TIDMSMEF
RNS Number : 5891B
SME Loan Fund PLC (The)
05 April 2017
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH
AFRICA OR ANY JURISDICTION FOR WHICH THE SAME COULD BE UNLAWFUL.
THE INFORMATION CONTAINED IN THIS ANNOUCNEMENT DOES NOT CONSTITUTE
AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION, INCLUDING IN
THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA.
5 April 2017
THE SME LOAN FUND PLC
(THE "COMPANY" OR "SMEF")
Circular re: General Meeting
Introduction
Further to its announcements on 21 February 2017 and 8 March
2017 regarding proposals for the future of the Company, the Company
announces that a circular containing further details of those
proposals is being posted to Shareholders today (the "Circular").
The circular also contains a notice convening a general meeting of
the Company for 1.00 p.m. on 27 April 2017 at which resolutions
will be proposed to:
-- approve changes to the Company's investment objective and investment policy,
-- adopt the new articles of association of the Company; and
-- authorise the Board to allot up to 250 million Ordinary
Shares and/or C Shares pursuant to a share issuance programme and
disapply pre-emption rights in respect of the issue of such
shares.
A summary of the Proposals is set out below and further details
are set out in the Circular. Copies of the Circular have been
submitted to the National Storage Mechanism and will shortly be
available for inspection at www.morningstar.co.uk/uk/nsm and on the
Company's website (www.thesmeloanfund.com). Words and expressions
defined in the Circular have the same meanings when used in this
announcement unless the context requires otherwise.
Background to, and Reasons for, the Proposals
The Board believes that, following the appointment of SQN
Capital Management, LLC and its UK subsidiary SQN Asset Management
Limited as the Company's investment managers with effect from 1
April 2017, the Company now has access to a broader range of
investment management skills. The Board is proposing, therefore, to
make certain changes to the Company's investment objective and
investment policy so that the Company can benefit from this broader
range of skills and continue to provide attractive returns to
Shareholders.
Having reviewed the operation of the Company's discretionary
six-monthly redemption facility for up to 20 per cent. of its
issued share capital at a redemption price equal to 99.5 per cent.
of the net asset value per Ordinary Share and, in particular, the
need to build up cash balances in advance of a redemption date in
order to be able to satisfy redemption requests, the Directors
concluded that the redemption facility is an inefficient and
inflexible structure that is not well-suited to the less liquid
assets in which the Company invests. Accordingly, the Directors
used their discretion and decided not to implement the first
potential redemption opportunity at 31 March 2017 and are proposing
that the Company adopt the New Articles which remove the provisions
relating to the six-monthly redemption facility.
The Directors recognise the importance to Shareholders of
increasing the size of the Company in order to increase the
liquidity of its Shares in the secondary market. The secondary
placing of the Ordinary Shares (representing 48 per cent. of the
Company's issued share capital) previously held by GLI Finance
Limited principally with new investors (both institutional and
wealth managers) in March 2017 has broadened the Shareholder base
significantly and has already led to a material improvement in the
market liquidity of the Ordinary Shares and a narrowing of the
discount at which the Ordinary Shares are trading relative to their
net asset value. The Directors believe that the Company's prospects
for issuing further Shares in due course have been enhanced
significantly by that secondary placing and the appointment of the
New Managers and will be further enhanced if Shareholders approve
the proposed changes to the investment objective and investment
policy and the adoption of the New Articles. Accordingly, the
Directors are seeking Shareholder approval at the General Meeting
to enable the Company to create a share issuance programme for up
to 250 million Ordinary Shares and/or C Shares. If approved, and
subject to publication of a prospectus by the Company, the Share
Issuance Programme may be implemented by way of a series of
placings and tap issues and, potentially, open offers, offers for
subscription and/or intermediaries offers. The Directors recognise,
however, that there are no guarantees that the Company can increase
its size substantially. For this reason, the Directors are seeking
to include in the New Articles a provision for a continuation
resolution (by way of an ordinary resolution) if the Company's net
assets at 31 December 2019 are less than GBP250 million.
Changes to Investment Objective and Investment Policy
The following is a summary of the material changes that are
being proposed to the Company's investment objective and investment
policy:
-- The Company's existing investment objective and investment
policy require it to invest in a range of SME loans originated
principally through Investee Platforms (being loan origination
platforms and finance companies in which GLI Finance Limited has an
equity interest). The revised investment objective and investment
policy will not include any obligations to invest through Investee
Platforms, allowing the Company to source investments originated
through a broader variety of channels, or to focus on SMEs.
