REG - Digital 9 Infrastr. - Company Update

Digital 9 InfrastructureAnnouncement

28/02/2024 07:00

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RNS Number : 6963E  Digital 9 Infrastructure PLC  28 February 2024

28 February 2024

 

DIGITAL 9 INFRASTRUCTURE PLC

 

("D9", the "Company" or, together with its subsidiaries, the "Group")

 

COMPANY UPDATE

 

Further to the conclusion of the Strategic Review of the Company announced on
29 January 2024, the Board of Directors of Digital 9 Infrastructure plc (the
"Board") today provides an update on key initiatives to prepare for a proposed
managed wind-down of the Company (the "Managed Wind-Down").

 

Circular to Shareholders

 

The Board has received approval from the Financial Conduct Authority ("FCA")
and the Group's lenders under the Revolving Credit Facility ("RCF") to amend
the Company's investment objective and investment policy (together, the
"Investment Policy"), which is required to facilitate the Managed Wind-Down.

 

Accordingly, a circular was published by the Company today (the "Circular") to
convene a General Meeting of shareholders on 25 March 2024 (the "General
Meeting") at which it will seek approval from shareholders to amend the
Company's Investment Policy pursuant to FCA Listing Rule 15. Shareholders are
encouraged to review the Circular at the earliest possible opportunity and
results of the General Meeting will be announced on 25 March 2024.

 

Managed Wind-Down

 

Following the anticipated shareholder approval of the revised Investment
Policy, the Board will endeavour to realise all of the Company's assets in an
orderly manner that maximises value to shareholders. In the event that
shareholders do not approve the new proposed Investment Policy as set out in
the Circular, the Company will continue to operate under its current
investment policy.

 

Triple Point Investment Management LLP (the "Investment Manager") has
commenced sale preparations for each of the Company's wholly owned assets, as
announced on 29 January 2024. These will only be progressed following the
passing of the resolutions set out in the Circular ahead of launching what it
currently expects to be competitive sale processes later this year.

 

As noted in the Circular, it is difficult for the Board to provide a precise
date or certainty on the timeframe for the disposal of the Company's assets.
After careful consideration of Arqiva's plans and current market conditions,
the Board believes that the maximisation of the value of D9's stake in Arqiva
is likely to take longer to realise than the other investments held by the
Company. The Board aims to realise the Company's assets in an orderly manner
to maximise shareholder value whilst also being aware of the ongoing costs of
managing the Company's portfolio.

 

Financial Position

 

The Board continues to closely monitor the Group's financial position. As at
31 January 2024, the Company held total unrestricted cash and cash equivalents
of £13.8 million and had £1.2 million undrawn on its existing RCF.

 

Group debt in aggregate 1 , excluding portfolio company debt held by the Verne
Global group of companies ("Verne Global") and Arqiva Group, was £543.6
million comprising RCF debt of £373.8 million and the Arqiva Group Vendor
Loan Note ("VLN") of £169.8 million; the latter including accrued
payment-in-kind ("PIK") interest of £6.8 million.

 

The Group completed the acquisition of a 48.02% equity stake in Arqiva on 18
October 2022 for approximately £463 million, following the granting of
regulatory approval. £300 million of the acquisition was funded by a drawdown
on the Group's RCF and £163 million through a non-recourse VLN, which matures
in 2029 and is listed on the International Stock Exchange
(https://tisegroup.com/market/securities/14809
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Ftisegroup.com%2Fmarket%2Fsecurities%2F14809&data=05%7C02%7Cluke.cheshire%40triplepoint.co.uk%7C8bb12a5b77064209f96608dc30cf427e%7Ccde8812e0dbd4dc3b4463655beb81efb%7C0%7C0%7C638438913945687659%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=8lASKaqGD5kkWdvqPvDQIniPeKERMok72ghBNmIKKC0%3D&reserved=0)
). Whilst the VLN is non-recourse to the Company, in the event of a default,
recourse is limited to the Company's shares in Arqiva Group Limited. This
charge is registered at Companies House against D9 Wireless Midco 1 Limited, a
subsidiary of the Company.

 

As previously disclosed, upon receipt of the initial purchase price from the
sale of the Verne Global, the Company intends to pay down the majority of the
Group's RCF. As disclosed in the Circular, and as part of the Managed
Wind-Down, the Board expects to use proceeds from future asset realisations to
repay the amount of the RCF that will be outstanding following completion of
the sale of 100 per cent of Verne Global (excluding the potential earn-out
payment).

 

Pending closing of the Verne Transaction, the Company announced on 15 February
2024 the signing of its first increase (the "Accordion Facility") under the
terms of Verne Global's existing green term loan facility for additional US
$17 million of financing. This will help fund Verne Global's growth capital
expenditure pipeline while the Company awaits the closing of the sale of the
Verne Global group of companies to funds managed or advised by Ardian France
SA or any of its affiliates (the "Verne Global Sale"), as previously announced
by the Company on 27 November 2023, and has strengthened Verne Global's cash
position.

 

As announced on 8 February 2024, the Board continues to monitor the process
related to the merger control approval in Iceland, and in relation to closing
conditions precedent generally, and will provide an update to shareholders in
due course.

