RCS - Linklease Finance - Linklease Finance PLC – Proposal for LL1 USD

Avis BudgetAnnouncement

31/01/2024 18:15

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RNS Number : 5919B  Linklease Finance PLC  31 January 2024

THIS NOTICE CONTAINS IMPORTANT INFORMATION THAT IS OF INTEREST TO THE
REGISTERED AND BENEFICIAL OWNERS OF THE SUBJECT SECURITIES. IF APPLICABLE, ALL
DEPOSITORIES, CUSTODIANS AND OTHER INTERMEDIARIES RECEIVING THIS NOTICE ARE
REQUESTED TO EXPEDITE THE RE-TRANSMITTAL TO BENEFICIAL OWNERS OF THE
SECURITIES IN A TIMELY MANNER.  IF NOTEHOLDERS ARE IN ANY DOUBT AS TO THE
ACTION THEY SHOULD TAKE, IF ANY, THEY SHOULD IMMEDIATELY CONSULT THEIR OWN
INDEPENDENT PROFESSIONAL ADVISERS AUTHORISED UNDER THE FINANCIAL SERVICES AND
MARKETS ACT 2000 (IF THEY ARE IN THE UNITED KINGDOM) OR ANOTHER APPROPRIATELY
AUTHORISED INDEPENDENT FINANCIAL ADVISER AND TAKE SUCH OTHER ADVICE FROM THEIR
OWN PROFESSIONAL, TAX AND LEGAL ADVISERS AS THEY DEEM NECESSARY.

 

31 JANUARY 2024

 

NOTICE TO NOTEHOLDERS

 

LINKLEASE FINANCE PLC

(Incorporated in England and Wales with registered number 11663405)

 

to the holders of those of the Series 2018-LL1 notes issued by the Issuer on
19 December 2018 with

ISIN: GB00BGWL1326

(the "Noteholders" and the "Notes", respectively)

Unless otherwise defined in this Notice, capitalised terms used in this Notice
shall have the meanings ascribed to them in the Trust Deed dated 19 December
2018 (as supplemented, restated or amended from time to time) between the
Issuer and Note Trustee (the "Trust Deed").

Events of Default under the Loan Agreement

The Issuer hereby confirms to Noteholders that Mercury Equipment Rental LLC
and Mercury Car Rental LLC (together, the "Borrower") continue to have failed
to pay interest due up to and including 19 December 2023 to the Issuer (as
lender) in an amount of US$717,129.94 pursuant to the terms of the Loan
Agreement and that this is an Event of Default under Condition 13(h) of the
Notes, which is continuing.

The Issuer hereby confirms to Noteholders that the Borrower continues to have
failed to repay the Loans due for repayment on 19 December 2023 to the Issuer
(as lender) in an amount of US$31,960,000.00 pursuant to the terms of the Loan
Agreement and that this is an Event of Default under Condition 13(h) of the
Notes, which is continuing.

Events of Default under the Notes

The Issuer hereby notifies Noteholders that, without payment of interest from
the Borrower to the Issuer pursuant to the terms of the Loan Agreement, the
Issuer was unable to pay its coupon due on the Interest Payment Date falling
on 19 December 2023 in an amount of US$717,129.94 and that this is an Event of
Default under Condition 13(a) of the Notes, which is continuing.

The Issuer hereby notifies Noteholders that, without repayment of the Loans by
the Borrower to the Issuer pursuant to the terms of the Loan Agreement, the
Issuer was unable to redeem the Notes due for redemption in respect of Series
2018-LL1 on 19 December 2023 for the nominal amount of US$31,960,000.00 and
that this is an Event of Default under Condition 13(a) of the Notes, which is
continuing.

Borrower proposal to amend terms

The Issuer hereby notifies the Noteholders that on 31 January 2024 the Issuer
and Note Trustee received from the Borrower the following proposal (set out in
full below) (the "Proposal"):

 

*********************

 

Mercury Equipment Rental LLC/

Mercury Car Rental LLC

102, Tasaheel Building

Al Qusais 4

Dubai

United Arab Emirates

 

To:

Linklease Finance PLC

1 Bartholomew Lane

London

EC2N 2AX

 

Woodside Corporate Services Limited

4(th) Floor

50 Mark Lane

London

EC3R 7QR

 

31 January 2024

 

BY EMAIL ONLY

 

Re: Linklease Finance PLC (the "Issuer") -

 

Proposal for Coupon and Principal Payment deferment for; Series 2018-LL1 being
up to USD$50,000,000 of 9.00% secured medium term notes due 2023, with ISIN:
GB00BGWL1326

("Series 2018-LL1") issued on 19 December 2018 (the "Bonds")

 

Dear Sirs,

 

Further to your recent RNS announcements in December 2023 and January 2024,
Mercury Equipment Rental LLC and Mercury Car Rental LLC (the "Borrowers")
hereby confirm that, jointly, they are requesting a proposal to allow for a
delay to the final coupon and principal payment of the Series 2018-LL1. The
delay is required to handle the complex unwinding of multiple high value
assets.