Instead, it is intended that, under its revised investment
objective and investment policy, the Company will invest in a range
of secured loan assets mainly through wholesale secured lending
opportunities, secured trade and receivable finance and other
collateralised lending opportunities. For this purpose, "loan
assets" will include both direct loans as well as other instruments
with loan-based investment characteristics (for example, but not
limited to, bonds, loan participations, syndicated loans,
structured notes, collateralised obligations or hybrid securities)
and may include (subject to the limit referred to below) other
types of investment (for example, equity or revenue- or
profit-linked instruments).
-- Under the current investment policy, the Company's portfolio
is weighted towards the UK. The revised investment policy envisages
that the portfolio will be weighted towards the UK, Continental
Europe and North America.
-- Several changes are proposed to the Company's investment
restrictions (calculated based on the Company's gross assets at the
time of investment) to reflect the proposed broader focus of its
investment policy:
Investment Restriction Current Investment Policy Revised Investment Policy
Geography
- Exposure to UK loan assets Maximum of 70% Minimum of 60%
- Minimum exposure to non-UK loan assets 30% 20%
Duration to maturity
- Minimum exposure to loan assets with duration of less than
6 months 20% None
- Maximum exposure to loan assets with duration of 6 - 18
months and 18 - 36 months
- Maximum exposure to loan assets with duration of more than 40% in each case None
36 months
40% 50%
Maximum single investment 2.5% 10%
Maximum exposure to single borrower or group None 10%
Maximum exposure to loan assets sourced through single
alternative lending platform or other
third party originator None 25%
Maximum exposure to any individual wholesale loan arrangement None 25%
Maximum exposure to loan assets which are neither
sterling-denominated nor hedged back to
sterling None 15%
Minimum exposure to unsecured loan assets 50% 25%
Maximum exposure to assets (excluding cash and
cash-equivalent investments) which are not
loans or investments with loan-based investment
characteristics None 10%
-------------------------------------------------------------- -------------------------- --------------------------
-- Under the Company's existing investment policy, the Company's
borrowings (including, for this purpose, borrowings by any special
purpose vehicles that may be established by the Company in
connection with obtaining leverage against any of its assets and,
on a look-through basis, by any investee entity) are capped at 150
per cent. of its net asset value. Under the revised investment
policy, the Company's borrowings will not be calculated on a
look-through basis to any investee entity and, accordingly, the cap
on the aggregate borrowings of the Company and any such special
purpose vehicles will be reduced to 35 per cent.
Share Issuance Programme
The Directors believe that the Share Issuance Programme will
have the following benefits for Shareholders:
-- the Company will be able to raise additional capital
promptly, enabling it to take advantage of investment
opportunities, thereby expanding and diversifying its investment
portfolio;
-- an increase in the market capitalisation of the Company will
help to make the Company attractive to a wider investor base;
-- it is expected that the secondary market liquidity in the
Ordinary Shares will be enhanced as a result of a larger and more
diversified Shareholder base;
-- the Company's competitive position should be increased by it
becoming a larger market participant and through growth in its
portfolio;
-- the Company's fixed running costs will be spread across a
larger equity capital base, thereby reducing the Company's ongoing
charges ratio; and
-- the Company has a tiered management fee which reduces from
one per cent. of the Company's net asset value to 0.9 per cent. of
its net asset value in excess of GBP250 million and, therefore, in
the event that the Share Issuance Programme is substantially used,
the Company's ongoing charges per Ordinary Share will be reduced
further.
Shareholders are therefore being asked to approve, by way of the
Share Issuance Programme Resolutions at the General Meeting, the
issue of up to 250 million new Ordinary Shares and/or C Shares, and
the disapplication of Shareholders' pre-emption rights in respect
of such issues, pursuant to the Share Issuance Programme. The
proposed disapplication is equivalent to approximately 475 per
cent. of the Company's issued share capital at the date of this
announcement.
The Company does not expect to issue New Shares pursuant to the
Share Issuance Programme immediately and, in any event, the Company
will be required to publish a prospectus before it can do so. The
Share Issuance Programme will be flexible and may have a number of
closing dates. Accordingly, it is currently expected that the
prospectus will relate to the issuance of New Shares pursuant to
the Share Issuance Programme by way of a series of placings and tap
issues and it may also facilitate issues of New Shares by way of
open offers, offers for subscription and/or intermediaries offers.
The structure (in terms of the class of shares to be offered and
the means by which they will be offered), size and frequency of
each issue of New Shares pursuant to the Share Issuance Programme,
and the price at which new Ordinary Shares are to be issued, will
be determined at the sole discretion of the Directors, in
consultation with Cantor Fitzgerald Europe and the New
Managers.
