HICL Infrastructure Regulatory News (HICL)

23 Apr 2008 07:01

HSBC Infrastructure Company Limited23 April 2008 Not for publication, release or distribution in whole or in part in Australia, Canada, Japan or the United States HSBC Infrastructure Company Limited Placing and Offer for Subscription of up to 145,000,000 C Shares of 0.01 pence each at an Issue Price of £1.00 per C Share The Board of HSBC Infrastructure Company Limited ("HICL" or the "Company") todayannounces its intention to raise up to £145 million by means of a Placing andOffer for Subscription of C Shares. Introduction HICL is a London listed, limited liability, Guernsey-incorporated, closed-endedinvestment company that makes infrastructure investments. HSBC Specialist FundManagement Limited ("HSFML"), an investment manager authorised and regulated inthe UK by the Financial Services Authority, acting through members of itsInfrastructure Investment Team, acts as Investment Adviser to the Company and asOperator of the Partnership. The Company was launched on 29 March 2006 and has 250 million Ordinary Shares inissue which are admitted to the Official List and to trading on the London StockExchange Main Market. As at 31 March 2008 the Company had a marketcapitalisation of £293.8 million. As at 30 September 2007, the aggregate netassets of the Company on an investment basis were £305.8 million. At the time of the Company's listing all the funds raised were fully invested orcommitted through the acquisition of the Initial Portfolio of 15 investmentsvalued at £250.4 million as at 31 March 2006. At launch the Group intended tomake further infrastructure investments to be funded by cash reserves heldpending investment, by borrowing facilities or by raising additional capital inthe market. Highlights • HICL has increased its portfolio of assets from 15 to 27 since launch. These assets including schools, hospitals, and police stations have high quality cash flows from long term contracts, generally from public sector or government clients with strong credit quality. • The proceeds are intended to be used to pay down the Group's existing debt in order to provide greater flexibility to invest in new infrastructure opportunities as these arise. • The total value of the Current Portfolio as at 31 March 2008 was £437.9 million, up 14 per cent from 30 September 2007. Based on this valuation, the Net Asset Value, on an investment basis, as at 31 March 2008 is expected to be approximately 123 pence per Ordinary Share. • HICL has outperformed the FTSE All Share Index by 25.9 per cent over the period 29 March 2006 to 31 March 2008 and has provided an annualised total shareholder return of 13.3 per cent over this period. • The Current Portfolio has performed better than the Company's projections at the time of launch. From 29 March 2006 to 30 September 2007, the Net Asset Value per Ordinary Share of the Company increased from 98.4 pence to 119.25 pence (after deduction of the 3.05p interim distribution). • The company will pay a second interim distribution of 3.2 pence for the financial year ended 31 March 2008 which brings the total distribution for the 2008 financial year to 6.25 pence, up from 6.1 pence in 2007. The second interim distribution of 3.2 pence per share will be payable on 23 May 2008 to ordinary shareholders on the register at 2 May 2008. Graham Picken, Chairman of HICL said: "We are very pleased with the performanceof the business since we launched in March 2006. The additional funds that weseek will allow us to pay down debt and position us to seek new opportunities tocontinue the growth of the business." Background and reasons for the Issue The Group acquired the Initial Portfolio shortly after launch. Over the periodsince launch the Group has acquired twelve further infrastructure investments,which have been financed by the Group's debt facilities. In December 2007 the Company took out a £200 million multi-currency revolvingcredit facility with the Bank of Scotland plc. Following the £20.5 million finalequity subscription in the Colchester Garrison project in April 2008 the Grouphas existing debt of approximately £145 million. The Company is now proposing to raise up to £145 million (before expenses)through the Placing and Offer for Subscription of C Shares. It is intended thatthe net proceeds of the Issue will be used to pay down the Group's existingdebt. In order to implement the repayments of debt, the Company will transfer tothe C Share portfolio a pro rata share of the Current Portfolio with a valueequal to the net proceeds of the Issue, in consideration for the purchase by theC Share portfolio of loan