corporate loans across multiple sectors, today announces that it has entered into an asset sale and purchase agreement with BMS Specialist Debt Fund Limited (the "Seller") pursuant to which the Company has agreed to purchase certain of its assets (the "Asset Sale and Purchase Agreement").
In order to satisfy the consideration payable under the Asset Sale and Purchase Agreement of approximately £11.6 million in aggregate, the Company has agreed to issue up to 23,322,056 ordinary shares to the Seller, although the Company may, in its discretion, elect to settle part of the Consideration in cash. Completion of the Asset Sale and Purchase Agreement is conditional on admission of the ordinary shares issued to the Seller (the "Consideration Shares") to trading on the AIM market of the London Stock Exchange plc ("AIM") and to the Official List of the Channel Islands Stock Exchange, LBG (the "CISX"). Further details of the Asset Sale and Purchase Agreement are set out below.
1. Background to and reasons for the Acquisition
GLIF is seeking new investment opportunities in order to: (a) put the capital that is becoming available to work; and (b) diversify its portfolio.
The Acquisition is in line with GLIF's corporate strategy and objectives:
(i) Geographical diversification. GLIF's corporate strategy is to seek geographical diversification of its assets, rather than using hedging, to reduce the currency and geographical risks associated with the exposures of its investments. The Acquisition will enable GLIF to increase its asset base outside of its core U.S. investments, which will diversify the portfolio geographically;
(ii) Asset diversification. The Assets to be acquired differ from the existing portfolio and, therefore, the Acquisition provides asset diversification, whilst remaining within the investment policy of GLIF;
(iii) Existing asset pool. The Acquisition is of an existing, mature pool of assets, giving greater visibility to the nature of the Acquisition;
(iv) Existing team with established track record. The Management Team (described below) have an established track record managing loans; and
(v) Target 10-15% net returns. The target returns are in line with those sought by GLIF and thus are complementary to its existing investments.
2. The Assets
The Assets that the Company has agreed to purchase comprise all of the issued share capital of BMS Finance AB Limited ("BMS Finance AB"), which is a UK-based specialist private finance company. BMS Finance AB is currently financed by a deep discount bond issued to the Seller currently standing in the nominal sum of £20,738,000 (the "DDB") and this is also being acquired by the Company pursuant to the Asset Sale and Purchase Agreement. In addition to the shares in BMS Finance AB and DDB, the Company is also acquiring the Seller's interest in Noble Venture Finance II Limited Partnership ("NVF II L.P."), and legacy warrants to subscribe for shares in Eazyfone Limited and EGS Group Limited (the "Warrants").
BMS Finance AB
The business of BMS Finance AB was founded in 2005 and, since then, has focused on providing senior lending to small to medium-sized enterprises that have been unable to access funding from banks. It relies on the cashflow and profitability of the borrower to service the loan, rather than on a particular asset.
The typical loan size is £500,000 - £3 million to borrowers with turnover of less than £25 million. Normally, loans are advanced for a period of three years with monthly amortisation, although alternative repayment schedules may be offered depending on the security and/or cashflow profile of the borrower. Interest is generally charged at a rate of between 10 - 14 per cent. per annum.
Over the past five years, the average return on its loan portfolio was 12 per cent. per annum. Its gross assets at 31 March 2012 were £9,749,181.
BMS Finance AB will continue to be managed by its existing management team: Ewan Stradling, Martin Ling and Shane Lanigan (the "Management Team").
Ewan Stradling, CEO
Prior to founding BMS, Ewan worked with a range of companies, as Group CFO for the Netdecisions Group, including Agilisys, a high growth IT outsourcer. He was responsible for the group's commercial, legal and finance functions. His experience included numerous corporate transactions, a substantial turnaround and restructuring following the dotcom crash, and board positions as an investor director. Prior to joining the Netdecisions Group, Ewan worked for Investec in the corporate finance department.
Martin Ling, Director
Martin assisted Ewan in establishing BMS after 4 years working together in the Netdecisions Group. He is a chartered accountant with over 12 years' experience in operational financial control and reporting, through his role as finance director of BMS, alongside extensive financial analysis and debt structuring expertise gained through various transactions completed whilst at Netdecisions and BMS. Martin's career prior to Netdecisions was with the Virgin Group where he worked as a financial advisor in the team which set up and grew Virgin Direct Financial Services (now Virgin Money).
