REG - Blackstone Loan Fin - Notice of Extraordinary General Meeting

Blackstone Loan FinancingAnnouncement

25/08/2023 07:00

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RNS Number : 4046K  Blackstone Loan Financing Limited  25 August 2023

25 August 2023

Blackstone Loan Financing Limited

(the "Company")

Proposed managed wind-down of the Company, associated amendments to the
investment objective and policy and changes to the Company's share capital

Publication of Circular and Notice of Extraordinary General Meeting

 

As announced by the Company on 23 June 2023, and after extensive consultation
with its advisers, the board of directors (the "Board") has decided to put
forward proposals to shareholders for the implementation of a managed
wind-down of the Company (the "Managed Wind-down").

A circular (the "Circular") to convene an extraordinary general meeting (the
"Extraordinary General Meeting" or "EGM") containing details of the proposals
in respect of the Managed Wind-down is expected to be published today and a
copy of will be submitted to the National Storage Mechanism and will shortly
be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The Circular will
also be available on the Company's website:
https://www.blackstone.com/fund/bglfln-blackstone-loan-financing-limited/
(https://www.blackstone.com/fund/bglfln-blackstone-loan-financing-limited/) .
This announcement provides a summary of the information set out in the
Circular and Shareholders should refer to the Circular for full details of the
Proposals.

 

Background to the Managed Wind-down

The performance of the Company has proved resilient over its nine-year life,
which has spanned a variety of market conditions. Its strong performance has
been supported by its underlying investments, which have provided shareholders
with uninterrupted cashflows and high current income, despite experiencing
many periods of volatility. Since inception to 30 June 2023, the Company's
annualised total return on a NAV basis is 7.86 per cent.

However, in formulating the Managed Wind-down proposals, the Board took into
account a number of factors, including the prevailing discount to Net Asset
Value at which the company's ordinary shares (the "Shares") have been trading,
the market capitalisation of the Company, the liquidity of the Shares and the
Company's structure. Furthermore, while the Company's share price continues to
trade at a discount to NAV per Share, reinvestment into the Blackstone
Corporate Funding DAC ("BCF") portfolio at NAV is not accretive to BGLF
Shareholders and the ability to grow through further share issuance is
limited. The Board therefore determined that an orderly return of the net
proceeds of the realisation of the Company's investments on an available funds
basis and subject to certain applicable regulatory and contractual constraints
(as further described in the Circular) will be in the best interest of its
Shareholders as a whole.

In order to do this, the Company is seeking Shareholder approval by way of
ordinary resolution (the "Resolution") to:

·      amend the Investment Objective and Policy to facilitate the
Managed Wind-down;

·    convert the Shares into ordinary shares redeemable at the option of
the Company ("Redeemable Shares"), to allow for the proceeds of realising
assets in accordance with the Managed Wind-down to be returned to Shareholders
by way of pro rata compulsory redemptions of the Redeemable Shares; and

·   enable the issue of a share in a new non-redeemable share class in the
Company with appropriately deferred rights (the "Deferred Share") to ensure
compliance with a mandatory requirement of the Companies (Jersey) Law 1991,

(together, the "Proposals"). Further details relating to the Proposals
outlined above are set out in the Circular published today.

Details of the proposed Managed Wind-down

The Company obtains its investment exposure via Blackstone Corporate Funding
DAC ("BCF"). BCF is an Irish designated activity company established on 16
April 2014 which, amongst other things, provides risk retention capital
solutions for certain European CLOs managed by Blackstone Ireland Limited (the
"Investment Adviser") and US CLOs managed by Blackstone CLO Management LLC
("BCM").

BCF invests directly and indirectly in a portfolio predominantly made up of
senior secured loans and bonds, CLO loan warehouses and CLO securities
(including, in relation to the European CLOs for which BCF acts as
"originator" and certain US CLOs for which BCM acts as "manager-originator",
in each case for purposes of the EU/UK risk retention rules, up to 100 per
cent. of the total CLO equity tranche and/or CLO securities in an amount equal
to 5 per cent. of each tranche of the relevant CLO).

The funding sources of BCF include profit participating notes issued via a
profit participating note issuing and purchase agreement dated 1 July 2014 (as
amended and restated from time-to-time) between, amongst others, BCF, the
Company and LuxCo (a wholly owned subsidiary of the Company) (the "LuxCo
PPNIPA", and the profit participating notes issued thereunder, the "LuxCo
PPNs"). The LuxCo PPNs rank subordinate to certain other obligations of BCF.

