SQN Secured Income board says vote against continuation – SQN Secured Income promised investors a continuation vote if it failed to grow beyond £250m of assets by 31 December 2019. Well here it is.
“Over the past few months, the board has been considering the future of the company, and consulting with larger shareholders, and in particular has been discussing the available viable options for addressing the challenges the Company faces, including size, scalability, liquidity and the discount to NAV at which the Shares have been trading. As a result of these discussions, the Board does not believe the Company can continue in its current form indefinitely and is recommending that Shareholders vote against continuation of the Company.
Regardless of the outcome of the General Meeting, the Board intends to undertake a strategic review into the future of the Company and in particular intends to examine the likely returns to Shareholders and timing of any managed wind down of the investment portfolio compared to other options to return capital to Shareholders or the creation of a more liquid investment in a larger vehicle that would be listed on the London Stock Exchange. The Board intends to consult on the possible strategic options both prior to and following the General Meeting.
Shareholders should note that, if the Company enters a managed wind down of its portfolio, the Company is unlikely to be able to realise the full value of its investment portfolio and return the proceeds to Shareholders for at least a period of between three and four years, and possibly longer, given the illiquid nature of the Company’s investments.
As at 30 April 2020, the weighted average maturity of the Company’s loan book is 2.62 years, with the longest maturity being 5.88 years. The Company cannot demand early repayment of these loans (except in the event of a borrower default) and has to await the repayment of the loans in accordance with their terms. Further, the Board anticipates that one of the effects of the Coronavirus pandemic will be that many borrowers seek to extend the maturities on their loans and/or request additional facilities as borrowers respond to the impact of the pandemic on their operations. The Company will need to consider providing such facilities, even during a managed wind down, to preserve the value of loans already advanced. Accordingly, there can be no certainty as to the value or timing of the returns Shareholders will receive as a result of any managed wind down process or other form of reconstruction.”
New manager (same manager)
KKV is being appointed as the manager – this is the same management company that SQN Asset Finance Income has appointed. Dawn Kendall, the fund’s manager, is co-head of this business.
Wind up vote coming
“The Directors recommend voting against the Continuation Resolution. Regardless of whether the Continuation Resolution is passed, the Directors will convene a further general meeting of the Company in order to consider a special resolution to approve the voluntary winding up or other reconstruction of the Company. As explained above, it is anticipated that an orderly wind down process may take between three and four years and there can be no guarantee as to the quantum or timing of returns to Shareholders as a result of any such process.”
[It may be that this fund ends up being merged with SQN Asset Finance Income with those shareholders that want it being offered a cash exit.]
SSIF : SQN Secured Income continuation vote