Publication of Circular and Notice of EGM

RNS Number : 4381H

Highbridge Multi-Strategy Fd Ltd £

31 July 2019

 

31 July 2019

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT OR ANY COPY OF IT. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN.

HIGHBRIDGE MULTI-STRATEGY FUND LIMITED

(the "Company")

Publication of Circular

Further to the Company's announcement on 8 July 2019, the Company is today posting a circular to Shareholders in connection with the proposals to change the Company's Investment Policy and the Company's name (the "Circular" and the "Proposals"), alongside a cash exit opportunity. The Circular sets out further details of the Proposals and contains a notice convening an Extraordinary General Meeting to be held at 8.30 a.m. on 16 August 2019 at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 1GR, Channel Islands.

Introduction and background

As announced by the Company on 17 June 2019, the Company's investment manager, Highbridge Capital Management, LLC ("Highbridge"), a Delaware limited liability company, notified the Company that it was refocusing its business exclusively around Highbridge's credit strategies. As part of this refocusing, the Highbridge Multi-Strategy Fund structure, through which the Company invests as a shareholder of Highbridge Multi-Strategy Fund Corporation ("HCC") which invests substantially all of its investable assets in Highbridge Multi-Strategy Master Fund, L.P. (the "HMS Master Fund"), will be wound down, and Highbridge is offering investors, including the Company, the ability to elect between one of three options:

i.    to transfer the investor's entire holding in HCC, over time, to the 1992 Tactical Credit Fund, Ltd. (the "TCF Feeder"), a fund managed by Highbridge focusing on credit strategies, over time, effected through the issuance of in-kind dividends consisting of new shares in the TCF Feeder to such investor;

ii.    to partially transfer such portion of the investor's holding in HCC, over time, as it may determine to the TCF Feeder over time, effected through the issuance of in-kind dividends consisting of new shares in the TCF Feeder to such investor, with the remainder of its holding being distributed to it, over time, through the payment of cash dividends; or

iii.   to request that the investor's entire investment in HCC is distributed to it, over time, through the payment of cash dividends, with an election for options (i) or (ii) being a "Continuation Election". Irrespective of which election the Company makes (in its capacity as a shareholder in HCC), the Company will continue to be a shareholder of HCC and will hold the same relative economic interest in the HMS Master Fund as compared with other indirect investors in the HMS Master Fund, until all of the assets of the HMS Master Fund have been liquidated.

The deadline for the Company to make a Continuation Election has been extended to 20 August 2019. Accordingly, if the Company is unable to obtain the requisite Shareholder approval by 19 August 2019 to enable it to make a Continuation Election, then unless Highbridge further extends the deadline, the Company will be unable to make a Continuation Election and will be required to request that the Company's entire investment in HCC is distributed to it, over time, through the payment of cash dividends.

As announced on 8 July 2019, following consultation with a majority of Shareholders, the Board considers that making a Continuation Election is in the best interests of the Company and of the Shareholders as a whole. Accordingly, the Board is now seeking authority from Shareholders, subject to the satisfaction of the Continuation Conditions, to make consequential changes to the Company's investment policy and to change the Company's name (the "Resolution") in order to continue the Company by transferring some or all of its holding in HCC to the TCF Feeder, over time, effected through the issuance of in-kind dividends consisting of new shares in the TCF Feeder to the Company (the "Continuation").

Investment in the Tactical Credit Fund

The Tactical Credit Fund is a multi-strategy credit fund that seeks to generate returns from relative value and idiosyncratic opportunities. The Tactical Credit Fund, which launched in November 2013, currently invests in six credit focused sub-strategies: (i) mid-cap convertible credit; (ii) European convertible credit; (iii) capital structure arbitrage; (iv) event credit; (v) income investments and (vi) distressed credit and reorganised equities.

TCF invests in convertible securities, non-convertible bonds and loans, preferred and common equity securities, and warrants, options, and other derivatives as well as other instruments. TCF invests in global markets with a focus on North America and Europe. Typically, TCF purchases convertible bonds, non-convertible bonds or loans, or other securities along with one or more other instruments, including any of the following, as a hedge: stocks, options, bonds, credit derivatives, interest rate swaps, treasuries and interest rate futures.

The Board believes that the investment strategy of the Tactical Credit Fund, which seeks to generate its return in a similar manner to the long-standing credit allocation within the HMS Master Fund, presents an opportunity for Shareholders wishing to remain invested in the Company. The Board further believes that investing in the Tactical Credit Fund through the TCF Feeder offers an opportunity for the Company to produce positive returns with low volatility for Shareholders. Pursuant to the Continuation, the Company will receive shares in a non-restricted series sterling share class of the TCF Feeder.

