3 Apr 2020 07:00
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OR TO US PERSONS
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
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3 April 2020
SME Credit Realisation Fund Limited
(the "Company")
Company Update
The Board provides the following update following its preliminary assessment of the potential implications of the COVID-19 pandemic.
Whilst the future performance of the Company's underlying loans may be adversely affected by COVID-19, in common with many other forms of corporate lending, the Board is pleased to report further positive progress in the Company's winding-down with returns of cash to shareholders of c. £22 million intended to be declared for payment in May 2020.
Returns to shareholders
The Company intends to continue returning surplus cash to shareholders on a quarterly basis; that is broadly speaking loan principal and interest receipts, less operating expenses, less leverage costs and repayments, less any FX margin reserve maintenance requirements.
Dividend declaration
The Company will pay a quarterly dividend of 1.3125 pence per share in May 2020. Details of the timetable for the dividend payment will be published in the next few days.
Compulsory partial redemption of Shares
In addition to the dividend, the Company will return approximately £18.5 million to shareholders by way of a compulsory partial redemption of shares. Again, further details of the partial redemption of shares will be published in the next few days.
The Company and its advisers will continue to review how and when capital is returned to shareholders, which may change over the course of time.
Delay to publication of the Company's NAV
As a result of the uncertainty caused by COVID-19 the Company has decided to delay the publication of its NAV as at 31 March 2020 which otherwise would have been released mid-April. The Company will publish the NAV when market conditions stabilise sufficiently to allow the establishment of detailed forward-looking assumptions based on evolving market data and thus facilitate the calculation of a reliable NAV.
Pending publication of the Company's NAV as at 31 March 2020, the Board has resolved to suspend share repurchases.
It is the Board's intention to be as transparent as possible with shareholders through this period of uncertainty and we will continue to provide updates at appropriate junctures.
Active risk management and focus on collections
The Board continues to work closely with its advisers and Funding Circle to manage the Company's portfolio and ensure that appropriate steps are being taken to mitigate risk and achieve the best outcome for both investors and borrowers.
The Company hedges USD and EUR exposure to GBP and maintains a prudent FX reserve margin which has been increased further in light of recent FX volatility; this reserve is actively monitored and maintained along with management of liquidity requirements deriving from other operating expenses and financial liabilities. The Company will continue to hedge USD and EUR exposure to GBP. The Company has provided additional detail on its current borrowings below under the section "Leverage".
Funding Circle has taken wide-ranging business contingency steps already and will continue to respond to COVID-19 as the environment develops. Funding Circle employees have successfully switched to working from home which has been readily facilitated by a pre-existing technology-focused infrastructure. Servicing, collections and recoveries capabilities have been materially enhanced with increased headcount and training as well as pre-emptive on-boarding of additional third party capacity should it be required.
Funding Circle's business model is built on the need for a well-functioning financial system for SME borrowers and lenders and is working to provide a flexible and pragmatic approach to its collections activities to both support borrowers and to protect investor returns, in line with governmental and regulatory guidance.
Portfolio disposals
The Company announced in early February 2020 that having run an auction process over the preceding months the Board were pursuing a potential sale of a portion of its assets. It is still the Company's intention to effect a sale of a portion of its assets and the Company continues to engage with potential buyers. That said, given the current market volatility and uncertainty caused by COVID-19, it is likely the asset sales shall be delayed, or may not proceed at all.
Leverage
As at 31 March 2020, the Company's outstanding borrowings were approximately £56 million on a look-through basis, which equates to a debt to equity ratio of 22% based on the Company's 31 December 2019 NAV of approximately £259 million. All of the Company's leverage facilities are in amortisation with the majority of cashflows from loans held within the respective SPVs being prioritised to reduce the Company's borrowings.
Transition to fair value accounting
As referenced in the Company's interim report published in December, the Company has, as a result of the Company's business model changing, with effect from its FY20/21 beginning 1 April 2020 moved to fair value accounting for the loans it holds. The Company therefore expects to publish its NAV from and including as at 30 June 2020 using fair value methodology, which will involve the application of a discount rate implied by market comparables to the expected cashflows from the Company's loan portfolio. Further details, including potential variance in NAV, will be disclosed in the Company's FY19/20 annual report scheduled for publication in July.
CONTACTS
Richard Boleat, Chairman
+44 (0) 1534 615 656
Richard.Boleat@smecreditrealisation.com
Secretary and Administrator
Sanne Group (Guernsey) Limited
+44 (0) 1481 739810
smecreditrealisation@sannegroup.com
Corporate Broker
Numis Securities
Nathan Brown
George Shiel
+44 (0) 207 260 1000
n.brown@numis.com
Investor Relations
IR@smecreditrealisation.com
Website
www.smecreditrealisation.com
The ISIN number of the Ordinary Shares is GG00BKX9MJ69, the SEDOL code is BKX9MJ6 and the TIDM is SCRF.
The LEI number of the Company is 549300ZQIYQVNIZGOW60.
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ABOUT SME CREDIT REALISATION FUND LIMITED
The Company is a registered closed-ended collective investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Registered Collective Investment Scheme Rules 2018 issued by the Guernsey Financial Services Commission (''GFSC'').
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IMPORTANT NOTICES
This announcement contains "forward-looking" statements, beliefs or opinions. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company and all of which are based on its directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "projects", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events, assumptions or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Board or the Company with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business concerning, amongst other things, the financial performance, liquidity, prospects, growth and strategies of the Company. These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement. Nothing in this announcement is, or should be relied on as, a promise or representation as to the future. The Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure Rules and Transparency Rules of the FCA. No statement in this announcement is intended as a forecast or profit estimate.
Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"), or distributed, directly or indirectly, in the United States or to US Persons (as such term is defined in Regulation S under the US Securities Act of 1933, as amended (the "Securities Act"). Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful.