Placing, Open Offer and Offer for Subscription

RNS Number : 6903Y

HICL Infrastructure Company Ld

26 February 2013

 



THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR TO U.S. PERSONS.  THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE INCLUDING IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR TO U.S. PERSONS.

HICL INFRASTRUCTURE COMPANY LIMITED

Placing, Open Offer and Offer for Subscription of New Ordinary Shares

 and

Publication of a Prospectus and Circular

26 February 2013

Summary

Further to the announcement made by HICL Infrastructure Company Limited (the "Company") on 31 January 2013, the Board of Directors is pleased to announce a Placing, Open Offer and Offer for Subscription with a target size of 100 million New Ordinary Shares at an issue price of 119.5p per New Ordinary Share (the "Issue").  The Company has published a prospectus relating to the Issue (the "Prospectus") and a circular to shareholders (the "Circular"), both of which will be posted to shareholders shortly, as well as being made available on the Company's website (www.hicl.com).

Unless otherwise defined, capitalised words and phrases in this Announcement shall have the meaning given to them in the Prospectus.

Key Highlights of the Issue

·    Target size of 100 million New Ordinary Shares (to raise £119.5 million before expenses), with the ability to increase the size of the Issue to 140 million New Ordinary Shares (to raise £167.3 million before expenses). Net proceeds will not in any event exceed the aggregate of: (i) the Group's net funding requirement (amounting to approximately £30 million at today's date); (ii) the consideration payable for the Conditional Investments of approximately £27.5 million (the Conditional Investments being a 29.2 per cent. equity and loan note interest in the Bradford Schools BSF (Phase I) project and a 50 per cent. equity and loan note interest in the University of Sheffield project); and (iii) the consideration payable for any Additional Investments

·    Under the Open Offer, existing Shareholders are entitled to subscribe for New Ordinary Shares pro rata to their holdings of Ordinary Shares on the basis of 1 New Ordinary Share for every 15 Ordinary Shares held as at close of business on Friday 22 February 2013

·    The balance of New Ordinary Shares to be made available under the Issue, together with any New Ordinary Shares not taken up pursuant to the Open Offer, will be made available for subscription under the Excess Application Facility, the Offer for Subscription and the Placing

·    The Company will first apply the net proceeds of the Issue to repay outstanding Group Debt in full and then, depending upon the amount of proceeds raised, to provide the Group with additional resources to make further investments. Repayment of existing Group Debt will provide the Group with greater flexibility in making further investments in the infrastructure market as suitable opportunities arise

Expected timetable

Each of the times and dates set out below and mentioned elsewhere in this announcement may be adjusted by the Company, in which event details of the new times and dates will be notified to the FSA and the London Stock Exchange.  References to a time of day are to London time.

Event	Date (2013)
Latest time and date for receipt of completed application forms and payment in full under the Offer for Subscription	1.00 p.m. on Monday, 18 March
Latest time and date for receipt of completed Open Offer Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate)	11.00 a.m. on Tuesday, 19 March
General Meeting	2.30 p.m. on Wednesday, 20 March
Latest time and date for receipt of Placing commitments	Midday on Thursday, 21 March
Admission to the Official List and commencement of dealings in New Ordinary Shares	8.00 a.m. on Wednesday, 27 March
Expected date for crediting of New Ordinary Shares to CREST accounts in uncertificated form	As soon as possible on Wednesday, 27 March
Expected date of despatch of definitive share certificates for New Ordinary Shares in certificated form	Week commencing 8 April

A.         The Issue

Introduction

The Company is a limited liability, Guernsey-incorporated, closed-ended investment company whose Ordinary Shares have a premium listing on the Official List and are traded on the Main Market of the London Stock Exchange. It is also a component of the FTSE250 Index.  An investment in the Company enables investors to access the income stream from a diversified and established portfolio of quality infrastructure investments.

The Current Portfolio consists of Infrastructure Equity in 79 Project Companies in the government accommodation, education, health, transport, utilities and law and order sectors. It includes:

-          accommodation projects for the UK Home Office, the Health and Safety Executive and the Ministry of Defence;

-          a number of hospitals, schools, and police projects;

-          a high speed rail project for the Dutch State; and

-          highway projects in Canada.

Background to the Issue

Since the Company's C Share issue in March 2012, the Group has made a number of further investments (of which 10 were investments in new projects), which have been financed by Group Debt and tap issues, and has disposed of one portfolio holding. It is intended that the net proceeds of the Issue will be used to meet the Group's current funding requirement and to acquire the Conditional Investments and any Additional Investments.

