TIDMGFIR
RNS Number : 5682S
Global Fixed Income Realisation Ltd
26 June 2018
GLOBAL FIXED INCOME REALISATION LIMITED ("GFIR")
Investment Manager Update
26 June 2018
Contents
I. Progress in the Period December 2012 - March 2018
1. Balance Sheet Summary
2. Distributions
3. Share Price and Net Asset Value
a. Portfolio Holdings
II. Current Portfolio
1. Portfolio Summary
2. Major Positions
a. Vision Funds
b. Autonomy Rochavera (fka Autonomy Global Macro Fund)
c. Autonomy Fund II D - Cajamar Class
d. South Asian Real Estate Ltd
3. Current Liquidity Projection
4. Future of GFIR
This document has been prepared by LumX Asset Management (U.K.)
Limited ("LumX"), in its capacity as Investment Manager of
GFIR.
I. Progress in the Period December 2012 - March 2018
1. Balance Sheet Summary
December March
31, 2012 31, 2018
------------------- -------------- -------------
Portfolio Holdings GBP65,556,678 GBP3,026,917
------------------- -------------- -------------
Cash in bank GBP4,929,983 GBP1,618,918
------------------- -------------- -------------
Receivables GBP1,437,762 GBP3,880,311
------------------- -------------- -------------
Payables (GBP297,865) (GBP71,480)
------------------- -------------- -------------
Net Assets GBP71,626,559 GBP8,454,665
------------------- -------------- -------------
There has been significant progress towards the liquidation of
the GFIR portfolio, with only a small number of illiquid, and in a
number of cases, troubled portfolio holdings remaining.
As GFIR shareholders will be aware, the Investment Manager's
view of the valuations of several of the remaining holdings is
substantially different to that of the underlying fund manager.
GFIR therefore retains a sizeable cash balance in order to work
towards realising the differential between these two amounts by the
most effective means possible.
Following the recent tender, the pro forma NAV of the company is
estimated at approximately GBP4.5m, including cash of GBP1.5m. The
next NAV will be dated June 30, 2018 and is expected to be
published by end of the July 2018.
2. Distributions
Since January 1, 2013, GBP38.26m has been returned to investors,
gross of expenses. This includes the recent GBP4m tender.
As at December 31, 2012, the market capitalisation of the
company was GBP41,718,226 (based on 77,113,172 shares at a price of
54.1p) and the NAV was GBP71,626,559. Hence 91.7% of the starting
market value of the company's equity and 53.4% of the starting NAV
has been returned to shareholders over the period.
3. Share Price and Net Asset Value
GFIR publishes both a pre- and post-reserve NAV[1]:
Source: Praxis Fund Services, Bloomberg (to May 31, 2018)
a. Portfolio Holdings
Since the appointment of LumX[2] in December 2012, holdings in
24 fund entities have been fully redeemed, sold or otherwise
resolved. As of the March 31, 2018 NAV, only 8 line items remain,
of which 3 line items account for less than 2% of the
portfolio.
I.
II. Current Portfolio
1. Portfolio Summary
Portfolio Summary as of March 2018 NAV:
Most of GFIR's portfolio holdings are denominated in US Dollars.
When the value of these assets is translated into sterling, the
holding will show a decline in value if the dollar falls in value
against sterling during the period, all else remaining equal.
Autonomy Fund II D - Cajamar Class is denominated in Brazilian
Reais. When the value of this position is translated into sterling,
the holding will show a decline in value if the Reais falls in
value against sterling during the period, all else remaining equal.
Similar FX impact can also be expected at the underlying portfolio
holding level.
2. Major Positions
a. Vision Funds[3]
The Vision funds have exposure to two sets of assets, primarily
FCVS credits held by Vision FCVS RJ and PB Funds and certain farm
assets, held by Vision Tercado, Piaui and Chapadao Funds.
