Proposed fundraising & change
17 August 2010
QUEEN'S WALK INVESTMENT LIMITED
PROPOSED PLACING AND OPEN OFFER, BONUS ISSUE OF PREFERENCE SHARES AND CHANGE OF INVESTMENT POLICY
Queen's Walk Investment Limited (the "Company") today announces plans for a capital raising of approximately €26.64 million (€24.88 million net of expenses) by way of a Placing and Open Offer at €2.00 per New Ordinary Share. Qualifying Open Offer Shareholders are being given the opportunity to apply to subscribe for 1 New Ordinary Share for every 2 Existing Ordinary Shares held at the close of business on 13 August 2010. Each of the Directors intends to take up his pro rata entitlement to New Ordinary Shares under the Open Offer.
Placees procured by Liberum Capital have conditionally committed to subscribe for all the New Ordinary Shares at the Offer Price subject to clawback to satisfy valid applications by existing Qualifying Open Offer Shareholders under the Open Offer.
After close of the first day of trading of the New Ordinary Shares, the Company also proposes to make a Bonus Issue to Qualifying Bonus Issue Shareholders of fixed income Preference Shares on the basis of 1.25 Preference Shares for every 1 Ordinary Share held at the close of business on 16 September 2010. The Preference Shares will be issued free of subscription costs to Qualifying Bonus Issue Shareholders and confer the right to a preferential cumulative Preference Dividend (which is an amount in Sterling equal to 8 per cent. per annum of the Preference Share Notional Value) payable quarterly in arrear.
The Company will shortly be publishing a Prospectus and Circular in connection with the Placing and Open Offer and Bonus Issue.
The Company, on the advice of its investment manager, Cheyne Capital Management (UK) LLP (the "Investment Manager"), believes that there is an opportunity for it to benefit from investment in the European real estate debt market. Going forward the Company intends to re-direct the focus of its investments on discounted real estate debt including residential mortgage backed securities and commercial mortgage backed securities. Accordingly, the Company is proposing to change its investment policy with the result that the Company's primary focus for new investments will be Real Estate Debt Investments. The net proceeds of the Placing and Open Offer will be invested in accordance with the proposed investment policy.
The Placing and Open Offer, the Bonus Issue and the change to the Company's investment policy are conditional on Ordinary Shareholders approving certain resolutions to be proposed at an Extraordinary General Meeting to be convened at Dorey Court, Admiral Park, St. Peter Port, Guernsey GY1 3BG at the registered office of the Company at 11.00 a.m. on 15 September 2010.
Summary
· The Company intends to raise €26.64 million (€24.88 million net of expenses), by way of a Placing and Open Offer of New Ordinary Shares.
· The Company intends to utilise the proceeds of the Placing and Open Offer to invest in discounted real estate debt, including residential mortgage backed securities and commercial mortgage backed securities, which the Investment Manager considers are suffering price dislocation. The Company is proposing to amend its investment policy in connection with its intention to focus on investment in Real Estate Debt Investments in the future. The Investment Manager believes that Real Estate Debt Investments offer a favourable risk-return profile, greater liquidity and improved price transparency than the Residual Income Positions.
· On completion of the Placing and Open Offer, the Company will undertake a Bonus Issue of fixed income Preference Shares to Ordinary Shareholders. The Preference Shares confer the right to a preferential cumulative Preference Dividend equivalent to 8 per cent. per annum, payable quarterly in arrear.
· Cheyne ABS Opportunities Fund LP (the "Investing Fund") has agreed in writing to not take up its Open Offer Entitlement and may also seek to dispose of its holding of Preference Shares on or shortly following Bonus Issue Admission.
· The Company intends to change its name, conditional on the approval of Shareholders at the EGM, to "Real Estate Credit Investments Limited".
· The Company has convened an extraordinary general meeting at which Shareholders will be asked to approve, inter alia, the Placing and Open Offer, the Bonus Issue and the change to the Company's investment policy.
Investment objective
The Board believes that it is now in the best interests of Ordinary Shareholders as a whole for the Company's investment policy to be amended.
The Company's proposed investment policy will permit the Company to invest primarily in Real Estate Debt Investments. As at 17 August 2010, the Investment Portfolio includes a number of Residual Income Positions and as a result, in order to avoid inadvertent breaches of the proposed investment policy, the proposed investment policy will, if adopted, require at least 70 per cent. of the NAV of the Company to be invested in Real Estate Debt Investments and Residual Income Positions. However, if the proposed investment policy is adopted at the EGM, the Company does not currently intend to actively increase existing Residual Income Positions or invest in other Residual Income Positions with the current intention that eventually Real Estate Debt Investments will form a majority of the Investment Portfolio.
The Placing and Open Offer
Conditional on the Required Resolutions being approved by Ordinary Shareholders at the EGM and Open Offer Admission occurring, 13,322,328 New Ordinary Shares are being issued pursuant to the Placing and Open Offer.
Qualifying Open Offer Shareholders are being given the opportunity to apply to subscribe for New Ordinary Shares in proportion to their existing holdings at the Offer Price (payable in full on application) on the following basis: 1 New Ordinary Share at €2.00 per New Ordinary Share for every 2 Existing Ordinary Shares registered in the name of Qualifying Open Offer Shareholders at the Open Offer Record Date and so in proportion for any other number of Existing Ordinary Shares then registered.