Since its inception, on 1 January 2012^1,2, the tactical credit strategy (the "TCF Strategy") has achieved 8.24 per cent. annualised net returns, 3.77 per cent. annualised volatility, a Sharpe Ratio of 1.94 and low beta relative to equity and credit indices (calculated in US Dollars). Shareholders should note that past performance is not necessarily indicative of future results and that there can be no assurance that the Company's and/or TCF's return objectives will be realised or that the Company and/or TCF will not experience losses.

As set out below, the Company's investment policy and the Company's name reflects its current investment in the HMS Master Fund (indirectly through HCC). Accordingly, if approved, the Continuation will require the Company to amend its investment policy and the Board believes it is appropriate to change the Company's name to reflect its investment in the Tactical Credit Fund.

Please see paragraphs 3 and 4 of Part I of the Circular for further details on the Tactical Credit Fund, the proposed new investment policy and the proposed new name of the Company.

Cash Exit Offer

The Board is offering Shareholders a cash exit for all or part of their shareholding by way of a redemption offer (the "Cash Exit Offer") which is conditional on the Continuation being approved, and on the Continuation Conditions being satisfied. Shareholders electing to redeem their Shares pursuant to the Cash Exit Offer will receive, over time, a proportion of the actual amount received by the Company from the realisation of the assets (less any liabilities) attributable to the Redemption Portfolio. Such assets shall comprise: (I) the net realisation proceeds of such portion of the Company's holding in HCC which is attributable to their holding of Shares, (ii) the redeeming Shareholders' pro rata share of the Residual AllBlue Assets following their realisation; and (iii) the pro rata share of any cash held by the Company, less the costs and expenses of effecting such redemptions. Such net proceeds will be paid to the relevant Shareholders as soon as practicable following receipt of such realisation proceeds by the Company in connection with the wind down of the HMS Master Fund and the realisation of the Residual AllBlue Assets. The realisation proceeds associated with the HMS Master Fund wind down are expected to be received by the Company from HCC on a staggered basis over a period of time and, based on the information Highbridge has provided, the first payment is expected to be made in October 2019.

The Resolution to be tabled at the Extraordinary General Meeting relates only to the Continuation of the Company and, as such, is to be viewed as separate from the Cash Exit Offer. Shareholders should note that, if they wish to participate in the Cash Exit Offer, further action is required to be taken by them. Information on such action to be taken by Shareholders seeking to participate in the Cash Exit Offer is set out in Part II of the Circular.

Continuation Conditions

It should be noted that the proposed Continuation will take effect only if: (i) the Net Asset Value of the Company would be at least £100 million or such higher amount as the Directors consider would be sufficient for the Company to continue to be viable; and (ii) the Company would satisfy the "shares in public hands" requirement of the Listing Rules, in each case, immediately following the redemption of Shares pursuant to the Cash Exit Offer (each of which, individually, is a "Continuation Condition").

In the event that requests for the redemption of Shares pursuant to the Cash Exit Offer are received such that the Board (in its sole discretion) determines that, following implementation of the Cash Exit Offer, either Continuation Condition will not or is unlikely to be satisfied, neither the Continuation nor the Cash Exit Offer will proceed. In such event, the Board proposes to commence the Managed Wind-down of the Company as further described in paragraph 7 in Part I of the Circular.

Change to the Company's name

In connection with the proposed investment into Highbridge's Tactical Credit Fund, the Board is proposing that, subject to satisfaction of the Continuation Conditions, the name of the Company be changed from "Highbridge Multi-Strategy Fund Limited" to "Highbridge Tactical Credit Fund Limited".

Regulatory Considerations

The Company is a closed-ended investment company limited by shares. The Company is incorporated and domiciled in the Island of Guernsey. The Company operates under the Companies (Guernsey) Law 2008, as amended and regulations made under that law. The Company is regulated as an authorised closed-ended investment fund by the Guernsey Financial Services Commission (the "GFSC") and is subject to the Authorised Closed-Ended Investment Schemes Rules 2008 (the "ACIS Rules"). Pursuant to the ACIS Rules the GFSC will be notified of the Proposals.

The Board shall be entitled to defer any effective date specified in the Circular and the implementation of the Proposals in its absolute discretion to accommodate any legal, regulatory or operational requirements that are not resolved prior to or on the relevant effective date.

Shareholder Approval Required

In order to implement the Continuation, it is necessary to seek Shareholder approval to change the Company's investment policy and the Company's name. The Circular sets out details of, and seeks your approval for, the proposed Continuation and explains why the Board is recommending that Shareholders vote in favour of the Resolution to be proposed at the Extraordinary General Meeting to be held on 16 August 2019.

The notice in respect of the Extraordinary General Meeting is set out at the end of the Circular.