notes through the Group. The repayment of the existing debt will provide the Group with greaterflexibility in making further investments in the infrastructure market assuitable opportunities arise. The Directors believe that the use of C Shares is the most appropriate method bywhich to raise further equity capital, as it will ensure that the costs of theIssue are borne fully by new investors and will therefore not dilute the NetAsset Value of existing Ordinary Shares. Benefits of the Issue The Directors believe that the Issue will have the following benefits: •It is intended that the net proceeds of the Issue will enable the Group to repay existing borrowings, thereby providing the Group with greater flexibility in making further investments in the infrastructure market as opportunities arise; •Shareholder funds will be fully invested in the Current Portfolio shortly after the Issue, which will avoid the Company holding uninvested cash balances and will remove the potential effects of cash drag on shareholder returns; •Existing shareholders will have the opportunity to subscribe for further shares in the Company, while other investors will be able to make an investment for the first time, and in each case subscription for C Shares will rapidly provide full exposure to the Current Portfolio of infrastructure assets; •The market capitalisation of the Company will increase, and the secondary market liquidity in the Company's Ordinary Shares is expected to be enhanced following Conversion as a result of a larger and more diversified shareholder base; and •The Company's fixed running costs will be spread across a wider shareholder base, thereby reducing the total expense ratio. Investment objectives The Company seeks to provide investors with long-term distributions, at levelsthat are sustainable, and to preserve the capital value of its investmentportfolio over the long-term with potential for capital growth. The Company targets a progressive distribution policy and growth of its annualdistributions to 7p per Ordinary Share within 5 years. The Company is targeting an IRR of 7 to 8 per cent.* on the original issue priceof its Ordinary Shares in March 2006, to be achieved over the long-term viaactive management, including the acquisition by the Group of further investmentsto complement the Current Portfolio and by the prudent use of gearing. Investment opportunity The Directors and the Investment Adviser believe that an investment ininfrastructure assets, a relatively new investment class for investors, offersthe following features, which potentially compare favourably with an investmentin other asset classes such as non-infrastructure equities and real estate: •Low correlation to equity investment and limited exposure to economic and business cycles; •Concessions which generally have central or local government counterparties, providing strong credit quality; •A growing income stream supported by indexation of contract revenues; •Underlying market demand for infrastructure remains strong worldwide - given political and economic imperatives and public budget constraints; •Recent market turmoil in financial markets has highlighted the stability of infrastructure assets; and •Valuation of infrastructure projects has been stable reflecting the inherent value in the underlying income streams for assets in both primary and secondary markets. The Directors also believe that an investment in the Company more specificallyoffers the following benefits: •Growing dividend from 6.1p per Ordinary Share; •Preservation of capital value of investment portfolios with potential for capital growth; •A diversified portfolio primarily focused on equity investments in operational yielding assets with proven track record, rather than assets under construction; •Current Portfolio assets combine size and scale to maintain balance and diversification across portfolio; •The Group has the possibility of purchasing additional equity in Current Portfolio projects, giving opportunity to enhance returns through benefits of scale; •Cash proceeds of the Issue will be immediately invested; •Management team has strength and depth in key skills - deal sourcing, deal structuring and portfolio management, enhancing returns on low risk basis; •The Group has recently negotiated five-year debt facilities on attractive terms for shareholders. Underlying projects have long term amortising debt and do not require refinancing; •The Company provides investors with comprehensive range of information enabling them to understand how portfolio is performing; •Access to HSBC global network gives the Group potential to source