Valid applications by Qualifying Open Offer Shareholders will be satisfied in full up to the amount of their individual Open Offer Entitlement.
Placees procured by Liberum Capital have agreed to subscribe for all the New Ordinary Shares at the Offer Price conditional upon the passing of the Required Resolutions at the Extraordinary General Meeting and Open Offer Admission, subject to clawback in respect of valid applications by Qualifying Open Offer Shareholders at the Offer Price under the Open Offer.
Not all holders of Existing Ordinary Shares will be Qualifying Open Offer Shareholders. Shareholders of the Company who are located or resident in, or who are citizens of, or who have a registered address in an Excluded Territory or are US Persons (regardless of the number of Existing Ordinary Shares that they hold) will not qualify to participate in the Open Offer.
The Bonus Issue
The Preference Shares, which will be denominated in Sterling, will be issued free of subscription cost to Qualifying Bonus Issue Shareholders.
The Bonus Issue is conditional on the Required Resolutions being passed and Bonus Issue Admission becoming effective by not later than 8.00 a.m. on 17 September 2010.
Qualifying Bonus Issue Shareholders will, subject to the conditions of the Bonus Issue, be issued Preference Shares on the basis of 1.25 Preference Shares for each Ordinary Share held as at the Bonus Issue Record Date.
Due to restrictions under the securities laws of the Excluded Territories, Restricted Shareholders will not qualify to participate in the Bonus Issue and will not be eligible to receive certificated Preference Shares or have their securities account in CREST credited with entitlements to Preference Shares.
Subject to applicable law and regulation, the Preference Shares confer the right to a preferential cumulative Preference Dividend (which is an amount in Sterling equal to 8 per cent. per annum of the Preference Share Notional Value) payable quarterly on each Payment Date.
On a return of capital on liquidation or otherwise of the Company (other than by way of a repurchase or redemption of Shares in accordance with the provisions of the Articles and the Companies Law) the assets of the Company available for distribution among the Shareholders shall be applied first to the Preference Shareholders in proportion to their holdings for an amount equal to the Repayment Amount in respect of each Preference Share.
Proposed change to the Company's investment policy and the fund raising
Having managed the Investment Portfolio through the credit crisis of 2008 and 2009, the Company, on the advice of the Investment Manager, believes that there is an opportunity for it to benefit from investment in the European real estate debt market.
Accordingly, the Company is proposing, subject to the approval of Ordinary Shareholders at the Extraordinary General meeting, to:
· change its investment policy with the result that the Company's primary focus for new investments will be Real Estate Debt Investments; and
· undertake a Placing and Open Offer of New Ordinary Shares to raise gross proceeds of €26.64 million to invest in accordance with the proposed investment policy.
The Company also proposes, subject to the approval of the Required Resolutions, to make a Bonus Issue to Qualifying Bonus Issue Shareholders of fixed income Preference Shares.
The Placing and Open Offer and the Bonus Issue are conditional, amongst other things, upon the approval of the following resolutions at the Extraordinary General Meeting:
· the special resolution to amend the Articles to accommodate the Preference Share rights, approve the Placing and Open Offer and the Bonus Issue and approve each modification, variation or abrogation of the rights of Ordinary Shares;
· the ordinary resolution to amend the Company's investment policy; and
· the ordinary resolution to approve the Offer Price of the New Ordinary Shares being €2.00 which is a discount of more than 10 per cent. to the middle market price of the Ordinary Shares at close on 16 August 2010.
The Board believes that the proposed change to the investment policy of the Company, the Placing and Open Offer and the Bonus Issue will result in a number of benefits for the Company. The Directors, on the advice of the Investment Manager, believe that Real Estate Debt Investments offer attractive returns relative to the risk of such investments. Further, the Company is mindful of the need to balance its best interests to raise capital against the interests of Ordinary Shareholders. The Board believes that the structure of the Placing and Open Offer balances appropriately the interests of Existing Ordinary Shareholders with new investors in that it offers Existing Ordinary Shareholders the opportunity to not suffer, or limit the, dilution that will occur upon the issue of New Ordinary Shares.
Tom Chandos, Chairman of Queen's Walk Investment Limited, said:
"The fundraising will allow the Company to re-focus its investment strategy on real-estate debt investments and, through the bonus issue of the preference shares will give investors an attractive and stable income return. The increased liquidity, price transparency and favourable risk-reward profile of the Company's new investments should benefit investors and further our aims to increase NAV and reduce the discount to NAV at which the ordinary shares trade."
-ENDS-
For further information:
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Queen's Walk Investment Limited Shamez Alibhai +44 (0)20 7031 7450
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Liberum Capital (Sponsor, Financial Adviser and Bookrunner) Chris Bowman / Tom Fyson / Richard Bootle Tel: +44 (0)20 3100 2000
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Background to the proposed change to the Company's investment policy and the fund raising
Since its inception in 2005 the Company has invested primarily in a diversified portfolio of subordinated tranches of asset-backed securitisations. These subordinated tranches of ABS will, in most cases, be below investment grade or unrated and will, in many cases, represent the residual income typically retained by the originator of a securitisation transaction as the "equity" or "first loss" position ("Residual Income Positions").
