TIDMPSD
RNS Number : 8171C
PSource Structured Debt Limited
19 April 2013
PSOURCE STRUCTURED DEBT LIMITED
(Registration Number) 47075
For immediate release 19 April 2013
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RECOMMENDED WINDING UP PROPOSAL
Further to the statement in the announcement of interim results
dated 27 February 2013, PSource Structured Debt Limited confirms
that a circular (the "Circular") has been published regarding a
recommended proposal for the winding up of the Company.
The expected timetable of principal events and key extracts from
the Circular are set out below. The Circular will shortly be
available to view on the Company's website
(http://www.psourcestructureddebt.com/) and at the National Storage
Mechanism (www.morningstar.co.uk/uk/NSM).
Defined terms used in this announcement shall, unless the
context otherwise requires, have the same meanings set out in the
Circular.
ENQUIRIES
PSource Capital Limited
Soondra Appavoo, Tel. +44 20 7925 3156
Numis Securities
Nathan Brown, Tel. +44 20 7260 1426
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Latest time and date for receipt 11:00 a.m. on 14 May
of Forms of Proxy in respect 2013
of the EGM
Suspension of listing and trading 7:30 a.m. on 16 May
of Shares 2013
EGM 11:00 a.m. on 16 May
2013
Cancellation of listing and 8:00 a.m. on 17 May
trading of Shares 2013
Each of the times and dates above are references to London time
and (other than those relating to the holding of meetings) may be
extended or brought forward without further notice. Any material
changes to the above times and/or dates will be notified to a
regulatory information service.
EXTRACTS FROM CIRCULAR DATED 19 APRIL 2013
CHAIRMAN'S LETTER
1. Introduction
This Circular includes notice of an extraordinary general
meeting of the Company, to be held at 11:00 a.m. on 16 May 2013 at
Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA at which
a special resolution will be proposed to wind up the Company (the
"Proposal").
As part of the Proposal, the Board intends to terminate the
Investment Management Agreement and the Management Agreement (the
"Agreements") as at 1 April 2013 and to settle any performance fee
accruals under those Agreements as described in more detail under
"Termination of the Agreements" below. Because the Manager and the
Investment Manager are classified as related parties of the Company
under the Listing Rules this part of the Proposal is classified
under the Listing Rules as a "related party transaction", which
amongst other things requires the approval of Shareholders.
The Proposal is subject to Shareholder approval at the EGM. The
purpose of this Circular is to provide Shareholders with details of
the Proposal and of the Resolutions required to implement the
Proposal and to recommend that Shareholders vote in favour of the
Resolutions.
2. Background
The Company is a Guernsey-registered, closed-ended investment
company incorporated on 5 June 2007 and listed on 3 August 2007.
The Company's issued share capital currently comprises shares
denominated in US Dollars, which are admitted to the Official List
and to trading on the Main Market on the London Stock Exchange.
The Board recognised in September 2011 that a continuation of
the Company in its current form was not in the interests of
Shareholders and on 5 April 2012 put forward proposals to
Shareholders for the Winding Down, changes to the Investment
Objective and Policy, and amendments to the Agreements. At an
extraordinary general meeting held on 16 May 2012, Shareholders
duly passed the resolution implementing these proposals.
In the Company's annual report dated 27 September 2012, the
Board committed to consult with major Shareholders and report by
the end of March 2013 on the options to put the Company into
liquidation at an appropriate point.
The Board has today announced recommended proposals for the
winding up of the Company and the termination of the
Agreements.
This circular sets out the background to and details of the
Proposal, and convenes the EGM at which Shareholders will be asked
to vote on the Resolutions.
3. The Proposal
Liquidation of the Company
The process to liquidate the Company commences with a board
meeting at which the Directors confirm that they have made a full
inquiry into the affairs of the Company and that, in their opinion,
the Company will be able to pay its debts in full. The board
meeting has now been held and the Directors have so confirmed, and
have resolved to recommend to the Shareholders that the Company be
wound up.
