REG - RM Infrastructure RM SecDirect - RMDC - Update: Managed Wind Down & GM Notice

RM Infrastructure IncomeAnnouncement

30/11/2023 07:15

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RNS Number : 1315V  RM Infrastructure Income PLC  30 November 2023

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN
OR INTO THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH
AFRICA, JAPAN, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OR ANY
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO

30 November 2023

RM Infrastructure Income plc

(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 6 September 2023, the board of directors (the
"Board") has decided to put forward details to Shareholders for the
implementation of a managed wind-down of the Company (the "Managed
Wind-down").

A circular (the "Circular") to convene a General Meeting ("GM") 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://rm-funds.co.uk/rm-infrastructure-income/
(https://rm-funds.co.uk/rm-infrastructure-income/) .

Background to the Managed Wind-down

Although the Company has demonstrated strong NAV total return performance over
the longer term (4.97 per cent. and 31.72 per cent. over one year and five
years, respectively, to 31 October 2023) and generated a high net interest
income in excess of the annual dividend target of 6.5 pence per share 1 
(#_ftn1) , the discount to NAV per Share at which the Shares trade has been
both wide and persistent despite measures taken by the Board to seek to
address this through the use of buybacks and the provision of a periodic
realisation opportunity. This, coupled with the small scale of the Company and
the low levels of liquidity in the Company's shares has restricted the
Company's ability to grow.

As set out in the Company's announcement on 23 May 2023, in April 2023 the
Board received a non-binding indicative proposal which involved a combination
of all the Company's assets with another investment company managed by Gravis
Capital Partners (as disclosed on 11 August 2023). The combination was
proposed to be structured under section 110 of the Insolvency Act 1986 with no
option, partial or otherwise, for you as a shareholder to elect to receive
cash.

The proposal was considered alongside a wide array of potential options under
a broader review of the Company's future strategy: a potential continuation of
the Company's existing investment policy and strategy, a full or partial exit
opportunity, a combination of the Company's assets with another suitable
investment company or fund and a managed wind-down. The Board consulted with
Shareholders on these options and concluded that a partial exit opportunity
would only exacerbate the challenges the Company faces, as it would further
reduce the size of the Company.

Following the receipt of the first proposal, the Board received two additional
business combination proposals, as described in the Company's announcement on
10 July 2023.

Having considered the various proposals in detail, the Board concluded that no
better option existed which was likely to receive the required Shareholder
consent, and on 6 September 2023, the Board announced its decision to put
forward a proposal for a managed wind-down of the Company.

The Investment Manager provided a run-off profile of the portfolio to
Shareholders during the Shareholder consultation in the third quarter of 2023.
This showed an expected maturity profile of the Company's Loans and a
forecasted weighted average remaining life of circa 1.7 years (as of 31
October 2023) with liquidation of the Company occurring in the second half of
2027. The Investment Manager has since then discussed with the Board an
incentive structure to accelerate capital repayments to Shareholders via
management initiatives and developed a capital acceleration incentive
proposal, details of which are set out in section 3 of the Circular. The
Investment Manager believes that the maturity profile of the run-off portfolio
could be reduced with proactive management and as a result the weighted
average remaining life reduced to less than one year (as of 31 October 2023).
Shareholders would benefit from such acceleration as follows:

·      circa £72 million of Loans returned quicker or circa 70 per
cent. of total portfolio Loans;

·      potential shorter maturity to December 2026;

·      a significant amount of capital returned during 2024;

·      a Net Present Value to Shareholders versus the Shareholder
consultation portfolio repayment profile of circa £7.5 million assuming a
discount rate of 9 per cent.; and

·      a reduction of forecasted management fees of circa £0.77
million.

In order to implement the Proposal, Shareholders are requested to approve
revisions to the investment objective and policy of the Company to restate the
policy to facilitate the Company's assets being realised in an orderly manner
in order to maximise shareholder value.