 

Independent Valuation

 

As announced on 5 February 2024, the Board has mandated an independent valuer
to guide the Independent Non-Executive Directors' assessment of the fair value
of portfolio assets under IFRS, including the Verne Global potential earn-out
payment of up to US $135 million. The independent valuation process is
ongoing, and the results are expected to be provided to the Board in due
course.

 

Annual Report and Accounts

 

In order to accommodate the outcome of the General Meeting, and the
anticipated timing of the Verne Transaction's closing, the Board expects the
Company to publish its audited Annual Report and Accounts including the NAV
for the year ended 31 December 2023 prior to the end of April 2024.

 

Today the Company has also provided an unaudited Portfolio Trading Update for
the six-month period ending 31 December 2023, in which the Investment Manager
noted the portfolio companies continued to perform in line with expectations
during the period. Shareholders are encouraged to refer to the Portfolio
Trading Update for more details.

 

Investment Management Agreement

 

As announced on 29 January 2024, the Company advised the Investment Manager
that, subject to any required consents, it presently intends to give notice to
terminate the investment management agreement, with any such notice of
termination to be issued on the later of 31 March 2024 or the closing of the
Verne Transaction. The termination will take effect no less than twelve months
following the Notice Date.

 

The Company is actively exploring with the Investment Manager whether the
Company and the Investment Manager might agree revised commercial terms that
would be in the best interests of the Company and its Shareholders given its
future needs in the context of the proposed Managed Wind Down prior to any
notice of termination taking effect.

 

Board Composition

 

All of the Company's current Independent Non-Executive Directors will stand
for re-election at the Company's upcoming AGM in May 2024.

 

Shareholder Engagement

 

The Board intends to maintain an active dialogue with its shareholders and
subject to shareholder approval of the resolutions in the Circular, further
Company updates will be provided as key initiatives are progressed.

 

ENDS.

 

Notes to Editors

 

Capitalised terms used but not defined in this announcement shall have the
same meaning as given in prior announcements by the Company. This Company
Update should be read in conjunction with the 'Portfolio Trading Update' and
'Proposed change of investment objective and policy to facilitate a managed
wind-down of the Company and Notice of General Meeting' announcements issued
today, 28 February 2024.

 

Contacts

 

   Triple Point Investment Management LLP           +44 (0)20 7201 8989

   (Investment Manager)                             D9contact@triplepoint.co.uk

   Diego Massidda

   Ben Beaton

   Arnaud Jaguin
   J.P. Morgan Cazenove (Joint Corporate Broker)    +44 (0)20 7742 4000

   William Simmonds

   Jérémie Birnbaum
   Peel Hunt (Joint Corporate Broker)               +44 (0) 20 7418 8900

   Luke Simpson

   Huw Jeremy
   FTI Consulting (Communications Adviser)          dgi9@fticonsulting.com

   Mitch Barltrop                                   +44 (0) 7807 296 032

   Maxime Lopes                                     +44 (0) 7890 896 777

 

 

About Digital 9 Infrastructure plc:

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the
London Stock Exchange and a constituent of the FTSE All-Share, with the ticker
DGI9. The Company invests in the infrastructure of the internet that underpins
the world's digital economy: digital infrastructure.

The Investment Manager is Triple Point Investment Management LLP ("Triple
Point") which is authorised and regulated by the Financial Conduct Authority.
For more information on the Investment Manager please
visit www.triplepoint.co.uk
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Furldefense.com%2Fv3%2F__http%3A%2Fwww.triplepoint.co.uk__%3B!!O2kDR7mm-zSJ!q-IhiRmOFrs2QYD7gmr9EcM8ukutg1_xde5Fce9GgBpHkvhSc3nlYhW7glbEiZG--1yRCrGc2K4WAjub3ANF%24&data=05%7C01%7CHelen.Richardson%40triplepoint.co.uk%7C736257c2b4244d9b148e08dbce910edc%7Ccde8812e0dbd4dc3b4463655beb81efb%7C0%7C0%7C638330894771285360%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=2SpCRgIybR8ARfciJBsE4bOmxNcDDFvRX9K9FehSEto%3D&reserved=0)
. For more information, please visit www.d9infrastructure.com
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Furldefense.com%2Fv3%2F__http%3A%2Fwww.d9infrastructure.com__%3B!!O2kDR7mm-zSJ!q-IhiRmOFrs2QYD7gmr9EcM8ukutg1_xde5Fce9GgBpHkvhSc3nlYhW7glbEiZG--1yRCrGc2K4WArD5RA1-%24&data=05%7C01%7CHelen.Richardson%40triplepoint.co.uk%7C736257c2b4244d9b148e08dbce910edc%7Ccde8812e0dbd4dc3b4463655beb81efb%7C0%7C0%7C638330894771285360%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=%2Fd%2FuhyGQHTb%2Ft4t2e4NW5UNYk%2FYmW1xyb%2B%2BalYftf5I%3D&reserved=0)
.

 1  Group includes D9 Group and portfolio companies, pro-rata D9 ownership.
Unaudited figures as provided by the Investment Manager.

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