Shane Lanigan, Director
Shane has 20 years' credit experience gained in insurance and banking, 12 of which were in European leveraged finance. He has worked for a number of banks including The Fuji Bank and Erste Bank within their credit, leveraged and acquisition finance departments and was responsible for sourcing, origination and analysis of Western European leveraged loan transactions. Prior to joining BMS, Shane worked at Elgin Capital and was involved in fundraising, as well as the sourcing, origination, trading and analysis of leveraged loan transactions for the Dalradian European CLO series of funds. Shane joined BMS in August 2008.
Deep discount bond
BMS Finance AB is funded through the issue of a revolving discounted note issuance facility in an amount of up to £50,000,000. The nominal value of the DDB is £20,738,000 which is being purchased pursuant to the Asset Sale and Purchase Agreement.
Noble Venture Finance II Limited Partnership
The Company is purchasing 70.75 per cent. of the partnership interests in NVF II L.P., a Jersey limited partnership. NVF II L.P. was formed to carry on the business of investing in European venture debt. NVF II L.P. has no plans to advance further financing to new counterparties. The general partner of NVF II L.P. has declared a cash dividend of £2 million of which, conditional on completion of the Asset Sale and Purchase Agreement, the Company will be entitled to £1.4 million.
Warrants
The Company has also agreed to purchase the Warrants.
Consideration Payable for the Acquisition
The value ascribed to the Assets will be £1 in respect of the shares of BMS Finance AB, £9,977,954 in respect of the DDB, £1,613,106 in respect of the interest in NVF II L.P. and £1 in respect of all of the Warrants. The Company will pay for these Assets by issuing ordinary shares at their net asset value as at 30 September 2012 (being equal to the net asset value per ordinary share of the Company) although the Company may, in its discretion, elect to settle part of the consideration for the Assets (other than the DDB) in cash up to a maximum amount of £1,613,108.
In respect of the period ending 31 March 2012, the losses attributable to BMS Finance AB were £1,216,399. The DDB for that period earned interest of £1,945,412. In respect of the period ending 31 August 2011, the profits attributable to the partners of NVF II L.P. were £435,899 (which excludes a loss on foreign exchange of £425,689). The Seller's share of the profits of NVF II L.P. profits was 70.75%. There are no profits attributable to the Warrants.
3. Agreement with the Management Team
Immediately upon completion of the Asset Sale and Purchase Agreement, GLIF has agreed to transfer the Assets to a newly established joint venture vehicle called GLIF BMS Holdings Limited ("Newco") pursuant to a transfer agreement (the "Transfer Agreement").
The Company will subscribe £666,666 for 666,666 ordinary shares of £1 each in the capital of Newco and, at the same time, the Management Team will, in aggregate, subscribe £333,334 for 333,334 ordinary shares of £1 each in the capital of Newco.
In connection with the operation of Newco, GLIF has entered into a Subscription and Shareholders' Agreement with the Management Team pursuant to which:
·; GLIF will have the right to appoint a majority of the directors to the board of Newco;
·; the Management Team will have a right to veto certain material decisions affecting the operation of Newco; and
·; each member of the Management Team will be a director of BMS Finance AB for so long as he remains employed by that company.
The Subscription and Shareholders' Agreement of Newco provides that, upon a proposed transfer of shares in Newco, existing shareholders will have pre-emption rights. The members of the Management Team have agreed to enter into new service agreements with BMS Finance AB, terminable on six months' notice by either party. Each member of the Management Team will be entitled to a salary of £100,000 per annum (pro rated where necessary). There is also a discretionary bonus pool arrangement of 35 per cent. of profits exceeding £450,000 per annum which is capped at 30 per cent. of salary.
Under the Subscription and Shareholders' Agreement, GLIF has been granted the option to invest a further £12.5 million into Newco in approximately 18 months' time. If GLIF does not exercise that option, Newco may seek third party investors to make that investment.
Under the Transfer Agreement, Newco will acquire the Assets from the Company in consideration for the issue of a loan note to the Company with a nominal value of £11,591,062, being equivalent to the value of the Consideration Shares issued by the Company for their original acquisition (the "Loan Note"). Under the terms of the Loan Note, interest will be payable quarterly at a rate of 8 per cent. per annum and the principal amount of the loan will be repayable in six equal quarterly instalments commencing on the sixth anniversary of completion.
