Investment in Close High Inco

RNS Number : 2766P

Alpha Tiger Property Trust Limited

13 July 2010

 



13 July 2010

ALPHA TIGER PROPERTY TRUST LIMITED ("ALPHA TIGER" OR THE "COMPANY")

ALPHA TIGER ANNOUNCES investment IN Close High Income Properties plc ("CHIP")

Highlights

·      £4.75m investment by way of three-year Convertible Unsecured Loan Stock ("CULS") which ranks ahead of ordinary equity

·      CULS to carry 4.75% p.a. coupon and 18% redemption premium if not converted

·      CULS convertible at Alpha Tiger's option into ordinary share capital at any time until June 2013

·      Option for Alpha Tiger to invest up to a further £2m in CHIP equity 

·      Investment expected to offer high total returns to the Company

CHIP overview

CHIP (CHI.L) is a London Stock Exchange listed UK property fund with gross property assets of £112m (as at 31/3/10). CHIP has a regionally diversified portfolio of UK light industrial and office property.

The current property investment advisor to CHIP is Close Investments Limited ("CIL"), a subsidiary of Close Brothers Group plc. However, subject to CHIP shareholder approval, agreement has been reached for CHIP to be managed by Alpha Real Capital LLP ("ARC") from 9 August 2010 with certain services still being provided by CIL.

Investment rationale

The investment by Alpha Tiger represents an excellent opportunity to invest, via an attractive capital structure with a preferred minimum return, in a portfolio of light industrial and office property which offers scope for improved performance through ARC's asset management expertise and experience.

Transaction structure

The Company will invest in CHIP by way of CULS earning a coupon of 4.75% per annum. The CULS will have preference shares attached to them which will give the Company voting rights on resolutions not pertaining to UK Listing Authority matters. The CULS are convertible into ordinary share capital at any time until June 2013 at a conversion price of 31p, close to the 31 March 2010 NAV of CHIP which stood at 31.28p.

Should Alpha Tiger not elect to convert, the CULS are redeemable at a premium of 18% to their face value.

Alpha Tiger has also been granted an option of purchasing up to a further 4 million shares in CHIP at a price of 50p per share (the "Option").

Both the investment in CULS and the Option are subject to CHIP shareholder approval at its AGM on 9 August 2010, along with a continuation vote to extend the life of CHIP for a further three years to August 2013.

Should Alpha Tiger elect to exercise the CULS in full (and assuming that the CULS coupon will be met by the issue of further CULS in accordance with its terms) Alpha Tiger will hold 17.4% of CHIP's enlarged share capital (assuming no other issues of shares). If the Option is also exercised in full, Alpha Tiger will hold 20.5% of CHIP's enlarged share capital (assuming no other issues of shares).

Going forward CHIP will be managed by ARC, the Company's investment manager. ARC will receive a management fee of 1.25% of CHIP's gross asset value in consideration for its services. ARC may also be entitled to certain performance fees in due course. To avoid double counting of fees on Alpha Tiger's investment in the CULS and Option, if exercised, ARC will rebate to Alpha Tiger its net management fee relating to Alpha Tiger's investment (the "Fee Rebate").

Further details on CHIP and the shareholder circular setting out the proposals being put to CHIP shareholders, together with details of its financial position and banking facilities, can be found on CHIP's website at:

http://www.closeam.com/Home/Close_insights/Close_fund_information/Offshore_fund_facts/

Related party transaction

The Fee Rebate is deemed to be a related party transaction under the AIM Rules for Companies. Phillip Rose is deemed to be a related party due to his relationship with ARC; as such he has not participated in the Board's consideration of the transaction. The Directors of Alpha Tiger (excluding Phillip Rose) consider, having consulted with Panmure Gordon (UK) Limited, Alpha Tiger's nominated adviser, that the terms of the Fee Rebate are fair and reasonable insofar as its shareholders are concerned.

For further information please contact:

Alpha Tiger Property Trust Limited

David Jeffreys, Chairman, Alpha Tiger                              [phone]

Brad Bauman, Joint Fund Manager, Alpha Tiger                [phone]

Panmure Gordon, Nominated Adviser to the Company                                                                                                                                                                             

Richard Gray/Andrew Potts/Stuart Gledhill                       [phone]

Notes to editors:

About Alpha Tiger Property Trust

Further information is available at www.alphatigerpropertytrust.com

 

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