 

The Borrowers understand the impact that the amendments set out in this
proposal may have, however they believe that revising the payment obligations
of the Borrower and Issuer (as set out herein) will best allow for those
payment obligations to be met.

 

The Proposal

 

This letter is intended to set forth the following specific aims of:

 

1)    repaying Series 2018-LL1 Noteholders' principal on the date set out
below;

 

2)    paying Series 2018-LL1 final coupon amount on the date set out below;
and

 

3)    winding-down of Series 2018-LL1, under the Linklease Finance PLC MTN
programme (the "Programme").

 

Together these three aims shall be referred to as, the "Proposal".

 

To enable the Proposal's aims to occur, the Borrowers request that a
standstill agreement until 30 September 2024 is implemented, to allow for the
orderly disposal of the assets held by the Borrowers. At the same time, a
corresponding agreement for the same period will be sought between the Issuer
and Trustee.

 

Following approval of the Proposal, each of the Borrowers would enter into
approved amendments to the Loan Agreements, the Trust Deed and/or ancillary
documents necessary to allow for the formalisation of the extended terms.

 

Please note, at no point does this Proposal change the extent of the security
provision provided to the Noteholders, versus what Noteholders currently
retain under the transaction and security documents of Series 2018-LL1. Should
disposal of assets occur quicker than the end date of the standstill
agreements, then the Borrower shall settle obligations earlier.

 

Below is further information and background to help evaluate the Proposal -
and to facilitate a decision from the Trustee and Noteholders.

 

What is the commercial background to this Proposal?

 

In 2018, Linklease Finance PLC created a $500m MTN Secured Medium Term Note
Programme and issued its first series, LL1.

 

As Noteholders are aware, the Bonds raised funds to invest in SME leasing
equipment assets in the UAE and broader Middle East - with the asset portfolio
providing the security for the Bonds - and the regular lease payments enabling
the Borrowers the cashflow to meet their obligations (with 29 coupons
successfully paid across all the Programme's series to date).

 

The original strategy was to issue multiple series over a number of years to
allow the Borrower's business to grow and expand - and also crucially raise
money at a reducing cost of funding, as well as allow the sale of long-life
assets between series. Further series were issued in July 2020, October 2021
and December 2022.

 

However, due to the interest rate environment, the slow pace of raising funds
and the very high costs involved (commission levels and third-party agent
fees), the Borrowers do not see that the Programme has a strategic way
forward; and are requesting that an orderly closure of Series 2018-LL1 is
granted under this proposal.

 

Why is an extension needed?

 

As the Series 2018-LL1 funded assets, a large number of the lessees
successfully met their lease payments but it became increasingly apparent over
the last few years of economic activity that the required final/balloon
payments due and/or required would be a challenge for many. This presented a
risk to the amount that could be recovered. To protect the position of the
Borrowers, and ultimately the Noteholders, selective extensions to some lease
terms were required to avoid defaults by the lessees; which would have
eventually meant a subpar recovery. This has led to the Borrowers subsequently
choosing that an extended run-off period for some lessees is preferable to
recovering the equipment and selling at sub-par.

 

Furthermore, similar difficulties are likely to occur in the future, as other
series come to mature. Therefore, it has been decided to handle the issue now
and request the orderly winding down of each series (handled via
series-specific proposals). This action is considered the best approach to
ensure repayment of principal to the Noteholders.

 

Where we are now?

 

The leases across the Bonds are contractually bound to lessees under local law
lease agreements. However, a new active disposal strategy is now required so
the best value for each asset can be realised; and monies returned in the
optimal way.

 

Under this Proposal, the assets will be wound-down and either:

 

1)    sold back to the Lessee (most preferable for full recovery);

 

2)    recovered and sold on the secondary market (less likely to gain full
value; and have additional cost); or

 

3)    refinanced into other unrelated SPV vehicles.

 

This would be handled by the Borrowers strictly on an asset-by-asset basis.