The ability to issue New Shares pursuant to the Share Issuance
Programme will expire on the earliest of (i) the date being 12
months after publication of the prospectus by the Company, (ii)
when all of the New Shares available for issue pursuant to the
Share Issuance Programme have been issued and (iii the date being
18 months from the date on which the authorities conferred by the
Share Issuance Programme Resolutions to issue New Shares pursuant
to the Share Issuance Programme are passed. The Share Issuance
Programme will not be underwritten.
All new Ordinary Shares issued pursuant to the Share Issuance
Programme will be issued at the minimum issue prices equal to the
prevailing net asset value per Ordinary Share at the time of the
relevant allotment together with a premium intended at least to
cover the costs and expenses of the relevant issue of new Ordinary
Shares (including, without limitation, any placing commissions).
Accordingly, such issues will avoid any dilution of the net asset
value of the then existing Ordinary Shares held by
Shareholders.
The issue price of any C Shares issued pursuant to the Share
Issuance Programme will be GBP1.00 per C Share. C Shares will
convert into Ordinary Shares on the occurrence of specified events
or at specified times and conversion will take place on a net asset
value for net asset value basis. The costs and expenses of any
issue of C Shares and any other costs and expenses which the
Directors believe are attributable to the C Shares will be paid out
of the pool of assets attributable to the C Shares and,
accordingly, an issue of C Shares will not dilute the net asset
value of the then existing Ordinary Shares held by
Shareholders.
The net proceeds of any issue of New Shares pursuant to the
Share Issuance Programme will be used to fund investment
opportunities, and/or to repay all or part of any borrowings drawn
down by the Company, in accordance with the Company's investment
policy.
The Company will apply for any new Ordinary Shares issued
pursuant to, or arising on conversion of C Shares issued pursuant
to, the Share Issuance Programme to be admitted to listing on the
specialist fund segment (or, if the existing Ordinary Shares have
been admitted to listing on the premium segment, the premium
segment) of the Official List and to trading on the main market of
the London Stock Exchange. The Company will apply for any C Shares
issued pursuant the Share Issuance Programme to be admitted to
listing on the standard segment of the Official List and to trading
on the main market of the London Stock Exchange.
The New Shares will be issued in registered form and may be held
in certificated or uncertificated form. The new Ordinary Shares
(and any Ordinary Shares arising on conversion of C Shares) will
rank equally with existing Ordinary Shares, including as to any
right to receive dividends (save for any dividends or other
distributions declared, made or paid on the Ordinary Shares by
reference to a record date prior to the allotment of, or conversion
into, the relevant new Ordinary Shares).
The maximum number of New Shares available pursuant to the Share
Issuance Programme should not be taken as an indication of the
number of New Shares that will be issued, which will depend on a
wide range of factors including the Company's investment
performance, the price at which the Ordinary Shares trade relative
to their net asset value and general market conditions and investor
sentiment. However, assuming only new Ordinary Shares are issued
pursuant to the Share Issuance Programme and the Share Issuance
Programme is fully subscribed, the issued share capital following
the closing of the Share Issuance Programme would have increased by
approximately 475 per cent. On this basis, if an existing
Shareholder did not acquire any Ordinary Shares in the Share
Issuance Programme, their proportionate voting interest in the
Company would be diluted by 82.6 per cent. However, as stated
above, New Shares will only be issued pursuant to the Share
Issuance Programme at prices (in the case of an issue of Ordinary
Shares) or on terms (in the case of an issue of C Shares) that
avoid any dilution of the net asset value of the existing Ordinary
Shares.
Change of Name
The Board has decided, subject to the resolutions approving the
proposed changes to the Company's investment objective and
investment policy and adopting the new Articles being passed at the
General Meeting, to change the name of the Company from The SME
Loan Fund plc to SQN Secured Income Fund plc with effect from 28
April 2017 to reflect the appointment of the New Managers and the
changes to the Company's investment objective and investment
policy.
In order to reflect the new name of the Company, the ticker for
the Ordinary Shares will also be changed to SSIF with effect from 2
May 2017.
Enquiries
The SME Loan Fund plc Richard Hills (Chairman) T: +44 (0) 1481 810 100
SQN Capital Management, LLC Jeremiah Silkowski T: +44 (0) 1932 575 888
Neil Roberts
Cantor Fitzgerald Europe Sue Inglis (Corporate Finance) T: +44 (0) 20 7894 8016
Andrew Davey (Sales) T: +44 (0) 20 7894 8646
Ben Heatley (Sales) T: +44 (0) 20 7894 8229
Buchanan Charles Ryland T :+44 (0) 20 7466 5000
Victoria Hayns
This information is provided by RNS
The company news service from the London Stock Exchange
END
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