The LuxCo PPNs are subscribed for by LuxCo which, in turn, provides the
Company with exposure to the portfolio of BCF through the issue of cash
settlement warrants to the Company.

The Board proposes to implement the Managed Wind-down by returning to
Shareholders the net proceeds from the realisation of the Company's investment
in BCF in an orderly manner by way of the compulsory redemption of Redeemable
Shares (in respect of proceeds received from BCF attributable to the early
redemption, maturity or sale of underlying investments or pursuant to a
disposal for cash of the LuxCo PPNs). The Company also intends to continue to
pay dividends to Shareholders (in respect of any other amounts other than
redemption proceeds deemed to be received from BCF) provided the Company
generates sufficient income (see below for further information on dividends).

As part of the Managed Wind-down, the Company (through LuxCo) will deliver a
redemption request in accordance with the terms of the LuxCo PPNs. Such
redemption request will take effect only after expiry of the requisite notice
period of at least 90 days as set out in the terms of the LuxCo PPNs.
Consequently, BCF will continue its investment activity as normal (including
by participating in the issue of new CLOs) during such period up until the
redemption request takes effect (expected to be in late December 2023). At the
expiry of the notice period, a pro rata portion of the assets and investments
of BCF (including its indirect investments held through BCM) will be placed
into a redemption pool (the "Redemption Pool"). As the assets in the
Redemption Pool redeem or are realised, the proceeds thereof, net of any
actual or reasonably anticipated liabilities, costs, expenses, debt service of
BCF and BCM and LuxCo and any actual or reasonably anticipated costs,
liabilities, margin or collateral requirements related to hedging transactions
entered into by BCF, will be utilised to redeem the LuxCo PPNs.

The availability of such proceeds will be subject to, amongst other things,
the regulatory and contractual risk retention requirements which apply to BCF
and BCM (which include a requirement that BCF reserves capital for the
purchase of assets which it will then transfer to invested CLOs in order to
ensure, on an on-going basis, that it has provided the majority of the assets
of each CLO, as required from a regulatory perspective) and the occurrence of
the redemption of the CLO investments held by BCF and BCM, which will not
occur until the final redemption or refinancing in whole (also known as a "CLO
Reset") of the relevant CLOs. Shareholders should note that, upon a CLO Reset,
BGLF will not instruct BCF to reinvest its capital in the Redemption Pool into
the relevant CLO, regardless of any contractual entitlement it may have to do
so.

Having consulted with the Investment Adviser, the Board anticipates that the
redemption of the CLO investments held in BCF and BCM, which may include CLO
investments held in excess of regulatory risk retention requirements, will
require a period of at least 7 years. However, this is indicative only and it
should not be considered a guarantee of the Company's actual portfolio
liquidity profile. Due to the illiquid nature of the assets to which the
Company is indirectly exposed, there can be no certainty of the length of time
it may take to complete the Managed Wind-down. In certain circumstances there
may be a CLO reset at an earlier date, providing proceeds for the redemption
of the LuxCo PPNs. However, there is no guarantee as to this eventuality as it
is based on, amongst other commercial factors, market conditions and the
availability of refinancing capital.

Under the Resolution, the Board is seeking Shareholder approval to convert the
Shares, which are currently non-redeemable, into Redeemable Shares, so as to
better facilitate the return of capital to Shareholders pursuant to the
Managed Wind-down.

Under the Proposals, the return to Shareholders of the net proceeds realised
pursuant to the Managed Wind-down would be effected primarily by way of the
compulsory redemptions of Redeemable Shares. In respect of each such round of
redemptions, a given percentage of the Redeemable Shares in issue would be
redeemed from all Shareholders (pro rata between the holders of such shares as
at the relevant Redemption Record Time) on the applicable Redemption Date for
the applicable Redemption Price per share, each as determined at the
Directors' sole discretion.

Shareholders wishing to receive redemption payments in Sterling should note
that a separate redemption currency election mandate form will need to be
submitted in respect of each Redemption Date (please see the Circular
published today for further details).

Shareholders should also note that, following the issuance of the Deferred
Share, the Company will no longer meet the requirements for being an "excluded
security" for the purposes of the FCA's definition of "non-mainstream pooled
investments". Accordingly, the promotion of the Redeemable Shares will be
subject to the FCA's restriction on the promotion of non-mass market
investments.