The Issue

The Company is seeking to raise £119.5 million (before expenses) through the Placing, Open Offer and Offer for Subscription of New Ordinary Shares. The Directors have also reserved the right, in consultation with Canaccord Genuity, to increase the size of the Issue up to a maximum of £167.3 million to the extent that Additional Investments are made or identified and overall demand for New Ordinary Shares exceeds the target amount.

The net proceeds of the Issue will not in any event exceed the aggregate of: (i) the Group's net funding requirement (which stands at approximately £30 million as at today's date); (ii) the consideration payable for the Conditional Investments of approximately £27.5 million; and (iii) the consideration payable for any Additional Investments.

Given the sustained and marked premium to Net Asset Value at which the Company's Ordinary Shares have traded in recent months, the Directors believe that the use of Ordinary Shares, rather than C Shares, is the most appropriate way by which to raise further equity capital. Issuing New Ordinary Shares at a price which (net of the costs of the Issue) is in excess of the prevailing Net Asset Value (excluding for these purposes the entitlement to the second interim dividend for the financial year ending 31 March 2013), rather than using C Shares (which effectively provide for the issue of Ordinary Shares at Net Asset Value after costs), is expected to avoid any short-term downward pressure upon the market price of Ordinary Shares (which the issue of C Shares might create), and will also provide Existing Ordinary Shareholders with an uplift in the Net Asset Value of their Existing Ordinary Shares.

The Issue is being implemented by way of a Placing, Open Offer and Offer for Subscription. The inclusion of an Open Offer ensures that a portion of the new share capital being made available pursuant to the Issue is reserved in the first instance exclusively for Existing Shareholders.

Under the Open Offer, Existing Shareholders are entitled to apply to subscribe for up to an aggregate of 65,090,675 New Ordinary Shares pro rata to their holdings of Ordinary Shares on the following basis:

1 New Ordinary Share for every 15 Ordinary Shares held at the Record Date (being the close of business on 22 February 2013).

The balance of New Ordinary Shares to be made available under the Issue, together with any New Ordinary Shares not taken up pursuant to the Open Offer, will be made available for subscription under the Excess Application Facility, the Offer for Subscription and the Placing.

The New Ordinary Shares will only be issued at a price which (net of the costs of the Issue) is in excess of the prevailing Net Asset Value per Ordinary Share. For these purposes, the Net Asset Value per Ordinary Share means the Net Asset Value excluding the entitlement of the Existing Ordinary Shares to the second interim dividend for the financial year ending 31 March 2013 of 3.575 pence per Ordinary Share, which was announced on 21 February 2013. In determining the Issue Price of 119.5 pence per New Ordinary Share, the Directors have added an appropriate premium to the prevailing Net Asset Value per Ordinary Share to take into account the anticipated costs of the Issue and potential movements in the Net Asset Value per Ordinary Share between the date of this prospectus and Admission. For information purposes only, the Net Asset Value per Ordinary Share as at 31 December 2012 was 115.8 pence (ex-dividend, and 117.6 pence including 1.8 pence of accrued dividend).

Benefits of the Issue

The Directors believe that the Issue will have the following benefits:

-           The Company will be able to repay existing borrowings, thereby freeing up the full extent of its loan facility for further investments in the infrastructure market as these opportunities arise

-           The size of the Issue may be increased, affording the Company the flexibility to take advantage of opportunities to invest in Additional Investments that may arise on or prior to Admission. The Directors will consider whether the investment opportunities identified by the Investment Adviser constitute Additional Investments shortly prior to Admission and may increase the size of the Issue at their discretion in consultation with Canaccord Genuity

-           The Directors recognise the importance of pre-emption rights to Shareholders and consequently: (i) as the Issue is not fully pre-emptive, are seeking the approval of Existing Shareholders for the Issue and for the disapplication of pre-emption rights in connection with the Issue by way of special resolution at an Extraordinary General Meeting of the Company to be held on 20 March 2013; and (ii) 65,090,675 New Ordinary Shares (or such greater number as may be made available by the Directors in exercising their discretion to scale back the Placing and the Offer for Subscription in favour of the Excess Application Facility) are being offered to Existing Shareholders at the Issue Price by way of the Open Offer

