Update re Financing Facility

RNS Number : 1381J

Queen's Walk Investment Limited

28 November 2008

 



Update on QWIL's Financing Facility

As at 27 November 2008, the Company had drawn €40.5 million against its financing facility and had undrawn availability of €94.5 million. Given current market yields, the Company should be able to achieve its return objectives on new investments without the need for additional leverage. In addition, in today's highly volatile markets, the Company could have been exposed to material change clauses that might have triggered the requirement for the repayment of the facility on unfavourable terms.  

In light of these circumstances, the Company has successfully negotiated amended terms on a reduced facility, involving a flexible two year repayment schedule of the outstanding debt and has reduced the risk associated with material change clauses that could have forced a repayment of the debt on unfavourable terms. The Company's cash balance of €16.5 million as at 27 November 2008 and continued cash flows from its investment portfolio support the repayment schedule and the timely redemption of the loan facility.  The Company believes that the renegotiated loan facility is more prudent than continued dependence on an unpredictable lending market.  

The Company has completed negotiations with its lender and the key elements of the amended facility are summarised below.

The Company has committed to repay the outstanding balance of the facility by October 2011, pursuant to an agreed loan amortisation schedule and will not make any further draw downs.  The Company believes it should be able to satisfy the loan amortisation schedule with the €16.5 million of cash currently on the balance sheet and the expected cash flows from its investment portfolio.  In addition, at the end of each quarter, the Company has pledged to keep the outstanding balance of the financing facility below the product of the then applicable advance rate ('Applicable Percentage') and the value of the investment portfolio plus cash (the 'Borrowing Base'). At present, the Company's Borrowing Base is approximately €62.9 million versus a loan balance of €40.5 million. 

At the end of each calendar quarter, the Company has agreed a target loan amount ('Target Loan Amount') with the lenders. The Company has also agreed to an Applicable Percentage for every quarter. The Target Loan Amount and Applicable Percentage Schedule are detailed below:

Date	Target Loan Amount	Applicable Percentage for Residuals
31 December 2008	35,000,000	30%
31 March 2009	33,000,000	30%
30 June 2009	31,000,000	30%
30 September 2009	28,500,000	30%
31 December 2009	27,000,000	27.5%
31 March 2010	25,000,000	20%
30 June 2010	12,000,000	20%
30 September 2010	10,000,000	20%
31 December 2010	0	20%
31 March 2011	0	10%

The Applicable Percentage for the Company's investment grade bond portfolio will be 50%, 40%, 30% and 15% for AA and above, A and above, BBB and above and BB and above; rated bonds respectively.  

The Target Loan Amount will reduce by €11 million in the event that the Magellan 1 transaction is re-financed by the originator, BCP Millennium, before June 2010. The Applicable Percentage for residuals will reduce to 25% if the Magellan 1 transaction is re-financed by BCP Millennium before 31 December 2009.

The Company has committed to use a percentage of its Free Cash (cash proceeds in a quarter less dividends and operating expenses) to amortise the facility. Prior to the Magellan 1 transaction being refinanced, 75% of the Company's Free Cash will be used to repay the facility. After the Magellan 1 transaction is called, 66% of the Free Cash will be used to repay the debt. Once the outstanding balance of the facility is below €22 million, 50% of the Free Cash will be used to repay the facility.  If the outstanding balance of the loan facility is less than the Target Loan Amount on the relevant date, the dividend will be capped at €2.25 million per quarter (or approximately a 19% dividend yield on the share price as at 26 November 2008).  If the Company is unable to satisfy the loan amortisation schedule, the dividend will be capped at 8% on the share price prevailing at the end of each quarter. A failure to meet the loan amortisation schedule would not trigger an event of default.

In the event that the balance of the facility is greater than the Borrowing Base, the Company will have 20 business days to remedy the breach. Failure to remedy the breach would constitute an event of default. 

The Company has agreed to more asset specific tests in exchange for limiting the scope of the material change triggers and believes that the investment portfolio can support the amended facility.

 

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