FCVS credits represent claims against a mortgage insurance
program backed by the Brazilian government. The process to take
credits to novation is bureaucratic and managed by Caixa Econômica
Federal (Caixa). The novation process consists of several phases
requiring the review of underlying documentation in order to verify
the authenticity, legitimacy and scope of each FCVS Credit Contract
by a number of different entities including Caixa and the
Comptroller General (and its successor entity since 2016). Once
these entities are satisfied that all documentation pertaining to
the novation process is in order, the credits are then passed to
the Treasury, who by law, has up to 18 months to exchange the FCVS
Credit Contracts for CVS bonds and cash.
LumX has continued its dialogue with Vision's investment
manager, other investors and the independent directors of the
Vision funds in an effort to accelerate liquidity. This resulted in
a new board structure implemented in 2017 to improve oversight and
ease investors' concerns over the stability of the management
company.
In late 2017, the investment manager successfully sold a
substantial part of the FCVS PB portfolio to a Brazilian bank,
resulting in a significant distribution to investors. A small stub
remains that represents a retention payment which comes due upon
completion of FCVS document review by the buyer and confirmation of
transfer by Caxia. While the deadline for the document review by
the buyer is in October 2018, we do not have visibility on the
timeline for Caixa to confirm the transfer.
For FCVS RJ, several potential exit strategies are being
explored, whether by settlement, novation or sale, though
significant hurdles and risks still exist with any of these
options, reflected in the reserve on the position. Shareholders
will recall that a Caixa systems issue in 2008/2009 resulted in a
novation-freeze on the RJ credits implemented in 2011 and a
subsequent distinction between good faith and bad faith holders of
the credits. Vision is the largest holder of the credits and have
also been identified by Caixa as a good faith holder of the
credits. Caixa has asked Vision on a number occasions to negotiate
a global settlement between Caixa and all RJ holders as a way to
resolve the freeze. Vision's attempts so far have been unsuccessful
and Vision are exploring litigation against Caixa to protect their
rights, bring parties to the table and potentially seek to restart
the novation process.
GFIR has elected to sell its Vision farm funds exposure as part
of a tender offer and recapitalisation proposal received in early
2018 and expect liquidity from these positions in the next 3
months.
b. Autonomy Rochavera (fka Autonomy Global Macro Fund)
Following a 2018 restructuring, the Autonomy Global Macro Fund
has been liquidated and the company now holds shares in Autonomy
Rochavera. The underlying asset remains the same however, part
ownership in a large corporate office development in Sao Paolo,
Brazil (Rochavera Towers). This particular asset was also part of
the Autonomy II D real estate portfolio. However, Autonomy Global
Macro Fund was not subject to the same divestment period and
termination date.
In April 2018, the investment manager of Autonomy engaged
secondary market group Hedgebay to facilitate a secondary market
exit for investors seeking liquidity from this asset in the near
term - preliminary indications from third party buyers is in the
60-70 cents range. The founder of Autonomy has also indicated
interest in obtaining additional Rochavera asset exposure which is
expected to be viewed favourably by secondary market buyers and
potentially drive bid levels up. GFIR has indicated its interest to
sell at NAV and we continue to evaluate options for generating
liquidity from this holding.
c. Autonomy Fund II D - Cajamar Class
Autonony II D originally held investments in several long term
multi-phase real estate developments, mainly office properties in
Sao Paolo and Rio de Janeiro. In early 2018, GFIR opted to
participate in a liquidity proposal for the majority of the
portfolio (the office property portfolio only), offering investors
an exit ahead of a final termination date in June 2018 at NAV. As
noted in a Stock Exchange Announcement on 3 April 2018, a
distribution of approximately 90% of our December 2017 carrying
value was received on 4 April 2018, allowing the company to
implement the recent tender.
Following a restructuring in Q1 2018, GFIR holds shares of the
II D Cajamar share class only. The underlying asset of this share
class is a logistics property which was excluded from the liquidity
proposal. The Cajamar property is being marketed separately and the
manager hopes to complete a sale in the coming months.
d. South Asian Real Estate Ltd
GFIR owns equity in S.A.R.E. Public Company Limited ("SARE"), a
company incorporated in Cyprus. The shares owned by the fund are
common equity and do not have any rights related to redemption.