-           The market capitalisation of the Company will increase, and the secondary market liquidity in the Ordinary Shares is expected to be enhanced as a result of a larger and more diversified Shareholder base

-           The Company's fixed running costs will be spread across a larger asset base, thereby reducing the total expense ratio

General Meeting

The Company has today posted to shareholders the Circular to convene a general meeting to be held at 2.30 p.m. on 20 March 2013 (the "General Meeting") in order to seek shareholder approval in connection with the Issue and the acquisition of the Conditional Investments.  The resolutions to be proposed at the General Meeting (the "Resolutions") are as follows:

-           To approve the Issue and the allotment of up to 140 million New Ordinary Shares in connection with the Issue;

-           To approve the acquisition by the Group from InfraRed Infrastructure Fund II of the Conditional Investments, being a 29.2 per cent. equity and loan note interest in the Bradford Schools BSF (Phase I) project and a 50 per cent. equity and loan note interest in the University of Sheffield project;

-           To waive pre-emption rights in connection with the allotment of up to 10 per cent. of the Ordinary Shares in issue immediately following the Issue until the sooner of the next AGM or 15 months from the passing of the resolution.

Forms of Proxy in respect of the Resolutions should be returned by no later than 2.30 p.m. on 18 March 2013.

Directors' intention to subscribe

As at the date of the prospectus, the Directors intend to subscribe for, in aggregate, 60,000 New Ordinary Shares pursuant to the Issue.

Issue expenses

The Issue expenses (including VAT where relevant and assuming the Issue is fully subscribed and the Directors proceed at the target Issue size of £119.5 million) are expected to be approximately £2.0 million. The Issue expenses (including VAT where relevant and assuming the Issue is fully subscribed and the Directors proceed at the maximum Issue size of £167.3 million) are expected to be approximately £2.55 million.

ISIN Numbers

The International Security Identification Number for New Ordinary Shares under the Open Offer is GG00B82WXW23.

The International Security Identification Number for Excess Shares under the Excess Application Facility is GG00B88WJX99.

B.         The Company

The Current Portfolio

The Current Portfolio consists of Infrastructure Equity in 79 Project Companies in the accommodation, education, health, transport, utilities and law and order sectors. It includes accommodation projects for the UK Home Office, Health and Safety Executive, London Underground and the Ministry of Defence, a number of hospitals, schools, and police projects, a Ministry of Defence helicopter training facility (all of which are based in the UK), two Canadian P3 road projects, two Irish PPP projects, and the DHSRL project in the Netherlands. As at 31 December 2012, the weighted average project concession length remaining in the portfolio was 22.4 years.

Investment Objectives

The Company seeks to provide investors with long-term distributions, at levels that are sustainable, and to preserve the capital value of its investment portfolio over the long-term with potential for capital growth. The Company targets an annual distribution of at least 7 pence per Ordinary Share, with the prospect of increasing this figure provided it is sustainable with regard to the portfolio's forecast operational performance and the prevailing macro-economic outlook.

Based on the Investment Adviser's analysis of the Current Portfolio, the Directors believe that an IRR of approximately 7 per cent. is an achievable long-term target in respect of a New Ordinary Share, by reference to the Issue Price of 119.5 pence.

Investment Opportunity

The Company offers investors access to income streams from a Current Portfolio of 79 investments with a value of £1.174 billion (as attributed by the Directors' valuation as at 31 December 2012). The Group intends to make further infrastructure investments in the future as suitable opportunities arise. The Directors believe that attractive opportunities are likely to arise outside, as well as within, the UK (where the majority of the projects within the Current Portfolio are based). 

The Directors and the Investment Adviser believe that an investment in infrastructure assets offers the following features, and that these compare favourably with an investment in other asset classes such as non-infrastructure equities and real estate:

·        Very low correlation to equity investment and limited exposure to economic and business cycles;

·        Concessions which generally have central or local government counterparties, providing strong credit quality;

·        A growing income stream supported by indexation of contract revenues;

·        Underlying market demand for infrastructure remaining strong globally, given political and economic imperatives worldwide and public budget constraints;

·        Relative stability of social infrastructure assets which contrasts with the volatility in financial markets over the past five years; and

·        Valuation of social infrastructure projects remaining relatively stable, reflecting the inherent value in the underlying income streams for assets in both primary and secondary markets.