During the course of 2007, the asset-backed securities market experienced rapid and significant deterioration as part of the global credit crisis. As a result, the Company's assets with exposure to underlying real estate in the United Kingdom and the United States suffered heavy losses, although losses incurred by the Company were mitigated by the Investment Manager's active management of the Investment Portfolio throughout the course of 2007.
During the calendar year 2007, the Company sold approximately 75 per cent. and 40 per cent. (by number of investments) of its Residual Income Positions exposed to the mortgage market in the United States and the United Kingdom, respectively, and replaced the Company's repo financing facility with term facilities that had no mark-to-market test. Since December 2005, the Company has returned in excess of €70 million to Ordinary Shareholders through buybacks and tenders of Ordinary Shares and has paid €2.45 per Ordinary Share in aggregate dividends. The Company focused on improving financial stability through 2008 and 2009 and has now fully repaid its €45 million debt facility, while continuing to pay a dividend on Ordinary Shares. The Company currently intends to continue to sell down and/or amortise its portfolio of Residual Income Positions.
Having managed the Investment Portfolio through the downturn, the Company, on the advice of the Investment Manager, believes that there is an opportunity for it to benefit from investment in the European real estate debt market. Subject to approval of the Required Resolutions, the Company intends to focus future investments on real estate debt including residential mortgage backed securities ("RMBS") and commercial mortgage backed securities ("CMBS").
Accordingly, the Company is proposing, subject to the consent of Ordinary Shareholders at the Extraordinary General Meeting, to:
· undertake a Placing and Open Offer of New Ordinary Shares to raise gross proceeds of €26.64 million to invest in accordance with the proposed investment policy; and
· change its investment policy with the result that the Company's primary focus for new investments will be Real Estate Debt Investments.
The Company also proposes, subject to Ordinary Shareholder consent, to make a bonus issue to Ordinary Shareholders of fixed income Preference Shares pro rata to their holdings of Ordinary Shares at the close of the first day of trading of the New Ordinary Shares on a 1.25:1 basis (the "Bonus Issue"). Subject to applicable law and regulation, the Preference Shares will confer the right to a preferential cumulative Preference Dividend equal to 8 per cent. per annum of the Preference Share Notional Value of £1.00, payable quarterly on each Payment Date.
The Company currently intends that in the event Preference Shares are issued pursuant to the Bonus Issue, the Company's dividend policy will be amended so that available income is first used to pay any Preference Dividend that is due and payable and then, if the Directors in their sole discretion so resolve, to pay dividends to Ordinary Shareholders. It is expected that any future dividends payable to Ordinary Shareholders, following payment of any Preference Dividend, will be substantially reduced as compared to the dividends that have been previously paid in respect of the Ordinary Shares. However, the Directors do currently intend that the Company continues to pay a dividend to Ordinary Shareholders when it is able and appropriate to do so.
The Placing and Open Offer and the Bonus Issue are conditional on the approval of the following resolutions at the Extraordinary General Meeting:
• the special resolution to amend the Articles to accommodate the Preference Share rights, approve the Placing and Open Offer and the Bonus Issue and approve each modification, variation or abrogation of the rights of Ordinary Shares;
• the ordinary resolution to amend the Company's investment policy as described below; and
• the ordinary resolution to approve the Offer Price of the New Ordinary Shares being €2.00 which is a discount of more than 10 per cent. to the middle market price of the Ordinary Shares at close on 16 August 2010,
such resolutions being the "Required Resolutions".
In the event that any one of the Required Resolutions is not passed by the required majority of Shareholders attending and voting at the EGM (whether in person or by proxy), the Placing and Open Offer and the Bonus Issue will not take place.
Shareholders should note that the Placing and Open Offer and the Bonus Issue are not conditional on the resolutions proposed at the EGM making certain amendments to the Articles (other than the insertion of the rights of the Preference Shares), approving the amendment to the Management Fee payable to the Investment Manager, granting authority to the Directors to buy back Preference Shares or disapplying the pre-emption rights, which are referred to below, being approved.
Details of the Placing and Open Offer and the Bonus Issue
Placing and Open Offer
Conditional on the Required Resolutions being approved by Ordinary Shareholders at the EGM and Open Offer Admission occurring, up to 13,322,328 New Ordinary Shares are being issued pursuant to the Placing and Open Offer.
Qualifying Open Offer Shareholders are being given the opportunity to apply to subscribe for New Ordinary Shares in proportion to their existing holdings at the Offer Price (payable in full on application) on the following basis:
1 New Ordinary Share at €2.00 per New Ordinary Share for every 2 Existing Ordinary Shares
registered in the name of Qualifying Open Offer Shareholders at the Open Offer Record Date and so in proportion for any other number of Existing Ordinary Shares then registered. Fractions representing New Ordinary Shares which would otherwise have arisen will not be allotted to Qualifying Open Offer Shareholders, but will be aggregated and subscribed for under the Placing for the benefit of the Company. The New Ordinary Shares will rank equally with Existing Ordinary Shares following their issue.
Valid applications by Qualifying Open Offer Shareholders will be satisfied in full up to the amount of their individual Open Offer Entitlement. Qualifying Open Offer Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Certificated Open Offer Shareholders should note that their Application Form is not a negotiable document and cannot be traded. Qualifying CREST Open Offer Shareholders should note that, although their Open Offer Entitlement will be credited to their CREST accounts, the Open Offer Entitlements will not be tradable or listed.
