JZ CAPITAL PARTNERS LIMITED
(the "Company" or "JZCP")
(a closed-end collective investment scheme incorporated with
limited liability under the laws of Guernsey with registered number
48761)
LEI: 549300TZCK08Q16HHU44
Recommended Proposals to approve:
The Company's proposed reduction of its commitments to Spruceview
Capital Partners
Amendments to the Company's investment policy
and
Notice of Extraordinary General Meeting
15 July
2020
Unless otherwise defined herein,
capitalised terms used in this announcement have the meanings given
to them in the Circular of the Company dated 15 July 2020.
On 27 November 2019, the Company
announced its interim results for the six month period ended
31 August 2019, in which it was
explained that the Company's Investment Adviser, Jordan/Zalaznick
Advisers, Inc. ("JZAI"), was working with the Board to
reduce the Company's commitments and future subscription
obligations to certain managed funds. The Board is now pleased to
announce that, as foreshadowed in the Company's annual results for
the year ended 29 February 2020, it
has secured agreement with David W.
Zalaznick and John (Jay) Jordan
II (together, being the "JZAI Founders", who are the
founders and principals of JZAI) (or their respective affiliates)
for the proposed reduction of the Company's commitments to its
investments in Spruceview Capital Partners ("Spruceview") in
the amount of approximately US$8.640
million. Accordingly, the Board is now requesting approval
from Shareholders for such proposed reduction of the Company's
commitments to Spruceview (the "Spruceview Proposal"). The
Spruceview Proposal would be considered a Related Party Transaction
of the Company thereby requiring Shareholder approval to be sought
and obtained.
In addition, as also set out in the Company's annual results, it
remains the case that the JZAI Founders have also agreed to relieve
the Company of certain of its commitments to the Orangewood Fund by
each of them assuming the obligation of US$2
million and with the balance of the Company's remaining
commitments of US$20 million intended
to be transferred to third parties. The Company will make further
announcements as required in relation to the status of its
commitments to the Orangewood Fund as matters progress.
Separately, on 22 April 2020, the
Company announced a proposed change to its investment policy,
pursuant to which the Company will make no further investments
except in respect of which it has existing obligations or to the
extent that investment is applied to support certain selected
existing investments (the "Investment Policy Amendment
Proposal" and together with the Spruceview Proposal, the
"Proposals"). The intention of the change is to realise the
maximum value of the Company's investments and, after repayment of
all debt, to return capital to Shareholders. The Board is now also
pleased to announce that, as previously indicated, including most
recently in the Company's annual results, it is requesting approval
from Shareholders for the proposed amendments to, and restatement
of, its investment policy.
Further details of the Proposals are set out in the sections of
this announcement below.
Notice of Extraordinary General
Meeting
The Company is today posting a Circular to Shareholders
containing details of the Proposals and convening an Extraordinary
General Meeting of the Company in order for Shareholders to
consider and, if thought fit, approve the Proposals.
The Extraordinary General Meeting of the Company is being
convened to be held at 1.15 p.m. on
12 August 2020 (or as soon thereafter
as the Annual General Meeting of the Company convened for the same
day and place has been concluded or adjourned). The Extraordinary
General Meeting will be held at the offices of Northern Trust
International Fund Administration Services (Guernsey) Limited,
Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL,
Channel Islands. The Notice convening the Extraordinary General
Meeting, which contains the Resolutions to be proposed at that
meeting concerning the Proposals, is set out at the end of the
Circular being posted to Shareholders.
Attendance at the Extraordinary
General Meeting
The Company has been closely
monitoring the evolving situation relating to the outbreak of
Coronavirus (COVID-19), including the current guidance and
restrictions on travel and public gatherings and social distancing.
The priority of the Company's Board at this time is the health,
safety and wellbeing of all Shareholders and Directors.
With effect from 20 June 2020, the States of Guernsey implemented
Phase 5 of its transitional plan to ease the stay at home and
travel restrictions originally introduced on 25 March 2020 in light of COVID-19. Whilst
restrictions within Guernsey have been eased, permitting gatherings
to take place within Guernsey, any persons arriving into Guernsey
are presently required to self-isolate for a period of 14 days upon
arrival.
