Renewal of Loan Facility and related matters (3725L)
July 29 2011 - 6:30AM
UK Regulatory
TIDMTLI
RNS Number : 3725L
Alternative Asset Opps PCC Ltd
29 July 2011
Alternative Asset Opportunities PCC Limited (the "Company")
29 July 2011
Renewal of Loan Facility and related matters
The Board of Alternative Asset Opportunities PCC Limited (the
"Company") announces that, while it continues to expect a
successful outcome to the negotiations with Allied Irish Banks
(AIB) about the planned extension to the existing loan agreement,
it has been advised that, although the first level committee has
recommended the extension to the next level in the approval chain,
it will not prove possible to obtain all the necessary approvals
before the expiry of the existing facility on 31 July 2011. This
has been caused by a change in AIB's credit approval process, which
now applies in all cases where AIB also has a significant equity
investment in a company. Pending these approvals, and as a
temporary arrangement, AIB has switched the loan to "repayment on
demand", allowing the Company to continue fulfilling its
obligations, including the payment of premiums. The present cash
balances will cover outgoings for a further two months, by which
time the Board is confident that an extended loan agreement with a
maturity date of 30 March 2012 will be in place.
The Board recognises that the level of gearing in the portfolio
is above planned levels, and is actively looking for attractive
policy sales opportunities, as and when these arise, and to explore
other methods of raising funds. Any potential sales will involve a
new life expectancy ("LE") assessment.
For some time now, the Board has been concerned about the
difficulty in arriving at an objective market value for the policy
portfolio, given the number of uncertainties involved. It has
responded to this by including a range of information about
possible portfolio outcomes, based on a number of scenarios. So far
the emphasis has been on LE assumptions, but in future the Board
also intends to publish information on valuations using differing
internal rates of return ("IRRs") to allow investors to judge the
effects of this factor on valuations. In practice, valuations are
less sensitive to the choice of IRR than they are to LE
assumptions.
It remains the Board's view that holding policies to maturity
will maximise value for shareholders. This reflects not only the
current state of the market but also the fact that buyers will
often not allow for the fact that a portfolio has been held for
some time (which should largely eliminate 'selection' as a negative
valuation factor).
As shareholders will be aware, the Company has pursued a
strategy of hedging the current value of the portfolio against
movements of the US Dollar. The Company's outstanding forward
foreign exchange contracts reflect this commitment, and they have
protected the Company at times of dollar weakness. Periods of
dollar strength, however, result in a loss on the forward
contracts, although this is balanced by a corresponding gain on
valuation of the dollar assets.
As the current contracts come to maturity on 30 March 2012, this
loss will have to be realised and, at present exchange rates, will
result in an increase in the Company's borrowings of approximately
$10 million. If the current policy is pursued, the contracts will
have to be rolled forward. On balance, the Directors feel that the
hedging contracts should not be renewed. As this will represent a
change in the policy outlined at launch, it is proposed to put
before shareholders a special resolution to this effect. A circular
convening an extraordinary general meeting will be circulated in
due course.
Enquiries:
Peter Ingram Tel: +44 (0) 20 7065
Company Secretary 1467
This information is provided by RNS
The company news service from the London Stock Exchange
END
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