REG - Digital 9 Infrastr. - Proposed Investment Policy change & Notice of GM

Digital 9 InfrastructureAnnouncement

28/02/2024 07:00

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RNS Number : 6970E  Digital 9 Infrastructure PLC  28 February 2024

 28 February 2024

 

DIGITAL 9 INFRASTRUCTURE PLC

 

("D9" or the "Company")

 

Proposed change of investment objective and policy to facilitate a managed
wind-down of the Company

and

Notice of General Meeting

 

As announced by the Company on 29 January 2024, the Board of Directors of the
Company (the "Board" or the "Directors") has decided to put forward details
for the implementation of a managed wind-down of the Company (the "Managed
Wind-Down").

A circular (the "Circular") to convene a general meeting (the "General
Meeting") containing details of the proposals in respect of the Managed
Wind-Down is expected to be published today and a copy of the Circular 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 at www.d9infrastructure.com
(http://www.d9infrastructure.com) and posted to the Company's shareholders
("Shareholders") shortly.

Rationale for and overview of the Managed Wind-Down

As announced on 29 January 2024, following careful consideration of the
options available to the Company, and after consultation with its financial
advisers, and taking into account feedback received from a large number of
Shareholders and the position of the lenders to the Company's group's £375
million revolving credit facility (the "RCF"), the Board has determined that
it would be in the best interests of the Company and Shareholders, to pursue a
managed wind-down of the Company.

The Board proposes to implement the Managed Wind-Down by pursuing a disposal
process for the assets of the Company at the appropriate time, namely Aqua
Comms, EMIC-1, Elio Networks and SeaEdge UK1 (being the "Wholly-Owned Assets")
and Arqiva.  At the current time, the Board's high-level approach to
realising each of the investments is set out below:

a)    Wholly-Owned Assets: The Board intends to commence sale preparations
for each of the Company's Wholly-Owned Assets immediately following the
passing of the resolution to be proposed at the General Meeting of the Company
("Resolution") ahead of launching what it currently expects to be competitive
sale processes later this year. The Board has instructed advisers to assist
with the sale process relating to Aqua Comms and is mandating advisers to
assist with the preparation of the other sale processes.

b)    Arqiva: As part of the strategic review process initiated by the
Company and announced on 27 November 2023 (the "Strategic Review"), various
options for realising the stake in Arqiva have been considered on a
preliminary basis by the Board. After careful consideration of Arqiva's plans
and current market conditions, the Board believes that the maximisation of the
value of the Company's stake in Arqiva is likely to take longer to realise
than the other investments held by the Company.  As such, while the Company
will continue to consider and be open to all options for Arqiva which are
value-accretive to Shareholders, the Board has decided to defer launching a
sale process for the Company's stake in Arqiva for the time being. The Board
will continue to explore various options, including but not limited to the
possible start of a sale process once the plan intended to fully realise the
embedded value in the asset is more advanced.

The disposal of each of these assets, and their supervision pending disposal,
is expected to be carried out either by a third party manager approved by the
Board, by members of the Board itself or possibly, insofar as the Board
considers it appropriate, a combination of those arrangements.

Notwithstanding the above, the strategy for each of the sales contemplated
will be flexible and may need to be altered to reflect changes in the
circumstances of a particular investment or in the prevailing market
conditions.  The Board will meet regularly to review the progress of the
realisation of each of the assets.  Any disposal will be subject to the
Board's approval.

It is difficult for the Board to provide a precise date or certainty on the
timeframe for the disposal of the Company's assets.  However, 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.

New investment objective and policy

The implementation of the Managed Wind-Down will require amendments to the
existing investment objective and policy of the Company (the "Existing
Investment Policy"). The amendments are considered a material change to the
Existing Investment Policy, which requires the consent of Shareholders in
accordance with the Listing Rules of the Financial Conduct Authority (the
"Listing Rules"). The Company is therefore seeking Shareholder approval to
amend the Existing Investment Policy.

The Board is proposing that the Company's investment objective and investment
policy be restated as follows:

Investment Objective

The Company will be managed, either by a third party investment manager or
internally by the Company's board of directors,  with the intention of
realising all the remaining assets in the Portfolio, in an orderly manner with
a view to ultimately returning available cash to Shareholders following the
repayment and cancellation of the Company's revolving credit facility ("RCF")
from the proceeds of the assets realised pursuant to the Investment Policy.