The Directors also believe that an investment in the Company offers investors seeking an investment in infrastructure assets the following benefits:

·        A stable level of dividend, with the potential for further growth;

·        Preservation of the capital value of the investment portfolio with the potential for capital growth;

·        A diversified portfolio primarily focused on equity investments in operational yielding assets with a proven track record;

·        A portfolio of assets that combine size and type to maintain balance and diversification across the portfolio;

·        The Group has the opportunity to purchase further stakes in Current Portfolio projects, giving an opportunity to enhance returns through benefits of scale;

·        The Infrastructure Investment Team has strength and depth in key skills - deal sourcing, deal structuring and portfolio management - enhancing returns on a low risk basis;

·        The Group's underlying projects have long term amortising debt and do not require refinancing;

·        The Company provides investors with a range of information assisting them to understand how the Current Portfolio is performing; 

·        The Infrastructure Investment Team has a network of contacts and relationships globally from which it will continue to source investment opportunities; and

·        The Infrastructure Investment Team has experience of working internationally in countries where there are strong opportunities for further investments.

Summary of Investment Policy

The Group's investment policy is to ensure a diversified portfolio which has a number of similarly sized investments and is not dominated by any single investment. The Group will seek to acquire further Infrastructure Equity investments with similar risk/reward characteristics to the Current Portfolio, which may include (but is not limited to ):

-           public sector, government-backed or regulated revenues;

-           concessions which are predominantly "availability" based (i.e. the payments from the concession do not generally depend on the level of use of the project asset); and/or

-           companies in the regulated utilities sector.

The Group will also seek to enhance returns for Shareholders by acquiring more diverse infrastructure investments. The Directors currently intend that the Group may invest in aggregate up to 35 per cent. of its total assets (at the time the relevant investment is made) in:

-           Project Companies which have not yet completed the construction phases of their concessions, but where prospective yield characteristics and associated risks are deemed appropriate to the investment objectives of the Company; and/or

-           Project Companies with "demand" based concessions where the Investment Adviser considers that demand and stability of revenues are not yet established, and/or Project Companies which do not have public sector sponsored/awarded or government-backed concessions;and

-           to a lesser extent (but counting towards the same aggregate 35 per cent.), limited partnerships, other funds that make infrastructure investments and/or financial instruments and securities issued by companies that make infrastructure investments, or whose activities are similar or comparable to infrastructure investments.

The Investment Adviser and the Operator

InfraRed Capital Partners Limited (the "Investment Adviser") is both the investment adviser to the Company and the manager and operator of the Partnership. Members of the Infrastructure Investment Team are responsible for carrying out the Investment Adviser's functions as investment adviser and operator. The Infrastructure Investment Team is comprised of experienced infrastructure professionals with a strong track record in managing infrastructure investments.

Distribution policy

To date, distributions on the Ordinary Shares have been paid twice a year, in respect of the six months to 31 March and 30 September, and have been made by way of dividend. Subject to market conditions, this is expected to continue. The Company may also make distributions by way of capital distributions (or otherwise in accordance with the Laws and the Articles) as well as, or in lieu of, by way of dividend if and to the extent that the Directors consider this appropriate.

The New Ordinary Shares will, when issued and fully paid, rank equally in all respects with the Existing Ordinary Shares currently in issue, including the right to receive all dividends or other distributions made, paid or declared, if any, by reference to a record date after the date of their issue. For the avoidance of doubt, Investors in the New Ordinary Shares will not be entitled to receive the second interim dividend of 3.575 pence per Ordinary Share for the financial year ending 31 March 2013.

The Directors intend that the Company will generally restrict distributions (by way of dividend or otherwise) to the level of Distributable Cash Flows, and dividends to the level of income from the Group's investments, as recognised in the relevant financial year. The Directors may, where they consider this to be appropriate in respect of acquisitions where such assets are not fully cash generative, distribute as dividend an amount up to the level of the Group's gross income, i.e. in excess of Distributable Cash Flows. Project Companies which are operational usually make distributions to the Group twice a year, and occasionally these payments may be received shortly after a period end due to timing of payment process. The Directors intend to include such amounts in Distributable Cash Flows where it is clear these payments relate to the period concerned.

Borrowing policy

The Group makes prudent use of leverage. Under the Articles, the Group's outstanding borrowings, including any financial guarantees to support outstanding investment obligations but excluding internal Group borrowings, or borrowing of the Group's underlying investments, are limited to 50 per cent. of the Adjusted Gross Asset Value of its investments and cash balances at any time.