An extraordinary general meeting of the Company is then held
(notice of which is set out in this Circular) in order to pass a
special resolution to approve, amongst other things, the voluntary
winding up of the Company and the appointment of a liquidator. The
voluntary winding up is deemed to commence at the time of the
passing of this resolution. The Company will then cease to carry on
its business (except as required for the winding up), but will
retain its corporate state and powers until dissolution. Within 7
days of the Resolutions being passed, the Resolutions shall be
advertised in the Gazette Officielle.
Entitlement of Shareholders on the Winding up
The Net Asset Value as at 31 December 2012 was USD$0.1371 per
Share.
The Company currently has very limited cash resources, as
detailed below, and therefore it is not expected that there will be
any distribution to Shareholders either prior to or immediately
following the appointment of the Liquidators.
Shareholders should note that the timing and value of any
distributions to Shareholders during the Winding Up will be subject
to the disposal of Investments (which are illiquid and whose
realisation will be subject to asset-specific factors and to market
conditions) and to the Company's ongoing working capital
requirements.
Any distributions to Shareholders during the Winding Up will be
paid pro rata to Shareholders as listed in the register on the date
the register closes. Distributions will be made by cheque and sent
to the relevant Shareholder's at their registered address. If any
Shareholder's entitlement on the distribution is less than GBP5,
such amount will not be distributed to such Shareholder but instead
will be donated to a charity to be selected by the Liquidators.
It is not currently possible, due to the illiquid nature of the
Investments, to estimate the expected timing of any distribution or
of the conclusion of the Winding Up. Any distribution will only be
made subject to the Liquidators' statutory duties to seek out,
adjudicate and pay creditors' claims.
Portfolio realisation
The Portfolio comprises private debt and equity securities
issued by North American companies. The majority of the Company's
assets are held in syndication with other funds associated with the
Company's Investment Manager.
These funds (principally, Laurus Master Fund Limited, Valens
Offshore Fund and Valens US Fund) are also in wind down or
liquidation. All of the assets in the Portfolio are therefore in
some kind of disposal process. Given that in all cases, these are
private assets (although in some cases held in publically traded
companies), the time taken to exit from these positions is
difficult to estimate.
The Board intends to terminate the Agreements (see below). It is
the intention of the nominated Liquidators to engage the Investment
Manager to act as an investment adviser during the liquidation,
with a mandate of actively seeking to realise the Investments. Such
engagement is subject to contract, but it is the intention of the
nominated Liquidators and the Investment Manager to enter into the
Investment Advisory Agreement with the following terms:
-- no periodic management fee
-- a cash realisation fee of 2.5 per cent. of net cash proceeds
received by the Company during the Winding Up
-- for assets other than Parabel, an incentive fee of 10 per
cent. of the net cash proceeds realised on each asset in excess of
the balance sheet valuation at 31 December 2012
Stock exchange dealings
The last day for dealings in the Shares on the London Stock
Exchange on a normal three day settlement basis will be 10 May
2013. After 10 May 2013, dealings should be for cash settlement
only and will be registered in the normal way if the transfer,
accompanied by the documents of title, is received by the Registrar
by close of business on 15 May 2013. Transfers received after that
time will be returned to the person lodging them.
Application will be made to the UKLA for suspension of listing
of the Shares on the Official List of the UKLA and application will
be made to the London Stock Exchange for suspension in trading in
the Shares as from 7:30 a.m. on 16 May 2013. The register of
members will be closed at 5:00 p.m. on 16 May 2013 and the Shares
will be disabled in CREST at start of business on 17 May 2013. In
addition, an application will be made for the listing and trading
of the Shares to be cancelled on the first business day following
the passing of the Resolutions, at 8:00 a.m. on 17 May 2013.
After liquidation of the Company and making the final
distribution to Shareholders, existing certificates in respect of
the Shares will cease to be of value and any existing credit of
such shares in any stock account in CREST will be redundant.
4. Termination of the Agreements
As part of the Proposal, the Board intends to terminate the
Agreements as at 1 April 2013 and to settle any performance fee
accruals under those Agreements as described below.
As part of the restructuring of the Agreements in April 2012,
the board negotiated a 25 per cent. write-off in the historically
accrued performance fee, reducing it to US$4,185,888 and further,
negotiated that its payment would be deferred until either Parabel
achieved an IPO or a trade sale which resulted in a majority stake
(i.e. greater than 50 per cent.) being acquired by a third party.