The Placees have agreed to subscribe for all the New Ordinary Shares at the Offer Price subject to Open Offer Admission and the passing of the Required Resolutions at the Extraordinary General Meeting, subject to clawback in order to satisfy all valid applications by Qualifying Open Offer Shareholders under the Open Offer.
Not all holders of Existing Ordinary Shares will be Qualifying Open Offer Shareholders. Shareholders of the Company who are located or resident in, or who are citizens of, or who have a registered address in an Excluded Territory or are US Persons (regardless of the number of Existing Ordinary Shares that they hold) will not qualify to participate in the Open Offer.
Full terms and conditions of the Open Offer will be set out in Part IV of the Prospectus and (for Qualifying Certificated Open Offer Shareholders only) the accompanying Application Form.
On the assumption that 13,322,328 New Ordinary Shares are issued pursuant to the Placing and Open Offer, the initial gross proceeds of the Placing and Open Offer will be €26.64 million, the expenses payable by the Company will be approximately €1.764 million (based on the prevailing exchange rates as at 16 August 2010) and the net proceeds of the Placing and Open Offer will be approximately €24.88 million.
Bonus Issue
The Preference Shares, which will be denominated in Sterling, will be issued free of subscription cost to Qualifying Bonus Issue Shareholders.
The Bonus Issue is conditional on the Required Resolutions being passed and Bonus Issue Admission becoming effective by not later than 8.00 a.m. on 17 September 2010.
Qualifying Bonus Issue Shareholders will, subject to the conditions set out in more detail in the Prospectus, be issued Preference Shares on the basis of 1.25 Preference Shares for every 1 Ordinary Share held as at the Bonus Issue Record Date.
Subject to applicable law and regulation, the Preference Shares confer the right to a preferential cumulative Preference Dividend (which is an amount in Sterling equal to 8 per cent. per annum of the Preference Share Notional Value) payable quarterly on each Payment Date.
Due to restrictions under the securities laws of the Excluded Territories, Restricted Shareholders will not qualify to participate in the Bonus Issue and will not be eligible to receive certificated Preference Shares or have their securities account in CREST credited with entitlements to Preference Shares. The Investing Fund may seek to dispose of all or part of its holding of Preference Shares immediately following the Bonus Issue.
Benefits of the Proposals
The Board believes that the proposed change to the investment policy of the Company, the Placing and Open Offer and the Bonus Issue will result in a number of benefits for the Company.
Given the volatile market conditions since 2007, the Company has taken steps to improve its financial stability and the Directors, on the advice of the Investment Manager, now believe that there is an opportunity for the Company to invest in Real Estate Debt Investments. The Company intends to utilise the net proceeds of the Placing and Open Offer primarily in RMBS and CMBS investments with underlying assets in the United Kingdom and Western Europe. The Directors, on the advice of the Investment Manager, believe that this asset class offers attractive returns relative to the risk of such investments. In addition, the Real Estate Debt Investments, and in particular the MBS, offer better liquidity and price transparency than the Residual Income Positions. This is consistent with the Company's actions in its financial year ended 31 March 2010 in which it focused on growing its Real Estate Debt Investments portfolio and selling Residual Income Positions. Assuming that: immediately following Open Offer Admission (i) the net proceeds of the Placing and Open Offer are approximately €26.64 million; (ii) such net proceeds are immediately invested in Real Estate Debt Investments; and (iii) the valuation of the Residual Income Positions is unchanged from the announced NAV on 31 March 2010 and the valuation of the Real Estate Debt Investments is unchanged from 30 June 2010, Real Estate Debt Investments would account for approximately 42.5 per cent. of the Investment Portfolio by NAV as compared to approximately 14.4 per cent. of the Investment Portfolio by NAV as at 31 March 2010 (source: Annual Report, management accounts, unaudited). This calculation is for illustrative purposes only. In particular, Shareholders and investors should be aware that the Company will not be able to invest all of the net proceeds of the Placing and Open Offer immediately following Open Offer Admission.
The Company is mindful of the need to balance its best interests to raise capital against the interests of Ordinary Shareholders. The Board believes that the structure of the Placing and Open Offer balances appropriately the interests of Existing Ordinary Shareholders with new investors in that it offers Existing Ordinary Shareholders the opportunity not to suffer, or to limit, the dilution which will occur upon the issue of New Ordinary Shares.
The Board believes that the issue of New Ordinary Shares pursuant to the Placing and Open Offer at an Offer Price of €2.00 per New Ordinary Share and the Bonus Issue of Preference Shares with a Preference Dividend equal to 8 per cent. per annum of the Preference Share Notional Value represents an attractive investment opportunity to both Existing Ordinary Shareholders and new investors. In particular, the Board believes that there is the potential for capital appreciation in the Investment Portfolio as the Company's financial position is stabilised and the Investment Portfolio is restructured, that the right to the Preference Dividend will appeal to certain investors and that there will be renewed appeal to investors as a result of the Company's revised capital structure.
The Directors further believe that the Placing and Open Offer will allow the Company to broaden its Shareholder base which should improve liquidity in the market for its Ordinary Shares. The Investing Fund, which holds 15,773,804 Ordinary Shares representing 59.2 per cent. of the Existing Ordinary Shares in the Company, has agreed in writing not to take up its Open Offer Entitlement. Assuming that 13,322,328 New Ordinary Shares are issued pursuant to the Placing and Open Offer, the Investing Fund will hold 39.47 per cent. of the Ordinary Shares in issue immediately following Open Offer Admission.