SARE is a company with a goal to develop 25,000 residential
units in various cities in India. The original assumed exit was an
IPO of the business. However, given disappointing unit sales and
significant liquidity issues, this is currently not a viable exit
opportunity. We have had significant pricing reserves in place on
the position for a number of years. Following a review of company
developments over 2017, the pricing reserve was increased from 60%
to 90% for December 2017 NAV - a weak real estate market,
significant operating costs, additional leverage, limited
liquidity, delay to both the annual audit and estimated quarterly
NAVs, and lack of communication, are among our concerns.
LumX continues to identify and work with other shareholders to
increase transparency and put pressure on the management team and
the board of SARE to work towards liquidity for current investors.
Following a call with the new member of the SARE board in late
April, a formal letter outlining a multitude of concerns was sent
by the company and three other SARE shareholders in mid-May.
Included in the letter was a list of questions on SARE, the
underlying properties and various decisions made by the board of
SARE and requesting that the letter and questions be shared with
other SARE shareholders. As of the date of this report, no response
from the SARE board or the management team has been received. GFIR
have engaged local counsel in Cyprus to evaluate other options.
An AGM for SARE is expected in the next few months, once the
March 2017 audited financials have been completed.
These four significant positions accounted for an aggregate
32.09% of GFIR NAV, and 89.62% of the portfolio as at March 31,
2018 NAV. The remaining four positions account for 3.71% of NAV,
with the balance representing cash and equivalents net of accrued
liabilities.
3. Current Liquidity Projection
GFIR's portfolio consists of illiquid equity investments in a
company and various funds. Natural liquidity from these holdings
remains highly unpredictable, as the majority of the remaining
portfolio is concentrated in emerging market legal claims and real
estate and is largely outside of the control of the underlying
managers. GFIR also has limited control that over the actions of
its underlying portfolio holdings. Potential secondary market sales
could accelerate liquidity but would be likely to come at a
significant discount to NAV.
The first half of 2018 has already seen significant liquidity
generated in the portfolio, with the receipt of 90% of the market
value of Autonomy II D in April, partial distributions from
Autonomy Global Macro Fund and later Autonomy Rochavera, Sergengeti
and Clearwater. We are hopeful of further liquidity from the other
Autonomy Funds and the Vision Farm funds over 2018.
The expectation is that in the second half of 2018 GFIR will be
left with three or four key positions, Autonomy Rochavera, SARE,
Vision FCVS RJ and the stub position in Vision FCVS PB. Liquidity
generation from these assets is very unpredictable. We will
continue to seek the optimal outcomes for shareholders of GFIR.
Disclaimer:
Projections are based on highly subjective analyses of complex
and dynamic investments held by underlying equity and fund
investments. The analyses are dependent on information sourced from
the investment managers of the underlying funds, and hence the
accuracy of the projections produced by LumX is reliant on the
accuracy of that information. In many cases the range of possible
outcomes from the underlying asset investments is extremely wide in
both value and timing. This range of outcomes will also become
significantly more unpredictable the further into the future
projections are made.
The projection is provided for the purpose of informing
shareholders as to the possible timing of the return of capital
from the company, but it should be understood that the actual
amount and timing of the return of capital will not be as
projected. There are many reasons why this will occur. These
include, but are not limited to:
-- Inaccurate or optimistically-skewed information provided by
the underlying investment managers;
-- Unpredictable events such as the appearance of a third-party
buyer for a given underlying asset;
-- Changes in the values of underlying assets as prices change in global asset markets;
-- Changes in the foreign exchange markets, causing translation
effects as foreign assets are marked back into sterling.
It also does not include any estimate of the fees and expenses
that the company will incur during the period of projection.
It is emphasised that:
-- There is no guarantee that the portfolio can be realised in
accordance with the above indicative timeline, or at all;
-- The values of any underlying investments as at the time of
realisation may differ significantly from the values relied on in
this document;
-- The estimated portfolio liquidity profile above is indicative
only and should not under any circumstances be considered a
prediction, forecast or guarantee of the company's actual portfolio
liquidity profile or an indication as to the timing of
distributions to Shareholders pursuant to the company's winding
down; and
-- There is no guarantee that the assets in the portfolio will
be realised at their net asset value, and it is possible that the
company may not be able to realise some of its remaining assets at
any material value.