and execute deals. HSBC also provides potential supply of target assets from existing primary funds; and •Management team has experience of operating in international arena where growth opportunities are strong. Expected Key dates Latest date and time for receipt of Application Forms 1.00pm on 15 May 2008under the Offer for Subscription Latest time and date for receipt of Placing commitments 5.00pm on 15 May 2008 Announcement of Placing and Offer for Subscription results 16 May 2008 Admission to the Official List and unconditional 8.00am on 21 May 2008dealings in the C Shares to commence on the London Stock Exchange The Prospectus will be posted to Shareholders. Copies of the Prospectus may beobtained by calling the offices of Oriel Securities Limited on +44 20 7710 7600or by emailing hiclcshare@orielsecurities.com. Copies of the Prospectus will also be available on the companies website www.hicl.hsbc.com. It can also be collected, free of charge during normal business hours, from anyof the following: HSBC Infrastructure Company Limited Lovells LLP Oriel Securities LimitedDorey Court Atlantic House 125 Wood StreetAdmiral Park Holborn Viaduct LondonSt Peter Port London EC2V 7ANGuernsey EC1A 2FGChannel IslandsGY1 3BG Two copies of the Prospectus will be submitted to the UK Listing Authority andwill shortly be available for inspection at the UK Listing Authority's Document Viewing Facility situated at: Financial Services Authority25 The North ColonnadeCanary WharfLondon E14 5HS For further information, please contact: HSBC Specialist Fund Management Limited +44 (0) 20 7991 8888Tony RoperKeith PickardSandra Lowe M: Communications +44 (0) 20 7153 1530Ed OrlebarTilly von Twickel Oriel Securities Limited +44 (0) 20 7710 7600Tom DurieEmma Ormond Dresdner Kleinwort Securities Limited +44 (0) 20 7475 6688Dominic Waters +44 (0) 20 7475 6674Robbie Robertson +44 (0) 20 7475 7144David Yovichic * These are targets only and are not profit forecasts. There can be no assurancethat these targets will be met or that the Company will make any distributionswhatsoever or that investors will recover all or any of their investments. Terms used in this announcement unless otherwise defined shall have the meaningsgiven in the Prospectus expected to be issued by the Company in respect of theIssue on 23 April 2008. For further information about HICL please see our website: www.hicl.hsbc.com This announcement and the information contained herein is restricted and is notfor publication, release or distribution in whole or in part in Australia,Canada, Japan or the United States. This announcement is not a prospectus andinvestors should not subscribe any C Shares referred to in this announcementexcept on the basis of information in the final prospectus to be published byHICL (the "Prospectus"), both in connection with the admission of its C Sharesto the Official List of the UK Listing Authority and to trading on the mainmarket for listed securities of London Stock Exchange plc. Copies of theProspectus will be available from the registered office of HICL at Dorey Court,Admiral Park, St Peter Port, Guernsey, GY1 3BG and at the offices of Lovells LLPat Atlantic House, Holborn Viaduct, London, EC1A 2FG and at the offices of OrielSecurities Limited, 125 Wood Street, London, EC2V 7AN in due course. This announcement does not constitute an offer of, or the solicitation of anoffer to buy or subscribe for, C Shares to any person in any jurisdiction towhom or in which such offer or solicitation is unlawful and, in particular, isnot for release, publication or distribution in or into the United States,Australia, Canada or Japan. The Offer for Subscription and the Placing of the CShares has not been and will not be registered under the US Securities Act of1933, as amended or under the applicable securities laws of Australia, Canada orJapan. Subject to certain exceptions, the C Shares may not be offered or sold inAustralia, Canada, Japan or the United States. The contents of this announcement have been prepared by and are the soleresponsibility of HICL. Oriel Securities Limited ("Oriel Securities") andDresdner Kleinwort Securities Limited ("Dresdner Kleinwort"), both of whom areregulated by the Financial Services Authority, are acting exclusively for HICLand no-one else and will not be responsible to anyone other than HICL forproviding the protections afforded to the clients of Oriel Securities andDresdner Kleinwort respectively, nor for affording advice, the contents of thisannouncement or any matter is referred to herein. This information is provided by RNS The company news service from the London Stock Exchange