Investment Policy

The assets of the Company will be realised in an orderly manner, returning
cash to Shareholders at such times and in such manner (which may be by way of
direct buybacks, tender offers, dividends or any other form of return) as the
Board may, in its absolute discretion, determine. The Board intends that the
proceeds of any asset realisations will be used to repay and cancel the RCF
before any such proceeds are distributed to shareholders or used to meet other
outstanding indebtedness of the Company (including the non-recourse
indebtedness to the vendors of the Company's Arqiva asset, issued by way of a
vendor loan note which the Company may repay or transfer to a future buyer of
the Arqiva asset). The Board will endeavour to realise all of the Company's
investments in a manner that achieves a balance between maximising the net
value received from those investments and making timely returns to
Shareholders. The Company will cease to make any new investments (including
any follow-on investments) or to undertake capital expenditure, except with
the prior written consent of the Board and where, in the opinion of the Board,
in its absolute discretion:

a) failure to make the investment or capital expenditure would result in a
breach of contract or applicable law or regulation by the Company, any member
of its group or any vehicle through which it holds its investments; or

b) the investment or capital expenditure is considered necessary to protect or
enhance the value of any existing investment or to facilitate an orderly
disposal, any such investment or capital expenditure being a "Permitted
Investment".

Subject to the ability of the Company to make Permitted Investments, any cash
received by the Company as part of the realisation process prior to its
distribution to Shareholders will be held by the Company as cash in Sterling
on deposit and/or as cash equivalents.

Borrowing and hedging

The Company may utilise borrowings for short term liquidity purposes. The
Company may also, from time to time, use borrowing for investment purposes on
a short term basis where it expects to repay those borrowings from realisation
of investments. Gearing represented by borrowings will not exceed 20 per cent.
of Net Asset Value calculated at the time of drawdown.

The Company may use derivatives for hedging as well as for efficient portfolio
management. Any such hedging transactions will not be undertaken for
speculative purposes.

Shareholder returns

The Board expects to use proceeds from the Managed Wind-Down to repay the
amount of the RCF that will be outstanding following completion of the sale of
100 per cent. of the Verne Global group of companies (the "Verne
Transaction"). Once the RCF has been repaid, the Board will review the
potential allocation of any remaining proceeds between the repayment of the
indebtedness to the vendor in respect of the Company's acquisition of its
interest in Arqiva in October 2022 and distributions to Shareholders. No
further dividend distributions are planned in respect of the year ended 31
December 2023 and none are foreseen in the medium term. To the extent
possible, it is intended that any cash distributions to Shareholders will take
the form of returns of capital.

Further, the Company's liquidity constraints prevent it from being able to
give consideration to the implementation of a programme to buy back shares in
the market at this stage.

Listing and Jersey regulatory status during the Managed Wind-Down

During the Managed Wind-Down, the Company will continue to be a "listed fund"
regulated by the Jersey Financial Services Commission, and it will continue to
comply with all of the investment restrictions imposed by the Listing Rules in
order to maintain the admission of the Company's shares to listing on the
Official List of the FCA, under Chapter 15 of the Listing Rules (or such
successor to Chapter 15 as may be in place following the conclusion of the
FCA's Primary Markets Effectiveness Review). There are however costs involved
with the Company maintaining its listing and Jersey regulatory status, and the
Board will monitor and review the cost efficiency and practicalities of
maintaining the same on an ongoing basis during the course of the Managed
Wind-Down. The Company will also seek to continue to conduct its affairs so as
to qualify as an investment trust for the purposes of section 1158 of the
Corporation Tax Act 2010 for as long as the Board believes such qualification
to be practicable and cost-effective.

The Board may reconsider the listing and Jersey regulatory status of the
Company alongside the completion of the sale of the Company's Wholly-Owned
Assets having regard to the proposed strategy for Arqiva at that time.

On an ongoing basis during the Managed Wind-Down, the Board may also consider
whether it would be appropriate for the Company to appoint an alternative
investment fund manager or potentially become a self-managed alternative
investment fund, should the Company's relationship with the Investment Manager
be terminated as referred to below.