Change to the Investment Policy

The Company's existing investment policy reflects its investment in HCC. Consequently, in connection with the proposed Continuation, the Board is seeking Shareholder approval for a new investment policy set out below. The adoption by the Company of the new investment policy is conditional on Shareholder approval and satisfaction of the Continuation Conditions. The proposed new investment policy has been approved by the Financial Conduct Authority, subject to Shareholder approval.

The Company's new proposed investment policy (the "New Investment Policy") will be as follows:

"Investment Objective and Policy

The Company's investment objective is to seek to provide positive returns with low volatility through an investment policy of investing predominantly in Highbridge's 1992 Tactical Credit Master Fund, L.P. ("TCF Master Fund" or "TCF") through the 1992 Tactical Credit Fund, Ltd. ("TCF Feeder") or any successor vehicle of TCF Feeder. Accordingly, the Company's published investment policy is consistent with that of TCF. In the event that TCF or TCF Feeder changes its investment policy, the Directors will take appropriate action to amend the Company's investment policy or will consider removing the Company's assets from TCF Feeder so that the Company is not in breach of any applicable regulation.

The Company shall continue to have investment exposure to Highbridge Multi-Strategy Fund until such time as such investment has been fully realised and redeployed within TCF.

TCF

TCF is a private, multi-strategy credit investment fund whose principal investment objective is to achieve a positive return on capital by applying fundamental credit research combined with intra-capital structure hedging strategies to select credit-sensitive investment opportunities. Highbridge Capital Management, LLC ("Highbridge"), a Delaware limited liability company, serves as the investment manager of TCF. To achieve its investment objective, TCF invests in convertible securities, non-convertible bonds and loans, preferred and common equity securities, and warrants, options, and other derivatives. TCF invests in global markets with a focus on North America and Europe. Typically, TCF purchases convertible bonds, non-convertible bonds or loans, or other securities along with one or more other instruments, including any of the following, as a hedge: stocks, options, bonds, credit derivatives, interest rate swaps, treasuries and interest rate futures. TCF currently invests in six credit focused sub-strategies: mid-cap convertible credit, European convertible credit, capital structure arbitrage, event credit, income investments, and, distressed credit and reorganized equities (the "Sub-Strategies").

The Company will not invest in other investment companies which are listed on the Official List.

Diversification

Diversification and a spread of risk is achieved by adhering to the limits and restrictions set out below:

·      TCF typically holds 50 to 75 positions diversified across geographies, industries and sectors, however will at all times have a minimum of 30 positions;

·      TCF will invest across a minimum of three Sub-Strategies;

·      No single investment will exceed 10 per cent. of the net asset value of TCF;

·      No aggregate long position in any single issuer will exceed 10 per cent. of the net asset value of TCF; and

·      No aggregate short position in any single issuer will exceed 10 per cent. of the net asset value of TCF.

Each of these investment restrictions will be calculated and applied as at the time of investment.

Cash management

The Company may hold cash on deposit and may invest in cash equivalent investments, which may include short-term investments in money market type funds (''Cash and Cash Equivalents''). The Company may hold up to 20 per cent. of its Gross Asset Value, measured at the time of investment, in investments comprising Cash and Cash Equivalents.

Borrowing and Leverage

Although the Company has power under its Articles of Incorporation to borrow up to an amount equal to 10 per cent. of its net assets at the time of the drawing, the Company will not engage directly in any structural borrowing and any borrowing would only be for the purpose of managing day-to-day cash flow, for meeting expenses of the Company or for funding repurchases of Shares. For the avoidance of doubt, this limit only applies to the Company and not TCF.

TCF utilises leverage in its investment program. Leverage may take a variety of forms, including margin loans by TCF's prime brokers for the purchase or sale of securities and implicitly as a result of low margin requirements, certain futures contracts and other derivative investments such as equity total return swaps.

Depending on the extent of the leverage utilised for TCF, its assets will increase or decrease at a greater rate than if extensions of credit were not utilised. TCF may purchase or sell short securities without an offsetting position in a related security when it is determined that a particular security is undervalued or overvalued. TCF may utilise interest rate hedging using swaps, treasuries, interest rate futures or other derivative instruments. Additionally, TCF may employ single name and index credit derivatives in an attempt to hedge credit exposure. TCF is not subject to any limit on the extent to which borrowings or leverage may be employed."