The Board believes that a carefully managed process of divesting assets and
periodically returning capital is in Shareholders' best interests. In the
Board's view, there is insufficient Shareholder support for an alternative as
evidenced during the Shareholder consultation.

Amendments to Investment Objective and Policy

In order for the Company to follow the Managed Wind-down process, it would be
necessary to amend the Company's Investment Objective and Policy. Therefore,
the Company proposes to amend its investment objective and is proposing that
the Company's investment objective be restated as follows: "The Company aims
to conduct an orderly realisation of the assets of the Company, to be effected
in a manner that seeks to achieve a balance between returning cash to
Shareholders promptly and maximising value.". The full text of the proposed
Investment Objective and Policy is in the Circular published today.

Amendment to the Investment Management Agreement

The Company proposes to amend the Investment Management Agreement, once the
Proposal has been approved, so that the management fee will continue to be
calculated at the rate of 0.875 per cent. of NAV per annum (payable monthly in
arrears), but subject to a minimum fee of £33,300 payable monthly in arrears,
subject to renegotiation with the Board, until the earlier of (i) the
Company's liquidation; (ii) the value of the Company's portfolio (excluding
cash and other liquid assets) being less than or equal to £35 million; or
(iii) 31 December 2026. Further details on the proposed amendments to the
Investment Management Agreement are set out in the Circular.

The proposed amendment to the Investment Management Agreement constitutes a
related party transaction to which the modified requirements for smaller
related party transactions in the Listing Rules apply (LR11.1.10R). Under the
smaller related party transaction rules, there is no requirement for
Shareholders to vote on the amendment. However, as a matter of good corporate
governance, the Company has consulted with its major Shareholders on the terms
of the proposed amendment as to the best interests of Shareholders. The
Company has also received written confirmation from a sponsor that the terms
of the proposed amendment are fair and reasonable as far as the Shareholders
are concerned.

Shareholder returns

The Board will keep Shareholders informed of its intentions concerning returns
of capital, mechanisms for which may include tender offers, other schemes for
the return of capital and/or the buying back of Shares as the portfolio is
realised. Throughout the managed wind-down, the Board will follow the
principle of seeking to balance the optimum scale and accompanying costs to
the Company of the relevant method of return with the desire to accomplish
that return as quickly as practicable, without eroding the value to be
distributed.

Amounts becoming available for return will come from contractual repayments of
Loans by borrowers to the Company and from the disposal of portfolio assets,
potentially after the repayment and cancellation of some or all of the
Company's bank facilities.

The Board also expects to continue paying dividends at the current rate of 6.5
pence per share 2  (#_ftn2) until the commencement of the managed wind-down.
Thereafter, the Company expects not to be able to keep paying dividends at the
current rate. The Company will instead pay dividends only as required to
maintain investment trust status. As the Company's portfolio reduces in size
its fixed costs will become a greater proportion of its income.

The Company intends to maintain its investment trust status and listing during
this managed realisation process prior to the Company's eventual liquidation.
Maintaining the listing would allow Shareholders to continue to trade Shares
during the managed wind-down of the Company.

Unless there are other proposals which it considers to be in the Company's
best interests at the relevant time, the Board also expects to propose that
the Company enters into members' voluntary liquidation at a point when the
realisations and returns of capital have caused the Company to become too
small to justify the costs of retaining a listing for its Shares or otherwise
at a point when the Board considers the Company's remaining portfolio would be
likely to cease, in the near term future, to continue to provide a spread of
investment risk that is reasonable in the prevailing circumstances. Any such
proposed liquidation process would require separate Shareholder approval.

General Meeting

The Proposal is conditional on the approval by Shareholders of the Resolution
to be proposed at the General Meeting which has been convened for 10 a.m. on
20 December 2023.

The Resolution will be proposed as an ordinary resolution. An ordinary
resolution requires a majority of members entitled to vote and present in
person or by proxy to vote in favour in order for it to be passed.