GFIR provides regular updates on its expectation of liquidity
from the portfolio via its quarterly factsheet, accessible on the
company's website, https://www.lumx.com/gfir/gfir
4. Future of GFIR
Given the small size of the remaining portfolio and the
significant costs associated with the current company structure,
the Board and LumX are evaluating potential options for the
company's future. Options being explored include:
-- Continue workout of remaining holdings as a listed company;
-- Delisting, continue workout of remaining portfolio
-- Delisting, appointment of liquidator to continue workout of remaining holdings
-- Sale of underlying assets for non-cash consideration to third
party, with holders obtaining exposure to the purchasing
vehicle;
-- Sale of underlying assets to third party for cash and
subsequent distribution of net proceeds and liquidation of the
company.
Disclaimer
This document has been prepared by LumX Asset Management (U.K.)
Limited (the "Company" or "LumX"). The Company is authorised and
regulated by the Financial Conduct Authority in the United Kingdom
as a "full-scope" alternative investment manager (FRN: 195960).
This document has been prepared by the Company for persons
reasonably believed by the Company to be of the kind to whom the
Company is permitted to communicate financial promotions pursuant
to the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the "FPO"), as amended, to give
preliminary information about the investment proposition described
herein. Such persons include: (a) professional investors (b)
persons having professional experience of participating in
unregulated collective investment schemes and (c) high net worth
bodies corporate, partnerships, unincorporated associations,
trusts, etc. falling within Article 49 of the FPO.
This document does not constitute an offer to sell or
solicitation of an offer to buy investments and may not be used to
make such an offer. Therefore, no person receiving a copy of the
document may treat it as constituting an offer or invitation to buy
investments, nor may it be copied for transmission to another
person. The purpose of this document is to give initial detail to
the recipient and all opinions and views expressed constitute
judgment as of the date of writing and may change at any time
without notice. The information contained in this document does not
purport to be all-inclusive or to contain all of the information
that may be required to make a full analysis of the proposal, and
is subject to updating, completion, modification and amendment.
Such information may be based on certain assumptions and involve
elements of subjective judgment and analysis. Actual results may
differ. Any investment strategies or case studies set out herein
are for illustrative purposes only. Any descriptions herein of
reports, statistical analysis or performance are for illustration
purposes only.
While all of the information prepared in this document is
currently believed to be accurate, the Company makes no claims as
to its completeness or accuracy and no representations or
warranties, express or implied are given in, or in respect of, this
document. Certain information has been provided by and/or is based
on third party sources and although believed to be reliable, has
not been independently verified and its accuracy, timeliness or
completeness cannot be guaranteed. To the fullest extent permitted
by law, in no circumstances will the Company, or any of its
respective subsidiaries, shareholders, affiliates, representatives,
partners, directors, officers, employees, advisers or agents be
responsible or liable for any direct, indirect or consequential
loss or loss of profit arising from the use of this document, its
contents, its omissions, reliance on the information contained
within it, or on opinions communicated in relation thereto or
otherwise arising in connection therewith. This document is for
informational purposes, and is neither an offer to sell nor a
solicitation of any offer to purchase any investment product or
investment advisory services.
Recipients of this document are not to construe its contents, or
any prior or subsequent communications from or with the Company or
its representatives as legal or tax advice. Recipients of this
document should each make their own evaluation of the proposal and
of the relevance and adequacy of the information and should make
such other investigations as they deem necessary.
This announcement has been issued through the Companies
Announcement Service of Euronext Dublin.
[1] Reserves are adjustments to the holding value of a portfolio
asset taken by the company when it is deemed that the NAV being
provided by the fund in question is not a fair estimate of the
value of the holding.
[2] Formerly known as Gottex Asset Management (UK) Ltd.
[3] The Vision funds are a group of hedge funds focused on
Brazilian assets and all run by a single investment manager.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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