Publication of a Prospectus and Circular

RNS Number : 3772Y

HICL Infrastructure Company Ld

29 February 2012

 



THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME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 C Shares

 and

Publication of a Prospectus and Circular

29 February 2012

Summary

Further to the announcement made by HICL Infrastructure Company Limited (the "Company") on 26 January 2012, the Board of Directors is pleased to announce a Placing, Open Offer and Offer for Subscription with a target size of 180 million C Shares at an issue price of 100p per C 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).

Graham Picken, Chairman of HICL Infrastructure Company Limited, said "The market environment for new investments remains favourable and the new equity capital that we are seeking to raise will leave us well positioned to take advantage of suitable opportunities. We are grateful for the continued support from our shareholders and also look forward to welcoming new investors to the Company."

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 £180 million (before expenses). Net proceeds will not in any event exceed the aggregate of: (i) the Group's funding requirements (amounting to £139 million at today's date); (ii) the consideration payable for the Conditional Investment  of approximately £39 million; and (iii) the consideration payable for any Additional Investments including £15 million for an Additional Investment which the Company expects to acquire prior to Admission

·    Under the Open Offer, existing Shareholders are entitled to subscribe for C Shares pro rata to their holdings of Ordinary Shares on the basis of 1 C Share for every 6 Ordinary Shares held as at close of business on 27 February 2012

·    The balance of C Shares to be made available under the Issue, together with any C 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

·    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 (2012)
Latest time and date for receipt of completed application forms and payment in full under the Offer for Subscription	1.00 p.m. on Thursday, 22 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 Friday, 23 March
General Meeting	11.00 a.m. on Friday, 23 March
Latest time and date for receipt of Placing commitments	Noon on Monday, 26 March
Admission to the Official List and commencement of dealings in C Shares	8.00 a.m. on Friday, 30 March
Expected date for crediting of C Shares to CREST accounts in uncertificated form	As soon as possible on Friday, 30 March
Expected date of despatch of definitive share certificates for C Shares in certificated form	Week commencing 2 April
Conversion of C Shares into Ordinary Shares	End April

Introduction

The Company is a limited liability, Guernsey incorporated, closed-ended investment company and its Ordinary Shares are admitted to the Official List with a premium listing and to trading on the Main Market of the London Stock Exchange. It is also a component of the FTSE 250 Index.  An investment in the Company enables investors to access the income stream from a diversified and established portfolio of quality, predominantly operational infrastructure investments.

The Current Portfolio consists of Infrastructure Equity in 70 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 Ministry of Defence helicopter training facility;

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

-          highway projects in Canada.

Background to the Issue

The Group acquired the Initial Portfolio shortly after launch in March 2006. Over the period since launch the Group has acquired 56 further infrastructure investments and has made 25 follow-on investments, which have been financed by Group Debt, the issues of C Shares in 2008, 2009 and 2010 and tap issues.

Since the Company's last C Share issue in November 2010, the Group has made a number of further investments (of which 34 were investments in new projects), which have been financed by Group Debt and tap issues. It is intended that the net proceeds of the Issue will be used to meet the Group's current funding requirements and to acquire the Conditional Investment and any Additional Investments.

The Issue

The Company is seeking to raise £180 million (before expenses) through the Placing, Open Offer and Offer for Subscription of C Shares. The Directors have also reserved the right, in consultation with Collins Stewart, to increase the size of the Issue up to a maximum of £250 million in circumstances in which Additional Investments are made or identified and overall demand for C Shares exceeds the target amount.

The net proceeds of the Issue will not in any event exceed the aggregate of: (i) the Group's funding requirements (amounting to £139 million at today's date); (ii) the consideration payable for the Conditional Investment of approximately £39 million; and (iii) the consideration payable for any Additional Investments including £15 million for an Additional Investment which the Company expects to acquire prior to Admission.

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 110,903,702 C Shares pro rata to their holdings of Ordinary Shares on the following basis:

1 C Share for every 6 Ordinary Shares held at the Record Date (being the close of business on 27 February 2012).

The balance of C Shares to be made available under the Issue, together with any C 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.

It is anticipated that the Calculation Time and subsequent Conversion of the C Shares into Ordinary Shares will occur in April 2012 based on the Directors' valuation for the investment portfolio as at 31 March 2012. The Conversion Ratio will be based on this valuation and the Directors believe that this is more equitable to Existing Shareholders and C Shareholders who will have the benefit of the Conversion being effected on the basis of an updated valuation.

Pending investment, the net proceeds of the Issue (and any interest thereon) will be the sole asset attributable to the C Shares.

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.

-           C Shareholder funds will be fully invested in the Current Portfolio (or will otherwise be available for Additional Investments) following Conversion which will occur shortly after the Issue in line with the Company's policy of avoiding uncommitted cash balances, thereby reducing the potential for cash drag on Shareholder returns.

-           The Directors recognise the importance of pre-emption rights to Shareholders and consequently: (i) are seeking the approval of Existing Shareholders for the Issue by way of ordinary resolution at an Extraordinary General Meeting of the Company to be held on 23 March 2012; and (ii) up to 110,903,702 (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) of the C Shares are being offered to Existing Shareholders at the Issue Price by way of the Open Offer. Open Offer Shares may be subscribed by Existing Shareholders pro rata to their holdings of Existing Ordinary Shares as at the Record Date. Existing Shareholders can subscribe in excess of their Open Offer Entitlements pursuant to the Excess Application Facility and can also participate by subscribing for C Shares pursuant to the Offer for Subscription.