Proposed investment policy
Asset Allocation
In order to achieve its investment objective, the Company will invest primarily in debt secured by commercial or residential properties in Western Europe and the United Kingdom ("Real Estate Debt Investments"). The Real Estate Debt Investments may take different forms but will likely be: (i) securitised tranches of secured real estate related debt securities, for example, RMBS and CMBS, together MBS; and (ii) secured real estate loans, debentures or any other form of debt instrument.
The Company will generally invest, either directly, through SPVs or subsidiaries, in new Real Estate Debt Investments on a buy-to-hold basis based on an analysis of the credit worthiness of the underlying assets in the applicable investment. Therefore, the total return from any given investment will be driven by actual performance of the underlying real estate loans rather than by market prices. However, the Company will actively manage the Investment Portfolio, and may from time to time dispose of an investment prior to its maturity if the Company so decides for reasons including, but not limited to, the price offered being sufficiently attractive, the credit view of the underlying assets changing or superior alternative investments being available.
The Company's investments in Real Estate Debt Investments will have some or all of the following key characteristics:
· investments will be backed, directly or indirectly, by real-estate primarily located in Western Europe and the UK;
· investments will have a varied weighted average life profile, with the weighted average life of the individual investments generally ranging from six months to 15 years;
· investments in securities will be rated by one of Fitch, Moody's, Standard and Poor's or another recognised rating agency; and/or
· investments in loans must be secured by one or more commercial or residential properties and loans may not exceed 85 per cent. LTV at the time of the investment.
For the purposes of the paragraph above, "Western Europe" shall mean Andorra; Austria; Belgium; Denmark; Finland; France; Germany; Gibraltar; Guernsey; Iceland; Ireland, Isle of Man; Italy; Jersey; Liechtenstein; Luxembourg; Monaco; the Netherlands; Norway; Portugal; San Marino; Spain; Sweden; and Switzerland.
As at 17 August 2010 the Investment Portfolio also includes Residual Income Positions. The Company does not currently intend actively to increase existing Residual Income Positions within the Investment Portfolio or to invest in other Residual Income Positions.
While the Company will have the flexibility to invest in assets that do not have some or all of the characteristics listed above, such as, inter alia, direct real estate investments, it has adopted a policy which requires that at least 70 per cent. of its Net Asset Value will comprise Real Estate Debt Investments and Residual Income Positions, measured at the time of, and after giving effect to, each proposed new or additional investment or at the time of any disposal by reference to the latest then available Net Asset Value. If upon such a measurement the Investment Manager determines that less than 70 per cent. of the Investment Portfolio comprises Real Estate Debt Investments and Residual Income Positions, the Investment Manager has agreed with the Company to take such action, including the sale of assets, as would be necessary to correct this imbalance prior to acquiring any further assets which do not qualify as Real Estate Debt Investments or Residual Income Positions.
The Company will not take make investments via derivatives unless the Company has fully collateralised the derivative position or cannot be exposed to margin calls. However, the Company intends to (but shall not be obliged to) reduce exposure to interest rate and currency fluctuations through the use of currency and interest rate hedging arrangements for the purposes of efficient portfolio management. From time to time, the Company may also enter into derivative transactions to hedge the value of the Investment Portfolio.
Risk Diversification
At any given time, certain geographic areas, asset types or industry sectors may provide more attractive investment opportunities than others and, as a result, the Company's Investment Portfolio may be concentrated in those geographic areas, asset types or industry sectors. Other than as described above, there are no restrictions regarding the concentration of the Company's Investment Portfolio. However, the Company will seek to create a diversified portfolio of investments. It will regularly monitor the extent to which the Investment Portfolio is concentrated in any particular country, region or servicer and the Investment Manager will re-balance the Investment Portfolio as and when it deems it necessary to do so.
The Board of Directors has adopted general guidelines for investments and borrowings to the effect that, except in the case of cash deposits awaiting investment, no more than 20 per cent. of the gross assets of the Group will be lent to or invested in any one group at the time the investment or loan is made, no more than 20 per cent. of the gross assets of the Group will be invested in direct real estate investments, no more than 10 per cent. of the gross assets of the Group will be invested in other listed investment companies (including listed investment trusts), except where the investment companies themselves have stated investment policies to invest no more than 15 per cent. of their gross assets in other listed investment companies (including listed investment trusts), no more than 15 per cent. of the gross assets of the Group will be invested in other listed investment companies (including listed investment trusts), regardless of their investment policies and the Group will not take legal control, or seek to take legal control, or be actively involved in the management of, any companies or businesses in which it invests, except for (i) any SPVs it may establish and (ii) pursuant to the exercise of rights as a consequence of the Group taking steps to preserve or enforce its security in relation to a particular investment. The Company will not, to a significant extent, be a dealer in investments and neither the Company nor any member of its Group will conduct a trading activity which is significant in the context of the Group as a whole.
Leverage
Other than a working capital facility limited to a maximum quantum equivalent to 10 per cent. of the Net Asset Value, the Company shall not, without the prior approval of the Ordinary Shareholders by ordinary resolution passed at a separate general meeting of the Ordinary Shareholders, agree to enter into any credit facility pursuant to which leverage is utilised by the Company.