 

At this stage, a straight forward enforcement option would see a significant
reduction in the recovery level achievable. Such action would likely erode
value, as fire sale pricing would likely apply, and in addition, the costs
connected to enforcing would have to come from the same pool of funds. In the
absence of default from the underlying lessees, recovery of the assets would
be extremely cumbersome and face legal challenge from the lessees.

 

Additionally, activation of transaction parties and agents in an enforcement
scenario will inevitably weaken any potential return for the Noteholders. This
is because the main transaction parties and agents sit higher in the
Post-Enforcement Priority of Payments and so take their own fees (and any
costs, charges, expenses or other liabilities they may incur), before any
unpaid interest and principal is returned to the Noteholders.

 

However, if this Proposal is accepted, the unknown costs of enforcements can
be avoided and as much value can be retained for the Noteholders before
extensive costs are applied.

 

What outcomes are being proposed and their timelines?

 

Following approval of this Proposal, the standstill agreement will be drafted
for Series 2018-LL1; 1) between each of the Borrowers and the Issuer; and 2)
back-to-back standstill agreements between the Issuer and the Trustee. The
standstill agreements shall be drafted with the aim to provide the time
requested by the Borrowers, to aid the repayment of principal and interest.

 

It will also be required, that the key Transaction Parties would enter into
amendments to the Loan Agreement, the Trust Deed and/or any ancillary
documents necessary to effectuate the following:

 

1)    a deferment of Series 2018-LL1 coupon, due on 19 December 2023, until
30 September 2024 and no further coupon payments;

 

2)    a deferment of Series 2018-LL1 redemption, due on 19 Dec 2023, until
30 September 2024; and

 

3)    other than as required to allow the Issuer to pay the above, the
removal of all further interest payment obligations of the Borrower (including
default interest).

 

All Series & Programme

 

1)    A new simplified asset security release process (to be discussed and
agreed with the Trustee and Security Agent) to be introduced. The Borrowers,
believe the current sale/release process may negate some opportunity to take
advantage of spot sales. Currently, the Borrowers need to obtain approval to
mandate the releases of each asset pledge. The Borrowers would like to make a
request to propose an alternative process in this regard.

 

2)    Upon above obligations being met for each series, the orderly closure
of the MTN programme.

 

The Transaction Parties and Noteholders are asked to acknowledge and agree
that any timescale and recovery amount may be subject to the market
environment that may require the Borrowers to best manage the sale of the
assets.

 

The Borrowers (and their affiliates) shall not receive any compensation for
the services provided hereunder but shall be reimbursed for third party fees
and professional service fees reasonably incurred (including legal, valuation
and accounting fees).

 

While market forces and complex disposal events have transpired to bring the
Borrowers to this position (like many other bonds in 2023), the Borrowers do
understand the effect on Noteholders and wish to sincerely apologise for the
impact while it resolves the situation.

 

We look forward to your support of the above Proposal.

 

Yours faithfully,

 

Authorised Signatory of:

Mercury Equipment Rental LLC/Mercury Car Rental LLC

 

 

*********************

The Borrower gave consent to the Issuer to publish the Proposal for the
Noteholders' information on 31 January 2024.

Neither the Issuer nor the Note Trustee make any recommendations and give no
legal or investment advice in respect of the Proposal or as to the Notes
generally.

Noteholders should take and rely on their own independent legal and financial
advice and may not rely on advice or information provided to the Note Trustee,
statements as to the legal position included in notices issued by the Issuer
or the Note Trustee relating to the Notes or otherwise or the views of the
Issuer or the Note Trustee expressed herein or otherwise.

Noteholders should note that the Proposal relates to the Notes only.

No Further Action by the Issuer or Note Trustee in respect of the Proposal

For the avoidance of doubt (but without prejudice to the exercise of any
discretion, power or authority which the Note Trustee is required, expressly
or impliedly, to exercise in or by reference to the interests of the
Noteholders under the Trust Deed), neither the Issuer nor the Note Trustee
currently intend to take any further action in respect of the Proposal without
the request or direction (including indemnification) of the Noteholders,
subject always to the terms and conditions of the Trust Deed. Noteholders are
reminded that the Note Trustee is under no obligation to take (or to instruct
the Security Trustee to take) any enforcement action unless instructed to do
so and indemnified and/or secured and/or prefunded to its satisfaction by the
Noteholders.

Notwithstanding the above, the Issuer and the Note Trustee intend to
facilitate Noteholders in their decision whether or not to accept the Proposal
through the passing or rejecting of Extraordinary Resolutions (pursuant to the
terms and conditions of the Notes). The Issuer will, at the appropriate time,
convene a meeting of Noteholders and/or arrange for written Extraordinary
Resolutions to be circulated to Noteholders for the purposes of approving or
rejecting the Proposal.

