GCP Asset Backed Inc GCP Asst Bckd - GABC - Strategic Review Update
29/01/2024 10:55
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RNS Number : 2254B GCP Asset Backed Income Fund Ltd 29 January 2024
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
29 January 2024
GCP Asset Backed Income Fund Limited
("GABI" or the "Company")
LEI: 213800FBBZCQMP73A815
Strategic Review Update
On 13 December 2023, the Company announced that the Board would be commencing
a strategic review to consider how it may best deliver value to shareholders
(the "Strategic Review" and the "Strategic Review Announcement").
The Company today publishes further information relating to its portfolio and
the Strategic Review, as set out below. In addition, an updated portfolio
report in respect of the Company's loan portfolio as at 31 December 2023 (the
"Portfolio Report") has been made available by Gravis Capital Management Ltd
(the "Investment Manager") in connection with the Strategic Review on the
Company's website at
https://www.graviscapital.com/funds/gabi-strategic-review/literature.
Portfolio repayment profile
As at 31 December 2023, the Company was invested in a portfolio of 42 asset
backed loans with a weighted average loan duration of 4.3 years (the
"Portfolio"). At that date, the principal value of the Portfolio and the net
asset value of the Company (the "NAV") were £374.6 million and £396.7
million, respectively.
The current contracted cash repayment profile of the Portfolio, including the
repayment of historic and future forecast capitalised interest, and after
provisions for certain Problem or Watchlist Loans as advised by the Investment
Manager, is shown below.
Years to maturity Repayments in period (£m) % of total repayments (cumulative) Repayments of Watchlist or Problem loans in period (£m)
0 to 1 years 187.3 * 48% 25.5
1 to 2 years 12.2 51% 0.6
2 to 4 years 71.4 69% 1.5
4 to 10 years 55.2 84% 14.1
10 to 20 years 57.5 98% 16.4
20+ years 6.2 100% 0
* Includes the assumed receipt of £32.5m of repayments that were due on or
prior to 31 December 2023, of which £0.8m has now been received by the
Company and the remainder of which includes 3 Problem or Watchlist Loans (as
further described below) and reflects the Board's current expectation, as
advised by the Investment Manager, of the timing and quantum of the repayment
of such loans
All figures relating to the Portfolio and/or valuations are as at 31 December
2023.
Shareholders should also note the following in relation to the information set
out above:
· There can be no guarantee that loans will be repaid in accordance
with contracted terms or that loans that were scheduled for repayment in 2023
will be repaid within the period assumed above. Borrowers may not repay on
time (or at all) and their ability to service debts may be impaired from time
to time;
· Borrowers may elect to repay loans before contractual maturity (in
full or in part) and may exercise permitted loan extensions, and in order to
maximise shareholder value the Company may extend the term of a loan at the
Board's discretion;
· There can be no assurance that the current valuation of the loans to
which the Company is exposed can be achieved;
· Loans made by the Company to 7 borrowers and representing 11.4% by
value of the NAV (£45.1 million) have been categorised by the Investment
Manager as Problem or Watchlist Loans, based on meeting at least one of the
following tests: (i) a likelihood that future interest and principal payments
will not be serviced; (ii) debt service is outstanding for more than 6 months;
and/or (iii) a persistent covenant breach. The circumstances around such loans
have been considered by the Board and Mazars, the Company's independent
valuation agent, in the valuation of such loans in the quarterly valuation
process and associated NAV;
· Across the Portfolio, the Company has exposure to real estate
markets. Approximately 88% of the Company's loans by portfolio value are
exposed to property, including loans exposed to property in social
infrastructure sectors such as student accommodation, social housing and care
homes. The Portfolio includes exposure to 7 projects that are under
construction, representing c. 18% of the portfolio value. Further information
on the Portfolio sector allocations and the loan-to-value of the Portfolio can
be found in the Portfolio Report; and
· The Portfolio includes subordinated loans which are subordinate to
the borrowers' senior debt. Such loans represent 32% of the portfolio value.
By way of illustration, and assuming all loans repay in accordance with their
contractual terms, and that loans scheduled for repayment in 2023 are repaid
by no later than 31 December 2024, in the event of an orderly wind down of the
Company, c. 69% of its principal outstanding at 31 December 2023 (including
cash held by the Company) is scheduled to be repaid by the end of the
financial year ended 31 December 2027.
Shareholder consultation
As part of the Strategic Review, the Board is seeking shareholder feedback to
inform its decision-making process. Barclays Bank PLC, acting through its
investment bank ("Barclays"), financial adviser and corporate broker to GABI,
will contact the Company's key shareholders to arrange meetings with the Board
shortly.