Use of proceeds of the Placing and Open Offer
The Company intends to use the net proceeds of the Placing and Open Offer primarily to invest in European Real Estate Debt Investments with particular focus on: (i) RMBS; and (ii) CMBS in accordance with the proposed investment policy of the Company. The Directors believe, having been so advised by the Investment Manager, that the primary advantage of raising capital pursuant to the Placing and Open Offer will be the opportunity for further investment in the European real estate debt markets, where the Investment Manager believes there is currently significant price dislocation. To the extent that suitable RMBS and CMBS investments are not available (which the Directors do not expect to be the case), the net proceeds of the Placing and Open Offer may also be invested in other assets that fall within the proposed investment policy to the extent that the Investment Manager identifies investment opportunities that it believes offer attractive returns to the Company.
Pending investment of the net proceeds of the Placing and Open Offer in RMBS and CMBS and other investments in accordance with the Company's investment policy, the Company may invest the net proceeds in short-term money market funds. The Company does not intend to apply leverage to these temporary investments.
Dividend policy
If the Required Resolutions are approved, following completion of the Bonus Issue of Preference Shares, the Company currently intends that available income is first used to pay any Preference Dividend that is due and payable and then, if the Directors in their sole discretion so resolve, to pay dividends to Ordinary Shareholders. It is expected that any future dividends payable to Ordinary Shareholders, following payment of any Preference Dividend, will be substantially reduced as compared to the dividends that have been previously paid in respect of the Ordinary Shares. However, the Directors do currently intend that the Company continues to pay a dividend to Ordinary Shareholders when it is able and appropriate to do so. The Company further intends, subject to the performance of the Investment Portfolio, that the amount of dividends paid, if any, to Ordinary Shareholders following the change to the dividend policy should be adjusted from time to time in line with any increase or decreases in the Investment Portfolio.
Subject to the payment of the Preference Dividend to the holders of the Preference Shares and the applicable requirements and restrictions contained in the Companies Law, the Company may consider making interim dividend payments to Ordinary Shareholders, having regard to the net income remaining after the payment of the Preference Dividends, potential reinvestment of cash or other uses of income at a level the Directors deem appropriate, in their sole discretion, from time to time. There is no fixed date on which it is expected that dividends will be paid to Ordinary Shareholders and Ordinary Shareholders should not expect to receive regular interim dividends.
Proposed changes to the Investment Management Agreement
The Company, Trebuchet and the Investment Manager have entered into the Investment Management Agreement Side Letter pursuant to which, and conditional upon approval by Ordinary Shareholders at the EGM and on Bonus Issue Admission occurring, the following amendments will be made to the Investment Management Agreement:
· adjustments to the Management Fee payable to the Investment Manager;
· agreement that at least 70 per cent. of the Company's Net Asset Value will comprise Residual Income Positions and Real Estate Debt Investments as opposed to Primary Target Investments in accordance with the proposed investment policy; and
· amendments to the Investment Manager's conflicts policy that applies to its management of the Investment Portfolio.
The Management Fee currently payable to the Investment Manager is an annual fee equal to 1.75 per cent. of the Net Asset Value. If Preference Shares are issued, the obligation on the Company to pay the Preference Share Notional Value on a winding up of the Company or the redemption of the Preference Shares in accordance with their terms will be classified as a liability for the purposes of calculating the NAV. The Directors believe that the Bonus Issue of itself should not lead to a reduction of the Management Fee that would be payable to the Investment Manager and, as such, have proposed the following amendment. If approved by the Ordinary Shareholders, the Management Fee payable will, with effect from Bonus Issue Admission, be equal to 1.75 per cent. per annum of the Adjusted NAV. No Management Fee will be payable to the Investment Manager in respect of investments in asset portfolios already managed by the Investment Manager. The Adjusted NAV will be equal to the prevailing NAV calculated in accordance with the Company's accounting policies increased by an amount equal to the Aggregate Preference Share Notional Value.
The Incentive Fee calculation will not be amended pursuant to the Investment Management Agreement Side Letter.