Timetable

The indicative timetable of principal events is set out below:

EXTRAORDINARY GENERAL MEETING
	2019
Circular sent to Shareholders	31 July
Latest time and date of receipt of Form of Proxy for the Extraordinary General Meeting	8:30 a.m. on 14 August
Extraordinary General Meeting	8:30 a.m. on 16 August
Announcement of results of the Extraordinary General Meeting	16 August
CASH EXIT OFFER
Latest time and date for receipt of Redemption Notices and TTE Instructions (together with the relevant CREST Holder Forms) for the Cash Exit Offer	8:30 a.m. on 14 August
Record Date	5:00 p.m. on 14 August
Announcement of results of the Cash Exit Offer	16 August
Cash Exit Redemption Date	19 August
Announcement of the level of initial cash distribution to be made to Shareholders redeeming Shares in the Cash Exit Offer	By early October
Initial, subsequent and final payment of Cash Exit Proceeds*		Within 5 Business Days following receipt by the Company of cash proceeds of realising assets comprised in the Redemption Portfolios**
*Shareholders should note that there is no CREST payment method available and therefore Shareholders holding their Shares through CREST (i.e., in uncertificated form) must complete and return (together with the submission of a TTE Instruction) a CREST Holder Form to the Registrars including bank details. Shareholders who have not indicated bank details (either in the Redemption Notice or the CREST Holder Form(s)) will be paid by cheque despatched at the latest known address as indicated on the Shareholders' register. **Shareholders should note that the Company may hold back the payment of cash proceeds of realising assets comprised in the Redemption Portfolios until a material amount is available for distribution to redeeming Shareholders to avoid the cost and administrative burden of distributing small amounts.

Each of the times and dates in the above expected timetable may be extended or brought forward without further notice. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a Regulatory Information Service. All references are to London time unless otherwise stated.

Further information

A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Circular will also be available on the Company's website: https://www.highbridgemsfltd.co.uk.

Definitions

Terms used but not defined in this announcement shall have the meanings given to such terms in the Circular.

Enquiries:

Peel Hunt LLP		020 7418 8900
Liz Yong / Luke Simpson
Praxis Fund Services Limited		01481 737 600
Company Secretary

LEI: 213800397SYHLYFH5961

Note 1: The TCF Strategy refers to, collectively, the Convertible Credit & Capital Structure Arbitrage Allocation (the "Highbridge Multi-Strategy Fund Allocation") within the Highbridge Multi-Strategy Fund from January 1, 2012 to October 31, 2013 and TCF beginning in November 2013. The Highbridge Multi-Strategy Fund Allocation and TCF are managed by Mr. Hempel and Mr. Segal. Please see note 2 below for additional detail regarding the TCF Strategy.

Note 2: PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RETURNS There can be no assurance that TCF's objectives will be realized or that TCF will not experience losses. The TCF Strategy performance depicted is not solely the performance of a standalone Highbridge fund. The performance incorporates numbers based on the trading P&L of the Highbridge Multi-Strategy Fund Allocation from January 1, 2012 to October 31, 2013. To generate the estimated returns, Highbridge has made assumptions on the amount of capital that would be required to support the strategy in a single strategy fund based on its view of the strategy's risk profile. Pro forma returns are shown net of a 2 per cent. management and 20 per cent. incentive compensation and 40 bps of estimated expenses. TCF is managed by the same team of investment professionals that manages the Highbridge Multi-Strategy Fund Allocation. TCF and the Highbridge Multi-Strategy Fund Allocation have historically followed a similar or substantially similar investment strategy. TCF was launched in November 2013. Actual returns are shown beginning on November 1, 2013 and are presented net of a pro forma 2 per cent. management fee, 20 per cent. incentive compensation and 40bps of estimated fund expenses. Certain recent performance is estimated and unaudited. Note: TCF was launched in November 2013. TCF returns are net of 2 per cent. management fee, 20 per cent. incentive compensation, and actual fund expenses. Inception to date performance statistics for TCF are: 6.84 per cent. annualized net return, 3.73 per cent. annualized volatility, (4.68 per cent.) maximum drawdown and 1.57 Sharpe Ratio.

IMPORTANT INFORMATION

This announcement appears as a matter of record only and does not constitute an offer to issue or sell, or a solicitation of an offer to purchase, subscribe for or otherwise acquire, any securities in any jurisdiction. The information contained in this announcement is given at the date of its publication and is subject to updating, revision and amendment. The contents of this announcement have not been approved by any competent regulatory or supervisory authority.

All investments are subject to risk. Past performance is no guarantee of future returns. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results. This document is not intended to constitute legal, tax or accounting advice or investment recommendations. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. Statements contained in this document that are not historical facts are "forward-looking statements" which are based on current expectations, estimates, projections, opinions and beliefs of the Company and/or its investment manager. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Forward-looking statements can be identified in some cases by the use of forward-looking terminology, including terms such as "intends", "intention", "will", "continue", "believe", "view" or, in each case, variations or comparable terminology. Forward-looking statements are not guarantees of future events or performance. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict. Actual events or results or the actual performance of the Company and/or TCF may differ materially from those reflected or contemplated in such forward-looking statements.

 

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