In February 2012, the Partnership took out a £150 million multi-currency revolving credit facility with the Royal Bank of Scotland plc and National Australia Bank Limited to replace the previous credit facility which was due to expire in December 2012. The Facility was split into two tranches: a £50 million tranche with an 18 month term and a £100 million multi-currency tranche with a 3 year term repayable on 28 February 2015. The Group subsequently cancelled the £50 million tranche. The £100 million multi-currency tranche is made up of a €50 million Euro tranche, a CAN$35 million Canadian dollar tranche and a €42 million multi-currency tranche with Euros as its base currency and may be utilised by way of cash advances denominated in the respective currencies of the tranches or, in respect of the multi-currency tranche only, in cash advances in Euros or optional currencies (subject to certain limits) or by the issue of letters of credit.

Discount control

In order to assist in the narrowing of any discount to the Net Asset Value at which the Ordinary Shares may trade from time to time, the Company may, at the sole discretion of the Directors and subject to compliance with the Law and the terms of its Loan Facility, make market purchases of up to 14.99 per cent. per annum of its issued Ordinary Shares and make tender offers for Ordinary Shares.

Publication of the Prospectus and Circular

A copy of each of the Prospectus and Circular will shortly be submitted to the National Storage Mechanism and will shortly be available for inspection at www.Hemscott.com/nsm.do.

CONTACTS

InfraRed Capital Partners Limited	020 7484 1800
Tony Roper Keith Pickard Erwan Fournis Robin Hubbard David Foot
Canaccord Genuity Limited	020 7523 8000
Robbie Robertson Dominic Waters Neil Brierley Will Barnett David Yovichic Lucy Lewis
Tulchan Communications	020 7353 4200
Ed Orlebar Rebecca Scott

Important Information

This Announcement has been issued by and is the sole responsibility of the Company.

No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Canaccord Genuity Limited ("Canaccord Genuity ") or by any of its respective affiliates or agents as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

This announcement is an advertisement and is not a prospectus.  Accordingly, investors should not subscribe for securities except on the basis of information in the Prospectus itself.

Neither this document nor anything contained herein shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction. Any offer to acquire securities pursuant to the Issue will be made, and any investor should make his investment, solely on the basis of information that is contained in the Prospectus.

This announcement and the information contained herein is not for publication, release or distribution, directly or indirectly, in or into the United States, Australia, South Africa, Canada or Japan or any jurisdiction in which the same would be unlawful.  This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire shares in the capital of the Company in the United States, Australia, Canada or Japan or any jurisdiction in which such an offer or solicitation is unlawful.

Any offering will only be made in any jurisdiction in compliance with local laws.

The New Ordinary Shares in the Company referred to in this Announcement (the "New Ordinary Shares") have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any State or other jurisdiction of the United States, and may not be offered, sold, pledged or otherwise transferred directly or indirectly in or into the United States, or to or for the account of any U.S. Person (as defined below), except pursuant to an exemption from, or in a transaction not subject to, registration under the Securities Act. No offering of the New Ordinary Shares is being made in the United States or to U.S. persons as defined in and in accordance with Regulation S under the Securities Act ("U.S. Persons"). The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act") and investors will not be entitled to the benefits of that Act.

Canaccord Genuity Limited, which is authorised by the Financial Services Authority, is acting for the Company and no-one else in connection with the Issue and the contents of this announcement, and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Canaccord Genuity Limited nor for affording advice in relation with the Issue and the contents of this announcement or any matters referred to herein. Canaccord Genuity Limited is not responsible for the contents of this announcement. This does not exclude or limit any responsibilities which Canaccord Genuity Limited may have under the Financial Services and Markets Act 2000 or the regulatory regime established thereunder.

The distribution of this Announcement and the Placing, Open Offer and Offer for Subscription in certain jurisdictions may be restricted by law. No action has been taken by the Company or Canaccord Genuity that would permit an offering of the New Ordinary Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and Canaccord Genuity to inform themselves about, and to observe, such restrictions.

This Announcement is for information purposes only and does not constitute an invitation to subscribe for or otherwise acquire or dispose of securities in the Company in any jurisdiction.  The information contained in this Announcement is for background purposes only and does not purport to be full or complete.  No reliance may be placed for any purpose on the information contained in this Announcement or its accuracy or completeness, This announcement does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any investments nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor.

Certain statements in this Announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The information contained in this Announcement is subject to change without notice and neither the Company nor Canaccord Genuity assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.

 

END

 

 

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