Information regarding the Proposal

Queries regarding the Proposal should be made promptly in writing to the
Calculation Agent, for onward communication to the Borrower, as follows:

ZigZag Management Experts LLC

Unit No:423 DMCC Business Centre

Level No 5 Jewellery & Gemplex 2

Dubai

United Arab Emirates
info@zigzag-me.com (mailto:info@zigzag-me.com)

Ref: 2018-LL1

The Calculation Agent shall not make any recommendations and shall give no
legal or investment advice in respect of the Proposal or as to the Notes
generally. The Calculation Agent shall use its reasonable endeavours to ensure
that the Borrower answers any queries raised by Noteholders but shall assume
no liability or duty of care to any party in so doing.

Noteholders should take and rely on their own independent legal and financial
advice and may not rely on advice or information provided by the Calculation
Agent.

Right to direct the Note Trustee

Pursuant to Condition 13 (Events of Default), if an Event of Default has
occurred and is continuing, the Note Trustee at its discretion may, and if so
requested in writing by the holders of at least one-quarter of the aggregate
principal amount of the Notes then outstanding or if so directed by an
Extraordinary Resolution of the Noteholders shall (subject to the Note Trustee
having been indemnified and/or secured and/or prefunded to its satisfaction),
give written notice to the Issuer (an "Acceleration Notice") declaring the
Notes to be immediately due and payable, whereupon they shall become
immediately due and payable at their Early Redemption Amount together with
accrued interest without further action or formality.

The Security shall become enforceable upon the service of an Acceleration
Notice by the Note Trustee on the Issuer.

Pursuant to Condition 18 (Enforcement), the Note Trustee may at any time at
its discretion and without notice, take such action under or in connection
with any of the Transaction Documents or the Notes or the Coupons as it may
think fit (including, without limitation, directing the Security Trustee to
take any action under or in connection with any of the Transaction Documents
or, at any time after the security has become enforceable, to take steps to
enforce the Security). The Note Trustee shall not be bound to take any such
action unless (i) it shall have been directed by an Extraordinary Resolution
of Noteholders or so requested in writing by the holders of at least
one-quarter in principal amount of the Notes then outstanding and (ii) it
shall have been indemnified and/or secured and/or prefunded to its
satisfaction. The Security Trustee shall not, and shall not be bound to, take
any such action unless (i) instructed by the Note Trustee and (ii) it shall
have been indemnified and/or secured and/or prefunded to its satisfaction.

No Further Action by Note Trustee

For the avoidance of doubt (but without prejudice to the exercise of any
discretion, power or authority which the Note Trustee is required, expressly
or impliedly, to exercise in or by reference to the interests of the
Noteholders under the Trust Deed), the Note Trustee will not take any further
action without the request or direction (including indemnification) of the
holders as described above.

Noteholder Contact

In order to facilitate communications with Noteholders, Noteholders should
make themselves known to the Note Trustee by contacting it by e-mail using the
contact details below.  Any such communication should make reference to the
Issuer and disclose the identity of the Noteholder, the aggregate nominal
amount of Notes held by the Noteholder and the details of the person(s) who
shall represent the Noteholder.

All Noteholders must verify their holdings when contacting the Note Trustee by
providing proof of holding (with a supporting custodian letter (if
applicable)), in each case disclosing the information set out above.

Persons who hold the Notes beneficially through CREST may also disclose their
identity to the Note Trustee in accordance with the above paragraph.  The
Note Trustee will require the Notes of any Noteholder that gives any direction
to the Note Trustee to be blocked in CREST.  Further instructions will be
provided in connection with this process on request.

Correspondence to the Note Trustee should be addressed to
chris.powell@woodsidesecretaries.co.uk
(mailto:chris.powell@woodsidesecretaries.co.uk)  and
john.rowe@woodsidesecretaries.co.uk
(mailto:john.rowe@woodsidesecretaries.co.uk)  with the ISIN of the Notes and
"Linklease Finance Plc" in the subject line of the email.

Queries regarding the circumstances surrounding this default may be addressed
to the Calculation Agent:

ZigZag Management Experts LLC

Unit No:423 DMCC Business Centre

Level No 5 Jewellery & Gemplex 2

Dubai

United Arab Emirates
info@zigzag-me.com (mailto:info@zigzag-me.com)

Ref: 2018-LL1

This notice is given by the Issuer.

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