The Board also negotiated an entitlement to elect on termination of
the Investment Management Agreement to discharge the performance
fee liability in specie rather than in cash, either in Parabel
common stock or PetroTech securities based on a valuation per share
of Parabel common stock of US$8.70 per share.
There is a further provision that, in the event of an IPO or
majority control transaction taking place within six months of such
a transfer, which results in Parabel being sold at a different
price to US$8.70 per share of Parabel common stock, then the
Company would either receive a refund by means of a return of some
of the Parabel shares or would top up the fee paid (subject always
to the US$4,185,888 cap) (the "True Up Obligation").
Upon termination of the Agreements, the Board has agreed to a
revised settlement of the performance fee accrual of US$4,185,888
in specie by transferring 20.8 per cent. of its PetroTech equity
(96 out of every 460 shares of participating stock and common stock
held). Based on the 31 December 2012 balance sheet valuation, these
securities have a valuation of zero.
This proposed settlement of the performance fee accrual is
equivalent to a valuation per Parabel share of US$4/share. If the
settlement had been based on the valuation per Parabel share of
US$8.70/share set out above, the Company would have transferred 7.9
per cent. of its PetroTech equity to the Manager and Investment
Manager.
In return for the revised valuation basis of the settlement, the
Manager and the Investment Manager have agreed that:
(a) the True Up Obligation will be waived; and
(b) approximately US$70,000 of the management fees accrued to 31
March 2013 will not be payable until a disposal of the Company's
investment in North Texas Steel, or another cash disposal of in
excess of $100,000, occurs.
The effect of the True Up Obligation being waived is that the
Company will no longer have an obligation to adjust its transfer of
Parabel shares in the event of Parabel being sold (or floated in an
IPO) within six months of the Winding Up. A sale (or IPO) at a
price below US$8.70 per share of Parabel common stock would have
resulted in the Company transferring additional Parabel shares to
the Manager and Investment Manager (subject to the US$4.185 million
cap). Conversely if Parabel was sold (or floated in an IPO) at a
price higher than US$8.70 per share of Parabel common stock, this
would have resulted in the Company receiving a return of some of
the Parabel shares transferred.
Under this proposal the Company would retain 100 per cent. of
its PetroTech preference shares (currently held at US$4.6m and
representing 100 per cent. of the value of the Company's holding in
PetroTech/Parabel).
5. Current cash balances
There have been only limited disposals during the half year
ended 31 December 2012, the only significant sale being the
disposal of the Company's holdings in BioDelivery Sciences for net
proceeds of US$671,309.
The Company had a small cash balance of US$336,683 at 31
December 2012. As at 17 April 2013, this cash balance had reduced
to US$254,169.
The Company has no debt or overdraft facility with its bankers,
Investec Specialist Private Bank.
The monthly expenses of the Company in its current form equate
to approximately US$37,000. In the absence of any further cash
inflows (none of which can be guaranteed), the Company does not
have the cash resources to continue operation in its current form
for an extended period.
6. Significant investment in Parabel
The Group has a significant holding in PetroTech, a Delaware
corporation. PetroTech is a privately held holding company whose
principal asset at 30 June 2012 was 100,000,000 shares of the
common stock of Parabel and US$101,000,000 of debt issued by
Parabel. PetroTech is owned jointly by the Group, Laurus Master
Fund and Valens (which are funds managed by the Investment
Manager).
Parabel is registered with the SEC and quoted on OTC Link
(PABL:US), following a reverse merger into a quoted shell in
December 2008. OTC Link is an electronic quotation system that
displays quotes from broker dealers for many over-the-counter
securities
On 1 February 2013, Parabel announced an investment of US$15m by
Dhabi Cayman One Ltd., a Cayman domiciled entity linked to an Abu
Dhabi partner into Parabel Ltd. which is a wholly owned subsidiary
of PA LLC, which is a subsidiary of Parabel.
7. Valuation
The Group owns 8.24 per cent. of the common stock and US$7.2
million in preferred stock in PetroTech. The Board has undertaken a
review of the valuation of Parabel as at 31 December 2012. It set
the valuation at 31 December 2012 at US$4,600,000 (including
accrued income). This is based on a valuation of the Parabel debt
held by Petrotech of US$100m and no value being ascribed to the
common stock of Parabel held by PetroTech. This represents 64 per
cent. of the par value of the preference shares the Company holds
in PetroTech (with accrued interest held at nil).