In light of the restrictions in place
from 20 June 2020, whilst Guernsey
based Shareholders are permitted to attend the Extraordinary
General Meeting in person, Shareholders from outside of Guernsey
are strongly encouraged to appoint the Chairman of the meeting or
the Company Secretary as their proxy and provide voting
instructions in advance of the Extraordinary General Meeting, in
accordance with the instructions explained in the Notice of
Extraordinary General Meeting set out at the end of the
Circular.
Shareholders are strongly encouraged
to exercise their voting rights by completing and submitting a Form
of Proxy. It is highly recommended that Shareholders submit their
Form of Proxy as early as possible to ensure that their votes are
counted at the Extraordinary General Meeting.
The Company will continue to closely
monitor the situation in the lead up to the Extraordinary General
Meeting and will make any further updates as required about the
meeting on its website at www.jzcp.com.
Spruceview Proposal
As mentioned above, the Board has secured agreement with the
JZAI Founders (or their respective affiliates) for the proposed
reduction of the Company's commitments to its investments in
Spruceview in the amount of approximately US$8.640 million. Spruceview, which is a
portfolio investment of the Company, includes its affiliated funds
from time to time, and in particular CERPI. Spruceview is an asset
management business in the United
States and aims to address the demand from corporate
pensions, endowments, family offices and foundations for fiduciary
management services through an Outsourced Chief Investment Officer
model as well as specific products per asset class. CERPI is an
investment fund established and managed by Spruceview for its
client, a Mexican retirement fund administrator. As the general
partner of CERPI, Spruceview is required to make co-investments in
CERPI which are permitted to be made by various of its affiliates,
including the Company and the JZAI Founders (or their respective
affiliates). The key individuals important to the Spruceview
business are Richard Sabo (Partner,
CEO and Co-CIO) and Neetesh Kumar (Partner).
The Company has previously obtained Shareholder approval for
certain investments in Spruceview jointly with the JZAI Founders
(or their respective affiliates). Such approvals included, in
March 2019, the Company increasing
its investment together with the JZAI Founders (or their respective
affiliates) in Spruceview Capital Partners by an additional
US$1.475 million from the Company
(with a further US$1.475 million
being contributed by the JZAI Founders (or their respective
affiliates)). This increase was considered by the Company not to be
a material change to the terms of the 2015 Spruceview Approval (as
defined in the circular) and, therefore, Shareholder approval was
not obtained for such increase. All of the Company's increased
investment of US$1.475 million (being
the "2015 Spruceview No Material Change Approval"), was to
be used to support Spruceview's share of the co-investment in
CERPI. In addition, in June 2019,
Shareholders approved the Company's proposed joint investment of
US$30 million (with the Company
investing US$15 million, and a
further US$15 million being
contributed by the JZAI Founders (or their respective affiliates))
(the "2019 Spruceview Approval").
Of the US$1.475 million and the
US$15 million approved for investment
by the Company pursuant to the 2015 Spruceview No Material Change
Approval and the 2019 Spruceview Approval respectively,
approximately US$8.640 million
represents the Company's maximum potential commitments to CERPI,
with the remaining approximately US$7.835
million representing its maximum potential commitments to
Spruceview (excluding CERPI).
With respect to the Company's commitments in CERPI and in light
of the Company's desire to reduce its commitments and future
subscription obligations, it is proposed that the Company will have
its CERPI commitments reduced in full (by approximately
US$8.640 million), with such
commitments being taken over by the JZAI Founders (or their
respective affiliates). Those commitments also include an amount of
approximately US$969,000 in respect
of certain commitments to CERPI to which the Company did not fully
subscribe and were instead subscribed to by affiliates of the JZAI
Founders on an interim basis. The Company is therefore being
relieved of an aggregate amount of approximately US$8.640 million of commitments.
Shareholders should note that the CERPI commitments comprise
funded commitments, unfunded commitments and potential future
commitments, in each case to CERPI, which are subject to change
between 10 July 2020 and the time of
the JZAI Founders (or their respective affiliates) taking over the
commitments (expected to be the later of 14
August 2020 and the second business day following receipt of
Shareholders approving the Spruceview Proposal). The price payable
by the JZAI Founders (or their respective affiliates) to the
Company for the transfer of their commitments will be equal to a
price equivalent to the net asset value of the aggregate funded
commitments, which is equal to (a) the total amount of such funded
commitments (being as at 10 July 2020
an amount equal to approximately US$1.287
million), less (b) the total accumulated net realised and
unrealised capital gains and losses of the Company's wholly owned
subsidiary (which has made the subscriptions) with respect to such
commitments to 31 March 2020 (being
the date of their most recent valuation) (and being as at
10 July 2020 an amount equal to
approximately US$4,500). The Company
intends to utilise the proceeds received in connection with the
Spruceview Proposal in accordance with the Company's revised
investment policy as further detailed below.
