For immediate release: 4th March 2010
CQS Rig Finance Fund Limited
(incorporated in Guernsey as a closed-ended investment scheme with registration
Notice of Annual General Meeting, Declaration of proposed Final Dividend and
proposed new Investment Object and Investing Policy
Notice of the Annual General Meeting is being given today.
The Board of the Company has today proposed a final dividend and, further to the
Annual Results announcement on 20 January 2011, a new Investment Objective and
Investing Policy for the Company.
Proposed Final Dividend
The Board of Directors of the Company is pleased to propose a final dividend of
1 pence per ordinary share of no par value (the "Shares") in respect of the year
ended 30 September 2010. Shareholders will be asked to approve payment of this
dividend and alterations to the Company's articles of association (the
"Articles") to take advantage of changes to Guernsey law with respect to payment
of dividends at the Annual General Meeting to be held at Dorey Court, Admiral
Park, St Peter Port, Guernsey, GY1 3BG on 7 April 2011 at 9.30am.
Subject to the necessary shareholder approvals, the final dividend will be
payable on 11 May 2011 to all shareholders on the register on not later than the
close of business 15 April 2011. The Shares will go ex-div on 13 April 2011.
On 1 July 2008, an updated companies legislation came into force in Guernsey,
entitled the Companies (Guernsey) Law, 2008 (the "New Law") replacing the
Companies (Guernsey) Law, 1994, as amended (the "Previous Law"), under which the
Company was incorporated. Although a number of transitional provisions were
adopted to ensure as little interruption as possible to the operation of
Guernsey companies, it is anticipated that the New Law will be amended during
the transitional period which expires in July 2012. The Directors however
believe that a number of changes are required, in advance of the end of the
transitional period, to the articles of the Company to comply with certain
provisions of the new legislation which would be of immediate benefit to the
Under the New Law there are no longer restrictions on paying dividends only from
profits available for the purpose. Under the New Law the "profits available for
the purpose" test is substituted for a solvency test whereby distributions
(which include dividends) may be made if the directors of a company are
satisfied on reasonable grounds, and certify to that effect, that that company
will immediately after the distribution, satisfy the solvency test as set out in
the New Law.
The Articles currently contain restrictions on the payment of dividends
otherwise than out of profits and as a consequence, the Articles are more
restrictive than required by the provisions of the New Law and to allow the
Company to utilise the increased flexibility permitted by the New Law, it is
proposed that the Articles be amended by passing the resolution (set out in the
Notice convening the Annual General Meeting) as a special resolution and if the
Resolution is approved, dividends will be paid in accordance with the New Law.
Proposed new Investment Objective and Investing Policy
Following the significant changes that have taken place in the market in which
the Company operates since the failure of Lehman Brothers in September 2008, it
has been necessary to update the Investment Objective and Investing Policy of
the Company to reflect the current and expected market environment and
After discussion with the Company's Investment Adviser, the Board proposes that
the Company's Investment Objective and Investing Policy be amended to provide
Shareholders with an attractive total return, through a combination of capital
appreciation and dividends.
Under the current Investing Policy, the Company's portfolio principally
comprises of secured debt instruments primarily issued to finance the
construction, modification and/or refurbishment of rigs and other infrastructure
and/or equipment used for offshore exploration and production of oil and natural
The Investment Adviser believes that there are now an increasing number of
attractive related opportunities available for the Company to invest in
instruments that are unsecured and/or subordinated within individual issuers'
capital structures. The related opportunities significantly widen the
investable universe and thereby allow the Company to source attractive
investments while also widening risk diversification and improving portfolio
liquidity. Additionally, the Investment Adviser believes that investments in
convertible bonds can offer an attractive combination of yield and equity
participation while providing some protection from declines in equity
valuations. It is therefore proposed that the Company expand its investable
universe to include unsecured and/or subordinated debt instruments, including
convertible bonds and other associated securities. Furthermore, the Investment
Adviser believes that expanding the investable universe to include a wider range
of financing opportunities relating to oil, natural gas and other resource
sectors should also assist in increasing the opportunity to generate attractive
returns in addition to widening both portfolio diversification and improving
The proposed new Investment Objective and Investing Policy is set out below:
"The Company's investment objective is to provide Shareholders with an
attractive total return, through a combination of capital appreciation and
The Investment Adviser seeks to achieve the investment objective of the Company
by sourcing and trading a portfolio comprising predominantly debt instruments.