Notwithstanding the significant write-down in valuation at 31
December 2012, the Board believes that following the investment by
the Abu Dhabi Group, the Company's holding in Parabel may have
upside potential.
8. Risks associated with the Proposal
Material risk factors associated with the Proposal and which are
known to the Company are set out below. Shareholders should
carefully consider all such risk factors (although there may be
others which are of equal or greater magnitude which are not known
to the Company or which the Company deems to be immaterial and
which, accordingly, are not set out in this document or which may
be applicable to certain Shareholders or types of Shareholders and
of which the Company is unaware). Further, as the market conditions
change or develop over time, these matters may be subject to risk
factors not currently contemplated. However, the Board considers
the following to be material risk factors relating to the
Proposal:
-- The actual amount of the liquidation costs may differ from
the Board's estimate, which may impact the amount of any final
distribution to Shareholders. In particular, Shareholders should
note that the costs and expenses of the Company during the Winding
Up may be significant, given the length of time it may take to
realise the holdings.
-- Due to the illiquid nature of many of the Investments, it may
take a significant time to effect a realisation of Investments in
the Portfolio and hence to make any payments under the liquidation
of the Company. Furthermore the amounts received by the Company on
such realisations may vary significantly from their valuation in
the NAV and the costs involved in releasing assets (which would be
borne by Shareholders) may be significant.
-- The Company currently holds only limited cash balances. It
would therefore be unable to continue to operate in its current
form for an extended period and, even in the event of a Winding Up,
it may therefore not be able to protect its Investments from
dilution by further funding rounds.
-- The Company's assets may not be realised at the values at
which they have been included in the calculation of the Net Asset
Value. The financial position of investee companies may deteriorate
before the Company's Investment can be realised. Some of the
Investments may be incapable of realisation at any material
value.
-- All bar one of the Investments are held in syndication with
other funds managed by the Investment Manager which may make it
more difficult or impossible for the Company to dispose of such
Investments independently.
-- During the Winding Up the Portfolio is likely to become more
concentrated as the number of Investments reduces, so increasing
the exposure of the Company to the Investments remaining in the
Portfolio.
9. Extraordinary general meeting
At the EGM, it is intended that the following will be proposed
as to Resolution 1 as an ordinary resolution and as to Resolution 2
as a special resolution for Shareholders' approval:
Resolution 1:
"THAT the proposal to terminate the management agreement dated
31 July 2007 between the Company and PSource Capital Guernsey
Limited ("PSource Guernsey"), as amended and restated from time to
time and as novated to PSource Capital Limited (the "Manager") on
26 July 2012 (the "Management Agreement") and the investment
management agreement dated 31 July 2007, between the Company,
PSource Guernsey and Laurus Capital Management, LLC, as amended
from time to time and as novated to the Manager on 26 July 2012 and
to settle any accrued performance fees under those agreements, as
more fully described in the circular with the title "Recommended
winding up proposal and notice of extraordinary general meeting",
sent to shareholders of the Company on 19 April 2013, be and are
hereby approved."
Resolution 2:
"THAT:
(a) the Company be wound up voluntarily;
(b) James Robert Toynton and Alan John Roberts of Grant Thornton
Limited, Lefebvre House, Lefebvre Street, St. Peter Port, Guernsey,
GY1 3TF be and are hereby appointed as joint liquidators (the
"Liquidators") for the purposes of winding up the Company's
affairs;
(c) the remuneration of the Liquidators be calculated by
reference to the time properly given by the Liquidators and its
staff in attending to matters arising in the winding up and the
Liquidators be and is hereby authorised to draw such remuneration
monthly or at such longer intervals as it determines;
(d) the Company's records and books be held to the order of the
Liquidators until the expiry of six years after the date of
dissolution of the Company after which the Liquidators may destroy
records as they see fit in accordance with the requirements of the
Companies (Guernsey) Law 2008 (as amended from time to time);
(e) any distribution amounts due to the shareholders of GBP5.00
or less be donated to a charity of the Liquidators' choice.
