TIDMSSIF
RNS Number : 0383K
SQN Secured Income Fund PLC
11 December 2018
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
11 December 2018
SQN SECURED INCOME FUND PLC
Relaunch and Growth Strategy for 2019
and
Appointment of Advisors
SQN Asset Management, the collateralised loan specialist and
multinational alternative investment fund manager, is pleased to
provide this strategic update on plans to increase the size of the
SQN Secured Income Fund ("SSIF or the Company") significantly.
Market Opportunity
The SQN Secured Income Fund aims to provide shareholders with
attractive risk-adjusted returns predominantly through investment
in a range of SME loan assets and secured lending opportunities,
diversified by way of borrower, sector, duration and geography. The
SQN Secured Income Fund seeks investments collateralised by a broad
range of assets including receivables, income streams, subsidies,
grants, real property, tax credits and rebates, loan portfolios and
other pools of financial assets. Investments are originated
directly and through third-party relationships, including
alternative finance platforms addressing underserved segments of
the market. The SQN Secured Income Fund delivers one of the highest
monthly dividends in the market and has been specifically
constructed to provide downside protection by way of structured
collateral packages for each individually underwritten
investment.
Anticipating a period of political and market instability, SQN
Asset Management (the "Investment Manager") sees this as an
opportune time to increase the size of the fund and capitalise on
an expanding opportunity set as cracks start to develop in the
portfolios of non-traditional underwriters and volume driven
platforms. This is expected to lead to either the sale of quality
segments of seasoned portfolios or a reduction in competition
around attractive risk adjusted high-yield transactions as other
non-traditional investors shift their focus to portfolio
maintenance.
The Investment Manager has spent the last 18 months
restructuring and balancing the portfolio in preparation of a
widely forecasted market dislocation among alternative lenders.
During this period, the Investment Manager implemented a robust
traditional underwriting regime, reduced exposure to platforms that
did not maintain the same underwriting standards, increased the
direct investment segment of the portfolio, established a healthy
pipeline of new business, and increased the dividend to 7p per
share which represents a yield of 7.69% annually based on the last
published NAV.
Growing the SQN Secured Income Fund by way of a capital raise is
now a key focus in order to take advantage of these attractive
opportunities (with or without a market dislocation), further
enhance the direct investment portion of the portfolio, increase
liquidity for shareholders, and lower the overall cost ratio for
the Company.
Proposed Equity Issue
The SQN Secured Income Fund proposes an equity issue in the
first quarter of the 2019 with a tap or with a larger target
capital raise of between GBP50 million to GBP100 million sized
according to the number of opportunities at hand that can be closed
within a short window. With the growth of the asset base, the SQN
Secured Income Fund will seek to maintain its current dividend
level of 7p per share per annum with the aim of moving towards
delivering its target total return of 8% per annum over the medium
term.
The details of the proposed equity issue are subject to final
determination by the SSIF Board and also shareholder and regulatory
approval. However, it is the Investment Manager's current
expectation that the proposed equity offering will be an issue of
Ordinary Shares and/or C Shares and, concurrently, SSIF will apply
for a Premium Listing on the Official List of the London Stock
Exchange.
Appointment of Advisors to support growth plans
To support the Company's transition and growth, the SSIF Board
has made the following strategic appointments:
-- finnCap Ltd. as broker and sponsor
-- Kepler Partners LLP as retail broker
-- Dickson Minto as legal advisors
Both the SSIF Board and the Investment Manager are excited about
the enthusiasm with which finnCap and Kepler have agreed to jointly
undertake the marketing of the SQN Secured Income Fund.
Somerston Sell Down
In further support of SSIF's relaunch and growth plan, Somerston
(owner of c.28% of SSIF) has agreed to make up to 11,780,000 of its
shares (the "Option Shares") available to new investors at a price
of 95p per share, a 2.2% discount to the last published NAV in
October. The Option Shares represent approximately 80% of
Somerston's entire shareholding in SSIF. The Investment Manager and
the SSIF Board see this as an important step in further broadening
SSIF's investor base and it is expected that any increased free
float of SSIF's shares will boost liquidity in the market. To the
extent that Somerston retains any Option Shares at 31 March 2019,
the Investment Manager has agreed to buy any such residual shares
at 95p per share with a view to making such shares available to new
investors as SSIF's growth strategy takes its course. The number of
Option Shares has been agreed such that the Investment Manager can
at most hold shares representing 29.9% of SSIF's voting rights and
as such no obligation under Rule 9 of the Code will be
triggered.
Dawn Kendall, Managing Director of SQN Asset Management
commented;
"We are delighted to announce this relaunch and growth plan for
SSIF. This fund has tremendous potential and in the face of
significant economic and political uncertainty, offers a unique
investment vehicle that is well positioned for changing market
dynamics, in addition to providing a significant source of
uncorrelated dividend income for investors."
"Although much work has already been successfully achieved, this
relaunch will transform the size of the fund, improve liquidity,
provide our shareholders with the benefits from being invested in a
larger fund with a more significant critical mass and the
opportunity to invest in our considerable pipeline of new
transaction underwritten by our credit team."
SQN Asset Management Limited tel: +44 1932 575 888
Dawn Kendall / Nicola Bird
finnCap Ltd. tel: +44 20 7220 0500
Corporate Finance:
William Marle / Giles Rolls
Sales:
Mark Whitfeld
tel: +44 20 3384 8790
Kepler Partners LLP
Hugh van Cutsem
Buchanan Communications tel: +44 20 7466 5000
Charles Ryland / Henry Wilson
http://www.sqncapital.com/managed-funds/sqn-secured-income-fund/about/
Notes to Editor
The Company aims to provide shareholders with attractive
risk-adjusted returns, principally in the form of regular,
sustainable dividends, through investment predominantly in a range
of secured loans and other secured loan-based instruments
originated through a variety of channels and diversified by way of
asset class, geography and duration.
The Company's Investment Managers are SQN Capital Management,
LLC, a Registered Investment Advisor with the United States
Securities and Exchange Commission and its subsidiary, SQN Asset
Management Limited. The principals responsible for managing the
portfolio are Dawn Kendall, Neil Roberts, and Jeremiah
Silkowski.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
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