The Investment Adviser will seek to use fundamental credit and industry analysis
to identify instruments expected to provide attractive risk-adjusted returns
which meet the investment objective of the Company. Such instruments are
expected to be issued primarily to finance companies involved in the
construction, modification and operation of offshore rigs and related
infrastructure equipment, and companies involved in the development and
operation of assets used in the offshore and/or onshore exploration, production
and distribution of oil, natural gas and other resources. Investments in
adjacent sectors such as shipping and transportation may be included at the
discretion of the Investment Adviser.
It is expected that the Portfolio will be passively managed, although the
Investment Adviser may elect to become actively involved in workout situations
should they arise. It is expected that some investments will be held through to
maturity (or earlier redemption/repayment by the issuer /borrower), while others
may be held for shorter terms to capture mispricing of risk. The Investment
Adviser may trade investments depending on the prevailing market conditions at
The Company seeks, on a global basis, to capture on its investments attractive
risk-adjusted yields and potential capital appreciation arising from possible
corporate activity, including but not limited to, refinancing, industry
consolidation and workouts, and from equity appreciation for securities
exhibiting equity characteristics. The Company is permitted to borrow to enhance
the returns of the Portfolio. The gearing of the Portfolio is not expected to
exceed 30% of Net Asset Value, and from time to time the Portfolio may be
constructed with little or no gearing. The Company may retain amounts in cash,
or cash equivalents, pending reinvestment if this is considered appropriate to
the achievement of its investment objective.
The Company may construct the Portfolio using a range of securities, derivatives
and other agreements including but not limited to positions in secured,
unsecured and subordinated bonds, including convertible bonds, that may be fixed
or floating rate securities, payment-in-kind bonds, senior, second lien and
mezzanine loans, equities and equity warrants. The Company may trade both rated
and unrated debt instruments although it expects, in most cases, that such
instruments will not be rated by a recognised rating agency. Exposure to
securities may be taken directly or synthetically through the use of repurchase
agreements, total return swaps and other derivatives referencing the securities
selected for the Portfolio. Interest rate and foreign exchange transactions may
be effected using swaps, forwards, futures and options and other derivatives.
The Company may trade listed and unlisted securities, and may execute
derivatives transactions on exchange or over the counter."
Adoption of the new Investment Objective and Investing Policy are subject to the
approval of Shareholders. An ordinary resolution to approve the Company's new
Investment Objective and Investing Policy will be presented for approval at the
Annual General Meeting.
Authority to repurchase Shares
The current authority to repurchase shares will terminate at the conclusion of
the Annual General Meeting.
Shareholders are invited to continue the authority granted by Shareholders at
the last annual general meeting by authorising the Company to purchase Shares at
any time until the annual general meeting of the Company in 2012 provided that
(i) the maximum number of Shares which may be purchased is 14.99 per cent. of
the issued Ordinary Shares at the date the resolution is passed; (ii) the
minimum price per Ordinary Share is 0.1p; and (iii) the maximum price which may
be paid for any Ordinary share is not more than the higher of 5 per cent. above:
(a) the average Channel Islands Stock Exchange LBG traded value per Ordinary
share for the 5 business days prior to the day the purchase is made; or (b) the
price stipulated by Article 5(i) of the Buyback and Stabilisation Regulation
(namely the higher of the price of the last independent trade in Ordinary shares
and the highest then current independent bid for the Ordinary Shares on the AIM
Market of the London Stock Exchange).
The Directors will exercise this authority only when to do so would be in the
best interests of Shareholders generally.
The Board considers the resolutions to be proposed at the Annual General Meeting
and contained in the enclosed notice are in the best interests of the Company
and its shareholders as a whole. The directors unanimously recommend that
shareholders vote in favour of the resolutions as they intend to do in respect
of their own beneficial holdings which amount in aggregate to 113446 shares
representing approximately 0.11 per cent. of the existing issued ordinary share
capital of the Company.
The notice convening the Annual General Meeting will be sent to Shareholders
today and will be available at www.cqsrigfinance.com. The Company's Annual
General Meeting is scheduled to be held at the offices of Kleinwort Benson
(Channel Islands) Fund Services Limited on 7 April 2011.
For further information, please contact:
Hugh Field / Richard Johnson
Arbuthnot Securities Limited
Telephone 020 7012 2000
Lynette Le Prevost
Kleinwort Benson (Channel Islands) Fund Services Limited
Telephone 01481 727111
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Source: CQS Rig Finance Fund Ltd via Thomson Reuters ONE