Proposals for Managed Wind-Down of the Company

abrdn Diversified Income and Growth

14 December 2023

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

14 December 2023

For Immediate Release

abrdn Diversified Income and Growth plc (the "Company")

Proposals for Managed Wind-Down of the Company

Following the Company's announcement of an enhanced distribution programme on 26 October 2023, further detailed discussions with shareholders have been undertaken. In the light of the feedback received during these conversations and the entrenched discount to net asset value ("NAV") at which the Company's shares continue to trade, the Board has concluded that it is in the best interests of shareholders as a whole to put forward proposals for a managed wind-down of the Company (the "Managed Wind-Down").

Pursuant to the Managed Wind-Down, the Company proposes to conduct an orderly realisation of its assets in a manner that seeks to optimise the value of the Company's investments whilst progressively returning cash to shareholders. In particular:

·      the Board expects that approximately £115 million would be returned to shareholders in the first half of 2024 at, or close to, NAV (subject to shareholder approval and the appropriate use of the Company's distributable reserves) with further returns of cash to follow as value is realised from the Company's private markets portfolio in a timely and efficient manner as laid out below;

·     approximately £107.3 million of the Company's private markets portfolio (valued as at 30 November 2023) is expected to mature between 2024 and 2027 (the "First Tranche"). It is intended that the proceeds from the First Tranche will be returned to shareholders in a timely manner as the investments mature;

·     the remaining £81.5 million of the private markets portfolio (valued as at 30 November 2023) is expected to mature between 2029 and 2033 (the "Second Tranche"). As market conditions improve, opportunistic secondary sales of Second Tranche assets would be considered by the Company in order to realise value from these assets in a timely manner;

·    the Company will cease making new investments (save as to fund existing commitments and support the Managed Wind-Down as set out below);

·       the Board will seek to reduce the Company's ongoing costs; and

·      it is intended that the Company's debt arrangements, comprising secured bonds with a par value of c.£16.1 million, will be repaid during 2024.

Implementation of the Managed Wind-Down will require shareholder approval to amend the Company's investment objective and policy and will also be conditional on shareholders approving the continuation of the Company into Managed-Wind Down at the Company's annual general meeting currently anticipated to be held on 27 February 2024. Full details of the proposals will be published in a circular to shareholders as soon as practicable.

The Company will continue to pay its regular quarterly dividend until such time as the change of investment objective and policy is approved. The Board will review the level of dividend payable thereafter.

Near term return of capital  

The Company's liquid assets currently comprise approximately £94 million of fixed income and credit investments, £51 million of listed equities and £9 million of cash and cash equivalents. Pursuant to the Managed Wind-Down, the Board intends to return the cash generated from the sale of the Company's liquid assets together with available cash to shareholders in the near term save that the Company will retain sufficient funds to meet outstanding commitments in respect of its private markets portfolio (such commitments amounting to c.£41 million in total), repay the Company's secured bonds (c.£18 million including the repayment penalty) and provide for its ongoing working capital requirements (c.£8.5 million). Subject to shareholder approval and the appropriate use of the Company's distributable reserves, the Board therefore currently expects that approximately £115 million will be returned to shareholders in the first half of 2024.

The Company will seek to return this cash, and any future returns of cash, to shareholders in an efficient and fair manner which accounts for, among other things, the UK tax consequences for shareholders and the composition of the Company's shareholder register. Any return of capital pursuant to the Managed Wind-Down will be offered to shareholders at, or close to, the underlying NAV per share of the amount to be returned (with a discount only being applied where appropriate to cover the costs of the return). For the avoidance of doubt, in the light of the Managed Wind-Down proposals, the Board does not intend to proceed with a tender offer on the terms outlined in the announcement of 26 October 2023.

Future realisations

The Company held approximately £188.8 million of private markets investments as at 30 November 2023. The First Tranche of approximately £107.3 million is expected to be realised, as the underlying funds mature, between 2024 and 2027. The proceeds received by the Company from the First Tranche realisations will be progressively returned to shareholders throughout this period and the Board will seek to do so in a timely and efficient manner. As set out in the chart below, the Second Tranche, comprising the Company's remaining private markets investments valued at c.£81.5 million, is expected to mature between 2029 and 2033:

Asset	Current estimated IRR	Expected Maturity	NAV	Unfunded Commitments
abrdn Andean Social Infrastructure Fund I	3.20%	2029	£15,024,741	£4,628,934
Healthcare Royalty Partners IV	18.50%	2031	£15,681,989	£1,242,929
SL Capital Infrastructure Fund II	8.90%	2032	£21,466,958	£2,790,193
Bonaccord Capital Partners I-A	17.40%	2032	£16,237,660	£3,454,256
Aberdeen Standard Secondary Opportunities Fund IV	35.00%	2033	£13,161,630	£11,127,767
TOTAL			£81,572,978	£23,244,079

The Board believes that these longer-term investments are, in the large part, attractive, saleable assets but remains cognisant of the fact that early disposals from its private markets portfolio in current market conditions would necessitate a substantial discount to their long-term realisable values, and thereby limit the value that could be achieved for shareholders. As market conditions improve, opportunistic secondary sales would be sought by the Company to realise value from these assets in a timely manner. Throughout the Managed Wind-Down the Board may also seek to use opportunistic secondary sales from either tranche of private markets investments to manage the Company's undrawn commitments and optimise the level of cash that can be realised and returned to shareholders. In considering how best to deliver value to shareholders, the Board will also remain open-minded to takeover and merger opportunities during the Managed Wind-Down.

Given the current position of the Company's private markets portfolio, it is expected that the Managed Wind-Down would be in place for three to four years or longer (depending, among other things, on prevailing market conditions enabling the Company to realise optimal value from the Second Tranche assets). There can be no certainty as to the precise quantum or timing of any realisations or returns of capital from the private markets portfolio and, in particular, from sales of the Second Tranche assets (which will depend on prevailing market conditions alongside consideration of the Company's liabilities, undrawn fund commitments and general working capital requirements).

No further investments

From the date of this announcement, the Company will not make any new investments save as in respect of existing fund commitments and, subject to the Company's investment policy, realised cash may be invested in liquid cash-equivalent securities, including short-dated corporate bonds, government bonds, cash funds or bank cash deposits pending its return to shareholders in accordance with the Managed Wind-Down.

Ongoing costs

The Board acknowledges the importance of monitoring the Company's ongoing costs as the Managed Wind-Down progresses and will continue to keep the options available to the Company under review. In order to reduce the costs of the Company, the Board intends to reduce the number of directors and Anna Troup has indicated that she does not intend to stand for re-election at the Company's annual general meeting in February 2024. The remaining Directors would like to take this opportunity to thank Anna for her substantial contributions to the Board. The Company is exploring further ways in which it can reduce its costs in the context of the Managed Wind-Down and it is also intended that the Company's existing secured bonds will be repaid in 2024.

A circular to shareholders setting out the full details of the proposals will be published as soon as practicable.

For further information, please contact:

abrdn Diversified Income and Growth plc

Davina Walter (Chairman)                           via Buchanan

Dickson Minto Advisers

Douglas Armstrong                                     [phone]

Buchanan

Helen Tarbet / Henry Wilson                       [phone]

George Beale / Verity Parker                       [e-mail]

Important Information

This announcement is released by the Company and the information contained within this announcement is deemed by the Company to constitute inside information for the purposes of Article 7 of the UK version of the EU Market Abuse Regulation (Regulation (EU) No.596/2014) which forms part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement via a Regulatory Information Service, such information is now considered to be in the public domain.

Legal Entity Identifier (LEI): 2138003QINEGCHYGW702

 

END