-           Subscription for C Shares by both Existing Shareholders and new investors will rapidly provide full exposure to the Current Portfolio of infrastructure assets and to any Additional Investment upon acquisition.

-           The market capitalisation of the Company will increase, and the secondary market liquidity in the Ordinary Shares is expected to be enhanced following Conversion 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 11 a.m. on 23 March 2012 (the "General Meeting") in order to seek shareholder approval, as a matter of good corporate governance, in connection with the Issue and the acquisition of the Conditional Investment, and in respect of certain housekeeping matters.  The resolutions to be proposed at the General Meeting (the "Resolutions") are as follows:

-           To approve the allotment of up to 250 million C Shares in connection with the Issue;

-           To approve the acquisition by the Group of the Conditional Investment, which is a PFI project toupgrade and operate London Underground's radio and telecommunications system, from InfraRed Principal Book Limited Partnership;

-           To increase the share capital of the Company; and

-           To waive pre-emption rights in connection with the allotment of up to 10 per cent. of the Ordinary Shares in issue immediately following Conversion 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 11.00 a.m. on 21 March 2012.

Directors' intention to subscribe

As at the date of the prospectus, the Directors and their spouses intend to subscribe for, in aggregate, 100,000 C Shares pursuant to the Issue.

The Current Portfolio

The Current Portfolio consists of Infrastructure Equity in 70 Project Companies in government accommodation, education, health, transport, utilities and law and order sectors with a Current Portfolio Value of £893.5 million. It includes accommodation projects for the UK Home Office, Health and Safety Executive and the Ministry of Defence, a number of hospitals, schools, and police projects, a high speed rail project in Holland and highway projects in Canada. As at 31 December 2011, the weighted average PFI/PPP/P3 project concession length remaining in the Current Portfolio was 23.7 years (on the assumption that the break options are exercised in relation to the Bishop Auckland Hospital and Helicopter Training Facility projects).

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 a progressive distribution policy and growth of its annual distributions to 7p¹ per Ordinary Share by 31 March 2013. The Company is targeting an IRR of 7 per cent.² on the Ordinary Shares to be issued upon conversion of the C Shares, to be achieved over the long-term via active management, including the acquisition by the Group of further investments to complement the Current Portfolio, and by the prudent use of gearing.

¹This is a target only and is not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.

²This is a target only and is not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.

Investment Opportunity

The Company offers investors access to income streams from a Current Portfolio of 70 investments.  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 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;

·        Volatility in financial markets over the past three years which has highlighted the stability of PFI/PPP/P3 infrastructure assets; and

·        Valuation of PFI/PPP/P3 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:

·        The potential for a growing dividend;

·        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 PPP 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 characteristics to the Current Portfolio.

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; 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.) in

-           limited partnerships and 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") has been appointed as both the investment adviser to the Company and the operator of the Partnership. Members of the Infrastructure Investment Team are responsible for carrying out the Investment Adviser's investment management and advisory functions for the Group. The Infrastructure Investment Team is one of Europe's most experienced infrastructure investment managers and has a strong track record.

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.

C Shareholders will not be entitled in respect of their C Shares to any dividend or distribution declared for the financial year ending 31 March 2012, although Ordinary Shares resulting from the conversion of C Shares will rank equally with all other Ordinary Shares in respect of any and all dividends declared after Conversion.  The Directors intend to declare a second interim dividend for the year ending 31 March 2012 prior to the Calculation Time.

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.

On 28 February 2012, the Group entered into a £150 million multi-currency revolving credit facility with The Royal Bank of Scotland plc and National Australia Bank Limited which is intended, inter alia, to refinance the existing 2007 £200 million multi-currency revolving credit facility with Bank of Scotland plc.

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 the 2012 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.

ISIN Numbers

The International Security Identification Number for the C Shares under the Open Offer is GG00B7MLCF83.

The International Security Identification Number for Excess Shares under the Excess Application Facility is GG00B422P624.

The International Security Identification Number for the C Shares under the Placing and Offer for Subscription is GG00B5SNML04.

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 David Foot Sandra Lowe
Collins Stewart Europe Limited	020 7523 8000
Robbie Robertson Dominic Waters Neil Brierley Will Barnett David Yovichic Lucy Lewis Andrew Zychowski
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 Collins Stewart Europe Limited ("Collins Stewart") 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.

Neither the C Shares in the Company referred to in this Announcement (the "C Shares") nor the new Ordinary Shares in the Company into which they will convert (the "New Ordinary Shares) have been, or will 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 accordingly may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, registration under the Securities Act. No offering of the C Shares or 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.

Collins Stewart Europe Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as sponsor to the Company and is acting for 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 Collins Stewart Europe Limited nor for providing advice in connection with the Issue and the contents of this announcement or any other matter referred to herein. Collins Stewart Europe Limited is not responsible for the contents of this announcement. This does not exclude or limit any responsibilities which Collins Stewart Europe 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 Collins Stewart that would permit an offering of the C Shares or 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 Collins Stewart 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 Collins Stewart assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.

 

END

 

 

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