The formal notice convening the General Meeting, to be held at the offices of
Travers Smith LLP, 10 Snow Hill, London EC1A 2AL on 20 December 2023 at 10
a.m., is set out in the Circular.

Consequences of the Proposal not being approved

The Board regards the orderly realisation of the Company's assets as the best
strategic option for Shareholders. However, should Shareholders reject the
proposed amendment to the investment policy to facilitate a managed wind-down
of the Company, the Board and the Investment Manager will continue to fulfil
the existing investment objective and policy and work to identify alternative
options for the future of the Company.

Recommendation

The Board considers that the Proposal is in the best interests of the Company
and its Shareholders as a whole. In the opinion of the Board the proposed
amendments to the Investment Management Agreement are fair and reasonable as
far as Shareholders are concerned.

Accordingly, the Board unanimously recommends that Shareholders vote in favour
of the Resolution to be proposed at the General Meeting.

The Directors intend to vote in favour, or procure the vote in favour, of the
Resolution at the General Meeting in respect of their own beneficial holdings
of Shares which, in aggregate, amount to 69,982 Shares representing
approximately 0.06 per cent. of the Company's issued share capital (excluding
Shares held in treasury).

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 Forms                                 10 a.m. on 18 December 2023

of Proxy or CREST electronic proxy appointments for the General Meeting
 General Meeting                                                           10 a.m. on 20 December 2023
 Adoption of amended and restated investment                               20 December 2023

objective and policy (if the Resolution is passed)
 Publication of the results of the General Meeting                         20 December 2023

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

 

For further information, please contact:

 

 RM Funds - Investment Manager                                  0131 603 7060

 James Robson

 Pietro Nicholls

 Thomas Le Grix De La Salle

 Singer Capital Markets - Financial Adviser and Broker          020 7496 3000

 James Maxwell

 Asha Chotai

 Apex Listed Funds Services (UK) Limited - Administrator and    020 3327 9720
 Company Secretary

 Jenny Thompson

 

 

About RM Infrastructure Income PLC

 

The Company aims to generate attractive and regular dividends and positive
social impact by lending to assets at the forefront of providing essential
services to society.

 

Its diversified portfolio of loans sourced or originated by the Investment
Manager with a degree of inflation protection through index-linked returns
where appropriate. Loans in which the Company invests are predominantly
secured against assets such as real estate or plant and machinery and/or
income streams such as account receivables.

 

For more information, please contact James Robson at RM Funds.

 

About RM Funds

RM Funds is an alternative asset manager. Founded in 2010, with offices
in Edinburgh, and London, the firm manages capital on behalf of
institutional investors, multi-asset allocators, wealth managers and retail
investors. RM Funds focuses on real asset investing across liquid alternatives
and private markets.

 

RM Funds is a delivery partner to the British Business Bank in connection
with the Coronavirus Business Interruption Loan Scheme. RM Funds is a trading
name of RM Capital Markets Limited.

 

RM Funds is a signatory to the Principles of Responsible Investment.

 

Disclaimer

Neither the content of the Company's website, nor the content on any website
accessible from hyperlinks on its website for any other website, is
incorporated into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any such
content be relied upon in reaching a decision as to whether or not to acquire,
continue to hold, or dispose of, securities in the Company.

 

 

 1  (#_ftnref1) The dividend target is a target only and not a profit
forecast. There can be no assurance that this target will be met, or that the
Company will make any distributions at all and it should not be taken as an
indication of the Company's expected future results. The Company's actual
returns will depend upon a number of factors, including but not limited to the
Company's net income and level of ongoing charges.

 2  (#_ftnref2) The dividend target is a target only and not a profit
forecast. There can be no assurance that this target will be met, or that the
Company will make any distributions at all and it should not be taken as an
indication of the Company's expected future results. The Company's actual
returns will depend upon a number of factors, including but not limited to the
Company's net income and level of ongoing charges.

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