 

Amendments to Investment Objective and Policy

For the Company to follow the Managed Wind-down process, it will be necessary
to amend the Company's Investment Objective and Policy. If the Proposals are
approved by Shareholders, the Company's revised Investment Objective will be
to realise all existing assets in the Company's portfolio in an orderly
manner, and the revised Investment Policy will be to effect an orderly
realisation of its assets by redeeming and/or by disposing for cash the profit
participating instruments issued by BCF and held by the Company (indirectly
through a subsidiary). The full text of the proposed Investment Objective and
Policy is in the Circular published today.

 

Dividends

If the Resolution is approved at the EGM (or any adjournment thereof):

·   in respect of the financial year ending 31 December 2023, the Board
intends to continue with the previously communicated dividend policy; and

·    in respect of the financial year commencing 1 January 2024 and
thereafter, the Board intends (following such consultation with its advisers
as it may consider appropriate) to continue to distribute as dividends the
interest payments (and any other amounts other than redemption proceeds)
deemed to be received from BCF during the Managed Wind-down on a quarterly
basis, having regard to any amounts which the Board deem prudent to retain.
However, as the Company's underlying assets are realised over time and the
Portfolio diminishes in size, the Board, in consultation with the Investment
Adviser, may decide it is in the best interests of Shareholders to cease
payments of dividends and to use all proceeds received from BCF for the
redemption of the Redeemable Shares and the return of capital to shareholders.

Should the Managed Wind-down be approved by Shareholders, the Board intends to
terminate the Company's dividend reinvestment plan ('DRIP'), with confirmation
of such termination to be announced by the Company in due course.

 

Extraordinary General Meeting

To become effective, the Resolution must be approved by a simple majority of
the votes cast by Shareholders who, being entitled to vote, are present in
person or by proxy at the EGM. The Notice includes the full text of the
Resolution.

The formal Notice convening the Extraordinary General Meeting, to be held at
the offices of BNP Paribas S.A. Jersey Branch, IFC 1, The Esplanade, St
Helier, Jersey JE1 4BP at 10 a.m. on 15 September 2023, is set out in Part II
of the Circular. The Notice includes the full text of the Resolution.

 Action to be taken by Shareholders

Shareholders are requested to return a Proxy Appointment by one of the
following methods: (i) in hard copy form by post, by courier or by hand to
Link Group, Central Square, 29 Wellington St., Leeds, LS1 4DL; (ii) via the
Registrar's app LinkVote+ which can be downloaded on the Apple App Store or
Google Play; (iii) online via www.signalshares.com; or (iv) in the case of
CREST members, by utilising the CREST electronic Proxy Appointment service, in
each case so as to be received by Link Group as soon as possible and, in any
event, not less than 48 hours before the time at which the Extraordinary
General Meeting (or any adjournment thereof) is to begin. In calculating such
48 hour period, no account shall be taken of any part of a day that is not a
Business Day. Completion of a Proxy Appointment will not preclude a
Shareholder from attending, speaking and voting in person at the Extraordinary
General Meeting.

 

Recommendation

The Board considers that the Proposals are in the best interests of the
Shareholders taken as a whole and accordingly, the Board unanimously
recommends that Shareholders vote in favour of the Resolution at the
Extraordinary General Meeting. The members of the Board who are Shareholders
intend to vote in favour of the Resolution at the Extraordinary General
Meeting in respect of their own holdings of Ordinary Shares amounting to
791,593 Ordinary Shares in aggregate, representing approximately 0.1788 per
cent. of the issued share capital of the Company. The Investment Adviser has
conveyed to the Board that it is supportive of the proposals.

Expected timetable of events

The anticipated dates and sequence of events relating to the implementation of
the Proposals are set out below:

 Latest time and date for receipt of Proxy Appointments for the Extraordinary   10 a.m. on 13 September 2023
 General Meeting
 Record date for participation and voting at the Extraordinary General Meeting  5.00 p.m. on 13 September 2023
 Extraordinary General Meeting                                                  10 a.m. on 15 September 2023
 Announcement of result of the Extraordinary General Meeting                    15 September 2023

Capitalised terms used but not defined in this announcement will have the same
meaning as set out in the Circular.

 

Enquiries:

 

 BNP Paribas                                          01534 709189 / 813967

 Singer Capital Markets                               020 7496 3000

 James Maxwell / Alaina Wong (Corporate Finance)

 Alan Geeves / Sam Greatrex (Sales)

                                                      020 3100 0000

 Winterflood Investment Trusts

 Neil Langford / Haris Khawaja (Corporate Finance)

 Darren Willis (Sales)

 

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