Expected Timetable of Principal Events
|
|
2010 |
|
Open Offer Record Date |
close of business on 13 August 2010 |
|
Publication of Prospectus and Circular and despatch of Application Forms |
17 August |
|
Existing Ordinary Shares marked "ex" by the London Stock Exchange |
(expected to be) 17 August |
|
Open Offer Entitlements credited to the stock accounts of Qualifying CREST Open Offer Holders |
18 August |
|
Recommended latest time and date for requesting withdrawal of Open Offer Entitlements from CREST (i.e. if Open Offer Entitlements are in CREST and the Qualifying CREST Open Offer Holder wishes to convert them into certificated form) |
4.30 p.m. on |
|
Recommended latest time for depositing an Application Form with the CREST Courier and Sorting Service (i.e. where a Qualifying Open Offer Shareholder wishes to hold the Open Offer Entitlement set out in an Application Form as Open Offer Entitlements in CREST) |
3.00 p.m. on |
|
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only) |
3.00 p.m. on |
|
Latest time and date for acceptance, payment in full and submission of Application Forms (in respect of Qualifying Certificated Open Offer Holders) and USE Instructions (in respect of Qualifying CREST Open Offer Holders) to the Receiving Agent |
11.00 a.m. on |
|
Open Offer Entitlements held in CREST expected to be disabled |
9 September |
|
Latest time and date for receipt of the Form of Proxy for the Extraordinary General Meeting (or receipt of the appropriate CREST message, in the case of CREST members) |
11.00 a.m. on 13 September |
|
Extraordinary General Meeting |
11.00 a.m. on 15 September |
|
Announcement of results of the Open Offer |
15 September |
|
Admission of the New Ordinary Shares issued pursuant to the Placing and Open Offer to the Official List and commencement of dealings on the London Stock Exchange |
16 September |
|
New Ordinary Shares in uncertificated form expected to be credited to accounts in CREST |
8.00 a.m. on 16 September |
|
Bonus Issue Record Date for the calculation of the maximum number of Preference Shares to be issued to Qualifying Bonus Issue Shareholders pursuant to the Bonus Issue |
close of business on 16 September |
|
Ordinary Shares marked "ex" by the London Stock Exchange |
(expected to be) 17 September |
|
Announcement of the number of Preference Shares to be issued pursuant to the Bonus Issue |
17 September |
|
Admission of the Preference Shares issued pursuant to the Bonus Issue to the Official List and commencement of dealings on the London Stock Exchange |
17 September |
|
Preference Shares in uncertificated form expected to be credited to accounts in CREST |
8.00 a.m. on 17 September |
|
Despatch of definitive share certificates for the New Ordinary Shares in certificated form |
by 23 September |
|
Despatch of definitive share certificates for the Preference Shares in certificated form |
by 23 September |
Definitions
The following definitions apply throughout this announcement unless the context requires otherwise:
|
Adjusted NAV |
the Net Asset Value of the Company calculated in accordance with the Company's accounting policies increased by an amount equal to the number of Preference Shares in issue (excluding Preference Shares held in treasury) multiplied by the Preference Share Notional Value |
|
Application Forms and each an Application Form |
the personalised application forms relating to the Open Offer being sent to Qualifying Certificated Open Offer Shareholders together with the Prospectus, in respect of the New Ordinary Shares |
|
Articles or Articles of Incorporation |
the Articles of Incorporation of the Company in force from time to time |
|
Board of Directors or Directors or |
the board of directors of the Company |
|
Bonus Issue |
the issue, free of subscription cost to Qualifying Bonus Issue Shareholders of Preference Shares on the basis of 1.25 Preference Shares for every 1 Ordinary Shares held as at the Bonus Issue Record Date |
|
Bonus Issue Admission |
admission of the Preference Shares issued pursuant to the Bonus Issue to the Official List and to trading on the London Stock Exchange's main market for listed securities and such admissions becoming effective |
|
Bonus Issue Record Date |
the record date for qualification for the Bonus Issue, being 5.00 p.m. on 16 September 2010 |
|
Cheyne Capital |
Cheyne Capital Management (UK) LLP |
|
Circular |
the circular issued by the Company dated 17 August 2010 in connection with the Extraordinary General Meeting |
|
Companies Law |
The Companies (Guernsey) Law, 2008 (as amended) |
|
QWIL or the Company |
Queen's Walk Investment Limited and, where relevant, its subsidiaries and subsidiary undertakings |
|
CREST |
the relevant system as defined in the CREST Regulations in respect of which Euroclear is operator (as defined in the CREST Regulations) in accordance with which securities may be held in uncertificated form |
|
CREST Courier and Sorting Service |
the CREST Courier and Sorting Service established by Euroclear to facilitate, among other things, the deposit and withdrawal of securities |
|
Euro or € or EUR |
the lawful single currency of member states of the European Communities that adopt or have adopted the Euro as their currency in accordance with the legislation of the European Union relating to European Monetary Union |
|
Euroclear |
Euroclear UK & Ireland Limited, the operator of CREST |
|
Excluded Territories and each an Excluded Territory |
the United States, Canada, Australia, Japan, New Zealand and South Africa and any other jurisdiction where the extension or availability of the Placing and Open Offer would breach any applicable law |
|
Existing Ordinary Shares |
the Ordinary Shares in issue as at the date of the Prospectus |
|
Extraordinary General Meeting or EGM |
the extraordinary general meeting of the Company due to be held on 15 September 2010 at which Shareholders will validly vote upon, amongst other business, the Required Resolutions in accordance with Guernsey law |
|
Group |
the Company and its subsidiary, Trebuchet Finance Limited, and any other consolidated subsidiaries of the Company from time to time |
|
Incentive Fee |
the incentive fee payable by the Company to the Investment Manager in accordance with the terms of the Investment Management Agreement |
|
Investing Fund |
Cheyne ABS Opportunities Fund LP, acting by its general partner, Cheyne ABS Opportunities General Partner Inc, and (as the context requires) such general partner itself, which is an open-ended investment fund managed by the Investment Manager from whom the Company acquired the Initial ABS Portfolio |
