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Goldman Sachs Dyn (GSDO)

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Friday 21 November, 2008

Goldman Sachs Dyn

Trading Update

RNS Number : 7311I
Goldman Sachs Dynamic Opportunities
21 November 2008

Goldman Sachs Dynamic Opportunities Limited

Trading Update, Continuation Votes and Shareholder Redemption Proposals

Trading update

The Company invests in underlying assets which are predominantly U.S. Dollar denominated. The Company has, since inception, engaged in currency hedging for the benefit of its £ shares and € shares (subject only to the availability of appropriate foreign exchange and credit facilities).  The Company has an overdraft facility with Royal Bank of Canada (Channel Islands) Limited ('RBC') for up to the lower of (i) US$120 million, (ii) 20 per cent. of NAV and (iii) 100 per cent. of the Company's Collateral Value (as defined in the facility agreement). The Company's use of the facility as at 18 November 2008 was approximately US$85 million (excluding unrealised currency hedging losses incurred in November) equivalent to approximately 16 per cent. of the Company's most recent weekly estimated net asset value calculation (as at 18 November 2008).  The size of the current overdraft has been substantially driven by the recent significant appreciation in value of the U.S. Dollar against Sterling and Euro. Such currency movements have caused realised losses to be incurred on the Company's forward foreign exchange contracts, requiring cash settlement. These losses, however, are substantially offset by unrealised gains in the Sterling and Euro value of the Company's portfolio. 

In view of the risk of a further appreciation in value of the U.S. Dollar against Sterling and Euro, resulting in further realised currency hedging losses requiring cash settlement, the Board has resolved to suspend the operation of the Company's currency hedging arrangements with immediate effect. This will result in the realisation of currency hedging losses incurred during November and full utilisation of the Company's current overdraft facility. The Company has obtained appropriate waivers from RBC to the extent that such credit utilisation exceeds the Company's credit limit by up to US$46 million pending receipt of the proceeds of portfolio redemptions referred to below.  

The Board intends to reinstate the currency hedging arrangements in due course having regard, in particular, to the prevailing level of volatility in currency markets, the liquidity profile of the Company's portfolio and assuming receipt of portfolio redemption proceeds required to provide sufficient liquidity under the Company's credit facility. In the meantime, the Board, in consultation with the Investment Manager, will give consideration to other currency hedging techniques and instruments which may be appropriate in the circumstances. Further announcements will be made in due course.

Continuation votes

If each class of the Company's shares continues to trade at recent discount levels, the Company's rolling 12 month discount floor provision will be triggered for each class of the Company's shares at the beginning of 2009. This will require, in accordance with the Company's articles of association, separate continuation votes to be proposed for each class of shares by way of ordinary resolutionThe articles further provide that the Board must put forward a continuation vote within 4 months of the discount floor provision of any class of shares being triggered.

If the discount floor provisions are triggered at the beginning of 2009, the Board expects to dispatch a circular to shareholders in February 2009 convening separate class meetings to be held thereafter at which the continuation votes will be proposed

If a continuation vote in respect of any class of shares is not passed, the Company's articles of association require the Board, within 2 months, to put forward proposals to offer to redeem all of the Company's shares of that class. However, where the class or classes of shares in respect of which a continuation vote is not passed collectively represent in aggregate 75 per cent. or more of the Company's issued share capital, then the Board (at their discretion) may first put to shareholders proposals to reorganise, reconstruct or wind up the Company. 

Portfolio redemptions and shareholder redemption proposals

The Board, in conjunction with its advisers, has undertaken a full review of the strategic options open to the Company with reference in particular to the liquidity profile of the Company's underlying funds, the concentrated nature of the Company's portfolio and the desire to maintain a balanced investment portfolio for the benefit of all shareholders.

Following such review, the Company's Investment Manager has initiated an orderly programme of portfolio redemptions, the proceeds of which are anticipated to allow the Company to repay the current overdraft and to provide additional liquidity for the purposes described belowIn determining which of the Company's underlying funds to redeem, the Investment Manager will, in particular, take into account the liquidity profile of such underlying funds. Accordingly, the net result of the portfolio redemption programme may result in the remaining portfolio being temporarily less liquid with greater or lesser exposure to particular investment sectors.  

For each class that passes the requisite continuation vote, and subject, amongst other things, to receipt by the Company of sufficient proceeds arising from the programme of portfolio redemptions referred to above to meet all classes' redemption requirements, it is proposed that a redemption offer for up to 25 per cent. of the Company's issued share capital will be made to shareholders of that continuing class at the Company's NAV as at 30 September 2009 (less the costs of implementing the redemption offer), for settlement in November 2009. 

Subject also to the requisite continuation votes being passed and having regard to the then prevailing share price rating of the Company's shares, the Board will also consider whether further action might be appropriate from time to time in order to provide further opportunities for investors to realise additional liquidity.


Robin Amer

RBC Offshore Fund Managers Limited

Tel: +44 (0)1481 744 000

Niklas Ekholm

Head of International Public Relations

Goldman Sachs Asset Management 

Tel: +44 (0)20 7051 9270

Fiona Laffan

Media Relations

Goldman Sachs Asset Management 

Tel: +44 (0)20 7774 9649

Gary Gould / Stuart Klein

RBS Hoare Govett Limited

Tel: +44 (0)20 7678 8000

This information is provided by RNS
The company news service from the London Stock Exchange