The Board would welcome shareholders' views on the future strategic direction
of the Company, including in respect of the following:
· a potential continuation of the Company in accordance with its
current investment policy delivered by the Investment Manager, paired with a
partial return of capital;
· a suitable time horizon for the return of capital in a potential
orderly wind down of the Company; and
· acceptable pricing on a potential sale of the Company.
Share buyback programme
As previously announced, the Board intended that available cash be used: (i)
to repay the Company's outstanding balance under its revolving credit
facilities (the "RCF") and reduce the Company's net debt; or (ii) repurchase
the Company's shares whilst such shares trade at a material discount to their
prevailing net asset value. The RCF has been fully repaid.
The Board is in discussion with its advisers in connection with the initiation
of a £7 million share buyback programme in the coming weeks that would enable
the Company to make capital available for return to shareholders in the period
to 30 April 2024.
The Board continues to consider a sale of the Company as an option for its
future. The timing and/or implementation of any share buyback programme may be
tempered by regulatory and commercial considerations in connection with any
potential approaches for the Company at the relevant time.
Expected timetable of events
The anticipated dates and sequence of events relating to the Strategic Review
are set out below:
Initial shareholder consultation period 29 January to 23 February 2024
Publication of outcome of the Strategic Review mid-March 2024
Posting of AGM notice / shareholder circular mid-April 2024
AGM of the Company 15 May 2024
Alex Ohlsson, Chairman of GABI, commented:
"The Board looks forward to engaging with shareholders as it seeks feedback to
inform its decision-making process for the future of the Company. The Board
will be seeking to ascertain a future direction for the Company which can be
supported by a majority of shareholders. The Board remains committed to
maximising value for shareholders."
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014, as it forms part of domestic law by virtue of the
European Union (Withdrawal) Act 2018 (as amended) ("MAR"). Upon publication of
this announcement, the inside information is now considered to be in the
public domain for the purposes of MAR. The person responsible for arranging
the release of this announcement on behalf of the Company is Sophie Botterill,
Manager at Apex Financial Services (Alternative Funds) Limited.
For further information:
GCP Asset Backed Income Fund Limited | +44 (0)15 3482 2251
Alex Ohlsson, Chairman
Barclays Bank PLC, acting through its Investment Bank (Financial Adviser and
Corporate Broker) | +44 (0)20 7623 2323
Adrian Beidas
Callum West
Dion Di Miceli (Corporate Broking)
Stuart Muress (Corporate Broking)
About GABI
GABI is a closed-ended investment company traded on the Main Market of the
LSE. The company makes investments secured against physical assets or
contracted cash flows, in sectors which are integral to society.
Important notices
This announcement is not intended to, and does not, constitute or form part of
any offer, invitation or solicitation of any offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of, any securities or the
solicitation of any vote or approval in any jurisdiction, whether pursuant to
this announcement or otherwise.
The release, distribution or publication of this announcement in jurisdictions
outside the United Kingdom may be restricted by laws of the relevant
jurisdictions and therefore persons into whose possession this announcement
comes should inform themselves about, and observe, any such restrictions. Any
failure to comply with the restrictions may constitute a violation of the
securities law of any such jurisdiction.
Disclaimer
Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is
authorised by the Prudential Regulation Authority and regulated in the United
Kingdom by the Financial Conduct Authority and the Prudential Regulation
Authority, is acting exclusively for the Company and no one else in connection
with the matters set out in this announcement and will not be responsible to
anyone other than the Company for providing the protections afforded to
clients of Barclays nor for providing advice in relation to any matter
referred to in this announcement.
In accordance with the Code, normal United Kingdom market practice and Rule
14e-5(b) of the Exchange Act, Barclays and its affiliates will continue to act
as exempt principal trader in the Company's securities on the London Stock
Exchange. These purchases and activities by exempt principal traders which are
required to be made public in the United Kingdom pursuant to the Code will be
reported to a Regulatory Information Service and will be available on the
London Stock Exchange website at www.londonstockexchange.com. This information
will also be publicly disclosed in the United States to the extent that such
information is made public in the United Kingdom.
Rule 26.1 disclosure
In accordance with Rule 26.1 of the Code, a copy of this announcement will be
available (subject to certain restrictions relating to persons resident in
restricted jurisdictions)
at https://www.graviscapital.com/funds/gabi-strategic-review/literature by no
later than 12 noon (London time) on the business day following the date of
this announcement. The content of the website referred to in this announcement
is not incorporated into and does not form part of this announcement.
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