With respect to the Company's commitments in Spruceview
(excluding CERPI), it is proposed that those commitments (of
approximately US$7.835 million) are
to remain in place with the Company continuing to invest together
with, and jointly alongside, the JZAI Founders (or their respective
affiliates) on a 50:50 basis economically and on the same terms and
conditions as above for the 2019 Spruceview Approval, albeit
limited to Spruceview (excluding CERPI) and excluding the Company's
commitments to CERPI as so taken over by the JZAI Founders (or
their respective affiliates). Specifically, the Company would
propose to continue to invest approximately US$7.835 million (with a further approximately
US$7.835 million to be contributed by
the JZAI Founders (or their respective affiliates)) in Spruceview
(excluding CERPI). The proposed joint investment would, as above,
be on the same terms as the joint investment in Spruceview approved
by the 2019 Spruceview Approval, being 50:50 economically and on
the same terms and conditions but with certain structural features
intended to afford each side appropriate US tax protections.
The proposed reduction in the Company's commitments in CERPI and
the proposed joint investments in Spruceview (excluding CERPI),
would be considered to be a material change to the 2019 Spruceview
Approval, and would therefore be considered a Related Party
Transaction under Chapter 11 of the Listing Rules (with which the
Company voluntarily complies and insofar as the Listing Rules are
applicable to the Company by virtue of its voluntary compliance).
JZAI is the Company's investment adviser pursuant to the Investment
Advisory Agreement and, under the Listing Rules, would therefore be
considered a Related Party of the Company. As founders and
principals of JZAI, the JZAI Founders are associates of JZAI and
would also be considered Related Parties of the Company. In
addition, each of the JZAI Founders are substantial shareholders of
the Company as they are each entitled to exercise or to control the
exercise of 10 per cent. or more of the votes able to be casted at
a general meeting of the Company. As such, each of the JZAI
Founders are considered to be Related Parties of the Company on
this basis as well. The Spruceview Proposal, which involves the
JZAI Founders as Related Parties of the Company, would be
considered to involve arrangements between the Company and its
Related Parties. Accordingly, the JZAI Founders as Related Parties
and the Spruceview Proposal as arrangements between them would be
considered a Related Party Transaction under Chapter 11 of the
Listing Rules, insofar as the Listing Rules are applicable to the
Company by virtue of its voluntary compliance with the same. As
such, the Spruceview Proposal, as a Related Party Transaction of
the Company, requires approval of Shareholders to reduce its
commitments in CERPI by divesting them to the JZAI Founders (or
their respective affiliates) and for the Company to invest jointly
together with them in Spruceview (excluding CERPI).
As such, a Resolution is to be proposed at the Extraordinary
General Meeting in relation to the Spruceview Proposal as a Related
Party Transaction of the Company and is being proposed to seek
Shareholder approval for the Company's proposed reduction of its
CERPI commitments and joint investments in Spruceview (excluding
CERPI).
Investment Policy Amendment
Proposal
Also as mentioned above, the Company is proposing to amend and
restate its investment policy to enshrine the Company's new
strategy of making no further investments except in respect of
which it has existing obligations or to the extent that investment
is applied to support certain selected existing investments. The
intention of the change is to realise the maximum value of the
Company's investments and, after repayment of all debt, to return
capital to Shareholders.
The rationale for this change in policy is that, whilst JZAI, as
the Company's Investment Adviser, has been working assiduously in
difficult circumstances to stabilise the Company's investments, the
Board recognises that, as a result of the disappointing and
significant losses in value of its real estate portfolio and poor
performance, and having reviewed all available options, there has
to be a change in investment policy. The policy of making no
further investments (with a limited number of exceptions), whilst
representing only a change in emphasis from the existing investment
policy, is nonetheless a significant change and is considered to be
material alteration to the policy.
