19 Dec 2018 07:01
19 December 2018
Hadrian's Wall Secured Investments Limited
Portfolio Update
Further to the note in the annual report and accounts for Hadrian's Wall Secured Investments Limited (the "Company") for the year ended 30 June 2018, the board of the Company (the "Board") notes that Arensis Energy Ltd, Entrade Energy Ltd and Arensis Energy One Ltd (each a "Borrower" and together the "Group"), with the knowledge of the Company's investment adviser, Hadrian's Wall Capital Limited (the "Investment Adviser"), entered administration proceedings on 15 October 2018. At such time, it was not anticipated that the administration proceedings would have a negative impact on the valuation of the Company's investment in the Group, nor on the Company's ability to meet the dividend target on the Ordinary Shares, and this continues to be the case.
The Company (through its subsidiaries) has a loan and hire purchase arrangement in place with the Group, which is attributable to the portfolio of the Company's ordinary shares (the "Ordinary Shares") and, as at 13 December 2018, represented a principal amount of £13.0m.
The Group is a leading wood pellet manufacturing business, representing approximately 30% of UK production, and benefitting from long-standing customer arrangements. The Company is the first ranking secured creditor to the Group, with security over all of the assets of the Group including, without limitation, the Group's manufacturing facilities and equipment, and owns the equipment hired to the Group under the hire purchase arrangement.
The Group experienced a working capital shortfall and did not have sufficient funds to complete certain capital improvement projects, which are expected to generate significant long-term inflation-linked income streams, such that it was necessary for the Group to enter administration. Administration has provided a more stable and orderly framework within which to hold discussions between the key stakeholders to seek to resolve the Group's critical working capital issues, which the Investment Adviser believes should result in the Company ultimately realising the full amount of its investment.
The assets of the Group are expected to be acquired out of administration by two new companies, one acquiring the English plant and associated operations and one acquiring the Scottish plant and associated operations, with the acquisitions financed by the Company. The Company has committed to provide additional funding not expected to exceed £3 million to the English business and £1 million to the Scottish business, for working capital and capex purposes.
As noted in the Company's annual report and accounts for the year ended 30 June 2018, based on advice received from the Investment Adviser, the Board did not consider that an individual loan loss reserve was required in respect of the Company's investment in the Group. The Company does, however, establish general loss reserves pursuant to IFRS9, as distinct from case loss reserves, as part of its continuing monitoring of its loan portfolio. On advice from the Investment Adviser, the Board continues to believe that an individual loss reserve is not required for this investment, however, the general IFRS9 loss reserves remain in place and has been reflected in the Ordinary Share NAV since 31 October.
Although the administrations of the Borrowers and corresponding restructuring process has caused the revenue received from the Company's portfolio of investments to be lower than expected in the short term, the Investment Adviser does not anticipate any impact on the Company's ability to continue to meet the dividend target on the Ordinary Shares.
Contact Details
Hadrian's Wall Capital Limited (Investment Adviser)Ron Miao / Mike SchozerTelephone 020 3026 8620
Winterflood Investment Trusts (Corporate Broker)Joe Winkley / Neil MorganTelephone 020 3100 0000
Forward-looking statements
This press release may contain forward-looking statements with respect to the Company's future (financial) performance and position. Such statements are based on current expectations, estimates and projections of the Company and information currently available to the Company. The Company cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause actual performance and position to differ materially from these statements. The Company has no obligation to update the statements contained in this press release, unless required by law.