Relationship with the Investment Manager

On 29 January 2024, the Company announced its intention to give notice to
terminate the investment management agreement (the "IMA") with the Investment
Manager under the provision in the IMA which states that "The Company or the
Investment Manager shall be entitled to terminate this Agreement upon giving
to the other party not less than twelve (12) months' prior written notice of
termination, such notice not to expire before the fourth anniversary of the
date of Admission." The fourth anniversary of the date of admission is 31
March 2025. The Company has advised the Investment Manager that, subject to
any required consents, it presently intends to give notice to terminate the
IMA under the above provision, with any such notice of termination to be
issued on the later of 31 March 2024 or the closing of the Verne Transaction
(the "Notice Date").

Pending 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 other matters set
out in the Circular.

NAV reporting

If the Resolution is approved by Shareholders, the Board also proposes during
the Managed Wind-Down to continue to publish the Company's net asset value on
a semi-annual basis and monthly factsheets and portfolio updates in a
shortened form summarising the current portfolio and other relevant
information, as considered appropriate.

The Board will keep this process under review in light of the diminishing size
of the Company's portfolio during the course of the Managed Wind-Down.

Benefits of the New Investment Policy

The Directors believe, having taken into account the views expressed by
Shareholders, that the proposed investment objective and policy for the
Company as set out in this announcement and the Circular (the "New Investment
Policy") is in the best interests of the Company's Shareholders as a whole
because:

a)    implementing a managed and orderly realisation of assets, rather than
seeking an immediate sale of the portfolio or the status quo, is expected to
strengthen the financial position of the Company by maximising the value to be
realised on the sale of the Company's assets;

b)    the Directors believe that the realisation process would be the best
way to maximise Shareholder value; and

c)    maintaining the listing of the Shares while the substantial majority
of the Company's assets are realised will, subject to market conditions,
enable certain Shareholders and prospective investors to continue to be able
to trade Shares in this period and meet their own investment restrictions, for
example where they are required to hold listed securities or instruments with
daily liquidity.

Accordingly, the Directors are recommending that Shareholders vote in favour
of the Resolution.

Consequences of the Resolution not being approved

In the event that the Resolution to be proposed at the General Meeting
relating to the Resolution is not passed by the Shareholders, the Company will
continue to operate under the Existing Investment Policy and the articles of
association of the Company. The Directors would in this scenario consider
proposals for the future of the Company and update the Shareholders
accordingly.

General Meeting

The Resolution is subject to Shareholder approval. The Circular contains a
notice convening the General Meeting of the Company to be held at the offices
of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL at 11:00 on 25 March 2024
setting out the full text of the Resolution. A form of proxy to be used in
connection with the General Meeting is enclosed with the Circular.

At the General Meeting, the Resolution will be proposed as an ordinary
resolution (which, to be passed, requires more than half of the total number
of votes cast on the Resolution by Shareholders being entitled to vote (by
proxy or in person) to be cast in favour) so as to duly sanction the changes
to the Existing Investment Policy.

The Board considers that the passing of the Resolution is in the best
interests of the Company and its Shareholders as a whole. Accordingly, the
Board unanimously recommends that Shareholders vote in favour of the
Resolution to be proposed at the General Meeting, as the directors intend to
do in respect of their own beneficial holdings of Shares which, in aggregate,
amount to 582,031 Shares representing approximately 0.067 per cent. of the
Company's issued share capital (no Shares are held in treasury).

The Board therefore strongly recommend that Shareholders VOTE IN FAVOUR of the
Resolution being proposed at the General Meeting.

Expected timetable of events

The anticipated dates and sequence of events relating to the implementation of
the Managed Wind-Down are set out below:

 Date of publication of the Circular and Notice of General                                                                                                         28 February 2024
 Meeting
 Latest time and date for receipt of Forms of Proxy or transmission of CREST                                                                                        11.00 a.m. on 21 March 2024
 proxy Instructions (as applicable)
 General Meeting                                                                                                                                                    11.00 a.m. on 25 March 2024
 Announcement of results of General Meeting                                                                                                                         25 March 2024

 

ENDS

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

   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

 

 

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, 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)
.

 

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