4. Details of the Placing
The Seller intends to sell some of the Consideration Shares in the Company received by it pursuant to the Asset Sale and Purchase Agreement. To this end, prior to Admission, irrevocable letters of commitment have been sought from placees confirming that they will purchase some of the Consideration Shares issued to the Seller pursuant to the terms of the Asset Sale and Purchase Agreement. Under the CISX Listing Rules, the marketing by or on behalf of sellers of securities allotted to them as consideration for an acquisition is treated as a placing. The transfer of those Consideration Shares agreed to be purchased by investors (the "Placing Shares") will take place immediately following Admission (the "Placing").
A maximum of 5,294,928 Placing Shares will be available under the Placing. Investec is acting as settlement agent with respect to the sale of the Placing Shares. The latest time and date for receipt of commitments under the Placing is 5.00 p.m. on 7 November 2012.
The Directors have confirmed that they each intend to purchase the following number of Placing Shares:
Patrick Firth 25,000
Geoffrey Miller 37,373
James Carthew 25,000
In the event that there are any significant changes affecting any of the matters described in this document or where any significant new matters have arisen after the publication of this document and prior to Admission, the Company will publish a supplementary listing document. The supplementary listing document will give details of the significant change(s) or the significant new matter(s).
5. Placing Price and Commissions
The Placing Shares will be placed at a Placing Price of 47.215 pence per Placing Share.
Whilst Investec will be entitled to a commission payable by the Company in connection the Placing, no commissions are payable by the Company to placees under the Placing.
6. CREST
The Placing Shares will be issued in registered form and will be eligible for settlement through CREST with effect from Admission. The Placing Shares allocated will be transferred to placees through the CREST system unless otherwise stated. Member firms should have given their CREST settlement details to Investec in their commitment letter.
The Company will arrange for CREST to be instructed to credit the appropriate CREST accounts of the placees concerned or their nominees with their respective entitlements to the Placing Shares. The names of placees or their nominees that invest through their CREST accounts will be entered directly on to the share register of the Company.
7. Dealing Arrangements
Application will be made to the London Stock Exchange for the Consideration Shares to be admitted to trading on AIM. Application will also be made to the CISX for the purposes of admitting the Consideration Shares to the Official List of the CISX. It is expected that dealings in the Consideration Shares will commence on 12 November 2012. Dealings in the Consideration Shares and Placing Shares in advance of the crediting of the relevant stock account shall be at the risk of the person concerned.
The ISIN Code for the Consideration Shares and the Placing Shares is GB00B0CL3P62.
8. Settlement
Payment for the Placing Shares should be made in accordance with settlement instructions set out in the Commitment Letter. Monies received by Investec will be held in segregated client accounts pending settlement.
9. Transfer of the Placing Shares
The transfer of the Placing Shares outside the CREST system should be arranged directly through the Registrar by completing and lodging an appropriate stock transfer form. However, an investor's beneficial holding held through the CREST system may rematerialise, in whole or in part, only upon the specific request of a beneficial owner to CREST through submitting a stock withdrawal form for share certificates or an uncertificated holding in definitive registered form.
If a Placee requests Placing Shares to be issued in certificated form, a share certificate will be despatched either to them or their nominated agent (at their own risk) within 10 days of completion of the registration process or transfer, as the case may be, of the Placing Shares. Placing Shareholders holding a definitive certificate may elect at a later date to hold their Placing Shares through CREST or in uncertificated form, provided they surrender their definitive certificates.
10. Dividends
It is the intention of the Directors to pay dividends to Shareholders quarterly. The Consideration Shares and the Placing Shares will rank for the dividend of 1.25 pence per Ordinary Share in respect of the third quarter of 2012 which was announced on 29 October 2012 and which will be paid on 23 November 2012.
For further information, please contact:
Geoffrey Miller
Greenwich Loan Income Fund Limited
+1 203 916 0003
+44 7408 830719
Patrick Conroy
Greenwich Loan Income Fund Limited
+1 203 983 5282
Investec Bank plc
Tim Mitchell
Jeremy Ellis
+44 (0) 207 597 5970
Mourant Ozannes Securities Limited
Gayna Babinski
+44 (0) 1481 739338
Ed Gascoigne Pees
FTI Consulting
+44 (0) 207 269 7132