The principal amendment to the Company's existing investment
policy relates to the Company's approach with regard to new
investments. The Company's existing investment policy provides that
the Company anticipates that no meaningful capital will be
dedicated to new investments other than honouring its funding
commitments and supporting its portfolio of assets. The Company is
now proposing to alter the emphasis of this concept by amending the
policy to provide that no new investments will be made except in
respect of which it has existing obligations or to the extent that
investment is applied to support certain selected existing
investments. The Company's strategy for implementing the policy
will also be changed to realising the maximum value of the
Company's investments and, after repayment of all debt, to
returning capital to Shareholders. The strategy will remove the
other existing objectives and will not be expressed as being
limited in duration to the next few years.
Save for those amendments as set out above, the Company is not
otherwise proposing to make any other material changes to its
existing investment policy (including its corporate objective and
borrowing policy) and, as such, the existing investment policy
otherwise remains largely unchanged. The Company's amended and
restated investment policy is set out in full in the Circular, with
copies of the same being on display and available for inspection as
described in the Circular.
The Company has previously voluntarily agreed that, in line with
Chapter 15 of the Listing Rules (with which the Company voluntarily
complies and insofar as the Listing Rules are applicable to the
Company by virtue of its voluntary compliance), it would not
materially alter its existing investment policy without the prior
approval of Shareholders. The Investment Policy Amendment Proposal
is considered to be a material change to the investment policy and
Shareholder approval is accordingly being sought for the proposed
amendments to the same.
As such, a Resolution is to be proposed at the Extraordinary
General Meeting in relation to the Investment Policy Amendment
Proposal and is being proposed to seek Shareholder approval for the
amended and restated investment policy to be approved and adopted
as the investment policy of the Company in substitution for, and to
the exclusion of, the Company's existing investment policy.
Notice of Extraordinary General
Meeting and Shareholder Circular
Notice is hereby given that the Extraordinary General Meeting of
the Company will be held at the offices of Northern Trust
International Fund Administration Services (Guernsey) Limited,
Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL,
Channel Islands at 1.15 p.m. on
12 August 2020 (or as soon thereafter
as the Annual General Meeting of the Company convened for the same
day and place has been concluded or adjourned).
Further details of the Proposals are included in the Notice
convening the Extraordinary General Meeting and in the
Circular.
The Notice convening the Extraordinary General Meeting is being
distributed to members of the Company and will shortly be uploaded
to the Company's website at www.jzcp.com. Copies of the Circular
the Company is posting to Shareholders are available for viewing,
during normal business hours, at the registered office of the
Company at Trafalgar Court, Les Banques, St Peter Port, Guernsey
GY1 3QL and will shortly be available for viewing at
www.morningstar.co.uk/uk/nsm.
The Notice convening the Extraordinary General Meeting is also
included within the Circular.
For further information:
Ed Berry / Kit
Dunford
FTI Consulting |
+44 (0) 20 3727 1046 / 1143 |
David Zalaznick
Jordan/Zalaznick Advisers, Inc. |
+1 (212) 485 9410 |
Sam Walden
Northern Trust International Fund Administration Services
(Guernsey) Limited |
+44 (0) 1481
745385 |
Important Notice
This announcement is not an offering of securities. Any
securities offered have not been and will not be registered under
the US Securities Act and may not be offered or sold in
the United States absent
registration or an applicable exemption from registration
requirements.
This announcement also includes statements that are, or may be
deemed to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will" or "should" or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements relate to matters
that are not historical facts. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future
performance. The Company's actual investment performance, results
of operations, financial condition, liquidity, policies and the
development of its strategies may differ materially from the
impression created by the forward-looking statements contained in
this announcement. In addition, even if the investment performance,
result of operations, financial condition, liquidity and policies
of the Company and development of its strategies, are consistent
with the forward-looking statements contained in this announcement,
those results or developments may not be indicative of results or
developments in subsequent periods. These forward-looking
statements speak only as at the date of this announcement. Subject
to their legal and regulatory obligations, each of the Company, the
Investment Adviser and their respective affiliates expressly
disclaims any obligations to update, review or revise any
forward-looking statement contained herein whether to reflect any
change in expectations with regard thereto or any change in events,
conditions or circumstances on which any statement is based or as a
result of new information, future developments or otherwise.