|
Investment Management Agreement |
the investment management agreement, as amended from time to time, initially between the Company, Trebuchet and the Investment Manager dated 8 December 2005, and to which other special purpose vehicles may, if so required, become party in the future pursuant to a Deed of Adherence |
|
Investment Management Agreement Side Letter |
the side letter between the Company, Trebuchet and the Investment Manager |
|
Investment Manager |
Cheyne Capital Management (UK) LLP, a limited liability partnership registered in England (registered number OC321484). The address of the registered office of the Investment Manager is set out in the section titled "Corporate Information" |
|
Investment Portfolio |
at any time, the ABS, MBS, RMBS, CMBS, Residual Income Positions or other investments, rights to investments, instruments and securities in which the Company's assets are invested |
|
Liberum Capital |
Liberum Capital Limited |
|
London Stock Exchange |
London Stock Exchange plc |
|
LTV |
loan to value |
|
Management Fee |
the management fee payable by the Company to the Investment Manager in accordance with the terms of the Investment Management Agreement |
|
Net Asset Value or NAV |
at any time, the net asset value of the Company in total or the net asset value per Ordinary Share (as the context requires), calculated in accordance with the Company's accounting policies |
|
New Ordinary Shares |
Ordinary Shares issued pursuant to the Placing and Open Offer |
|
Notice of Extraordinary General Meeting |
the notice contained in the Circular convening the EGM dated 17 August 2010 |
|
Offer Price |
the price at which New Ordinary Shares are being offered pursuant to the Placing and Open Offer, being €2.00 |
|
Open Offer |
the invitation by the Company to certain Qualifying Open Offer Shareholders to apply for New Ordinary Shares on the terms and subject to the conditions set out in the Prospectus |
|
Open Offer Admission |
admission of the New Ordinary Shares issued pursuant to the Placing and Open Offer to the Official List and to trading on the London Stock Exchange Main Market for listed securities and such admissions becoming effective |
|
Open Offer Entitlements |
the pro rata entitlements to subscribe for New Ordinary Shares allocated to Qualifying Open Offer Shareholders pursuant to the Open Offer |
|
Open Offer Record Date |
the record date for qualification for the Open Offer, being 5.00 p.m. on 13 August 2010 |
|
Ordinary Shareholders |
holders of Ordinary Shares |
|
Ordinary Shares |
the shares of no par value in the capital of the Company |
|
Payment Date |
31 March, 30 June, 30 September and 31 December in each year from 2010 to 2017 inclusive and the date of final repayment of the Preference Shares |
|
Placees |
those investors participating in the Placing |
|
Placing |
the placing of the New Ordinary Shares with the Placees subject to the clawback under the Open Offer |
|
Preference Dividend |
an amount in Sterling equal to 8 per cent. per annum of the Preference Share Notional Value |
|
Preference Shareholders |
holders of Preference Shares |
|
Preference Shares |
fixed income preference shares of no par value each in the capital of the Company designated as Preference Shares |
|
Qualifying Bonus Issue Shareholders |
holders of Ordinary Shares as set out in the Register on the Bonus Issue Record Date with the exclusion of (i) holders of Ordinary Shares with a registered address in, or who are citizens, residents or nationals of, or are located in any Excluded Territory and (ii) US Persons |
|
Qualifying Open Offer Shareholders |
holders of Ordinary Shares as set out in the register of members of the Company on the Open Offer Record Date with the exclusion of (i) holders of Ordinary Shares with a registered address in, or who are citizens, residents or nationals of, or are located in any Excluded Territory and (ii) US Persons |
|
Real Estate Debt Investments |
debt secured by commercial or residential properties within Western Europe or the United Kingdom |
|
Receiving Agent |
Capita Registrars |
|
Register |
the register of members of the Company |
|
Regulation S |
Regulation S under the US Securities Act |
|
Repayment Amount |
an amount equal to (i) the Preference Share Notional Value increased by (ii) any accrued but unpaid Preference Dividend |
|
Required Resolutions |
means the special resolution proposed at the EGM to amend the Articles by accommodating the Preference Share rights and certain other consequential amendments to the Articles, approve the Placing and Open Offer and the Bonus Issue and approve each modification, variation or abrogation of the rights attached to Ordinary Shares; and the ordinary resolutions proposed at the EGM to: (i) amend the Company's investment policy, and (ii) approve the issue of New Ordinary Shares at the Offer Price which is a discount of more than 10 per cent. to the middle market price of the Existing Ordinary Shares at the time of announcing the terms of the Placing and Open Offer |
|
Residual Income Positions |
assets currently held in the Investment Portfolio which are subordinated tranches of ABS that are, in most cases, unrated and, in many cases, represent the residual income typically retained by the originator of a securitisation transaction as the "equity" or "first loss" position |
|
Restricted Shareholders |
Ordinary Shareholders as at the Open Offer Record Date and the Bonus Issue Record Date (as applicable) with a registered address in, or who are citizens, residents or nationals of or are located in any Excluded Territories or are US Persons |
|
Shares |
the Ordinary Shares and/or Preference Shares (as appropriate) |
|
SPV |
special purpose vehicle |
|
Trebuchet |
Trebuchet Finance Limited, a special purpose vehicle incorporated in Ireland on 19 May 2005 with registered number 402419 |
|
US Investment Company Act |
the US Investment Company Act of 1940, as amended |
|
US Person |
US person within the meaning given to it in Regulation S |
|
US Securities Act |
the US Securities Act of 1933, as amended |
|
Western Europe |
means Andorra; Austria; Belgium; Denmark; Finland; France; Germany; Gibraltar; Guernsey; Iceland; Ireland, Isle of Man; Italy; Jersey; Liechtenstein; Luxembourg; Monaco; the Netherlands; Norway; Portugal; San Marino; Spain; Sweden; and Switzerland |
This information is provided by RNS
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