(f) subject to the passing of resolution 1, the Liquidators be
authorised to settle amounts under the termination agreement in
respect of the Management Agreement entered into between the
Company and the Manager, on or around the date of the
Circular."
10. Meeting and Resolutions
The Proposal is subject to the approval of the Resolutions by
Shareholders at the EGM. Further, because the proposed settlement
of any performance fee accruals upon termination of the Agreements
is a related party transaction it is conditional upon, amongst
other things, the approval of Shareholders in general meeting. You
will find set out at the end of this document a notice of
extraordinary general meeting convening the EGM.
All persons holding Shares at 11:00 a.m. on 14 May 2013, or if
the EGM is adjourned, on the register of members of the Company 48
hours before the time of any adjourned meeting, shall be entitled
to attend or vote at that meeting and shall be entitled to one vote
per Share held.
A quorum consisting of two Shareholders present in person or by
proxy and being entitled to vote is required for the EGM. In order
for Resolution 1 to be passed, it must be approved by more than 50
per cent. of the votes cast or, if on a poll, by Shareholders
representing more than 50 per cent. of the votes cast, by those
Shareholders present in person or by proxy and being entitled to
vote. In order for Resolution 2 to be passed, it must be approved
by at least 75 per cent. of the votes cast or, if on a poll, by
Shareholders representing at least 75 per cent. of the votes cast,
by those Shareholders present in person or by proxy and being
entitled to vote.
Because each of the Investment Manager and Soondra Appavoo, who
is an associate of the Manager under the Listing Rules by reason of
his wife's shareholding in PSource Guernsey, the holding company of
the Manager, are precluded from voting in relation to the proposed
settlement of any performance fee accruals upon termination of the
Agreements, each of the Investment Manager and Soondra Appavoo have
undertaken to abstain and ensure that its and his associates will
abstain from voting on Resolution 1 in the event that either they
or their respective associates own Shares. As at 18 April 2013,
being the last practicable day prior to publication of this
document, the Investment Manager and its associates held 500,000
Shares and Soondra Appavoo held 20,000 Shares.
11. Communication
Shareholders will be able to view all notices and communication
in relation to the Proposal on the Company's website -
www.psourcestructureddebt.com.
12. Action to be taken by Shareholders
Enclosed with this letter is a Form of Proxy for use at the EGM.
Shareholders are urged to complete the Form of Proxy and return it
to the Company's registrars, Capita Registrars, PXS, 34 Beckenham
Road, Beckenham BR3 4TU either by personal delivery or post, so as
to arrive not later than 48 hours before the time fixed for the
EGM.
The return of a Form of Proxy will not prevent a Shareholder
from attending the EGM and voting in person if he/she is entitled
to do so and so wishes.
13. Importance of vote
As set out above, the Company does not have the cash resources
to continue operation in its current form for an extended period.
The Board believes that there is a very limited possibility of the
Company securing cash resources through disposals from the
Portfolio in the near term, and no foreseeable possibility of the
Company securing debt or equity funding. The Board therefore
believes that it is important that Shareholders approve the
Resolutions in order that the Company may implement the Winding Up
and concurrently terminate the Agreements and cease the other
expenditures associated with operating as a listed company.
If the Resolutions are not passed by the Shareholders and the
Winding Up does not proceed the Company would incur unnecessary
additional expenditure in respect of its continuing operations and
in respect of developing and implementing alternative proposals for
the Company's future. In the absence of any further cash inflows
the insolvency of the Company may also result, which would reduce
the possibility of Shareholders receiving distributions.
RECOMMENDATION
The Board, which has received advice from Numis to this effect,
considers the Proposal to be fair and reasonable as far as
Shareholders are concerned and that the Resolutions to be proposed
at the EGM to be in the best interests of the Company and its
Shareholders as a whole. Soondra Appavoo has not taken part in the
Board's consideration of the matter for the fair and reasonable
statement in relation to the amendment to the Investment Management
Agreement because he is an associate of a related party. In
providing advice to the Board,
This information is provided by RNS
The company news service from the London Stock Exchange
END
NOENKCDPNBKDQQD
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