Scottish Mortgage raises £125 million in debt

RNS Number : 8599B

Scottish Mortgage Inv Tst PLC

07 April 2017

 

Scottish Mortgage Investment Trust PLC

Legal Entity Identifier: 213800G37DCS3Q9IJM38

7 April 2017

Scottish Mortgage Investment Trust PLC raises

£125 million in private placement debt

Scottish Mortgage Investment Trust PLC announces that it has agreed to raise a total of £125 million in long term, fixed rate, senior, unsecured private placement notes, denominated in sterling. The purpose of this transaction is to obtain long dated unsecured sterling denominated financing at what the company believes to be attractive pricing levels, with the intention of enhancing shareholder returns over the long term.

The private placement agreement provides for total borrowings of £105 million, with a funding date of 6 April 2017, through the issuance of three notes: one 25 year note for £45 million with a fixed coupon of 3.05%, one 27 year note for £30 million with a fixed coupon of 3.30% and a 30 year note for £30 million with a fixed coupon of 3.12%. All coupons will be payable semi annually. The funds raised will be used to retire, in part, an existing bank debt facility of US$165 million which is to due to mature in early April 2017.

Further, the Company has agreed to raise an additional sum of £20 million to refinance the company's existing £20 million debenture, at the time this matures in 2020. This note will have a fixed coupon of 3.65%, payable semi annually, and a tenor of 24 years. 

The private placement agreement forms part of the existing gearing facilities for the company. There will be no change to the overall level of indebtedness of the Company as a result of these borrowings.

Santander acted as sole placement agent for the transaction.

John Scott, Chairman of Scottish Mortgage, says:

"Our current borrowing facilities comprise principally some US$450 million in floating rate loans and three fixed rate, long term debentures totalling £145 million.  The latter were arranged many years ago and pay interest rates which reflect the circumstances of those times - which are considerably higher than the rates available today. We are unable to pre-pay these debentures without significant penalty, but I am pleased to say that we have taken advantage of current market conditions which allow us to access long term fixed rate sterling at rates of just over 3% per annum.  We will use this to reduce Scottish Mortgage's exposure to possible future increases in interest rates, as well as starting the programme of replacing our existing fixed rate debentures, the first of which will mature in 2020, and whose successor facility is now in place. When this new £20 million facility replaces its predecessor in 3 years' time, the interest rate on that £20 million tranche will fall from 14% to 3.65%.

"In committing Scottish Mortgage to a borrowing programme which stretches to 2047, the Board looked both at the interest costs, which average some 3.22%, and the Company's long term investment record, which in the five years to 28 February 2017 has seen a compound increase in NAV per share of 19.2% per annum."

Performance

Periodic Performance (%)

	1 Year	3 Years	5 Years	10 Years
Share Price	42.1	65.0	169.1	296.7
NAV	40.1	63.4	141.2	233.4
Index*	37.7	58.4	96.9	151.6

Discrete Performance (%)

	31/12/11 - 31/12/12	31/12/12 - 31/12/13	31/12/13 - 31/12/14	31/12/14 - 31/12/15	31/12/15 - 31/12/16
Share Price	30.1	39.8	21.4	13.3	16.5
NAV	25.4	32.4	16.3	14.8	15.3
Index*	12.0	21.0	11.3	4.0	29.6

Performance source: Morningstar, total return.

*FTSE All-World Index

All data as at 28 February 2017 unless otherwise stated.

Past performance is not a guide to future returns.

With any investment, capital is at risk.  The value of shares can fall as well as rise and investors may not get back the amount invested. The trust's risk could be increased by its investment in unlisted investments.  These assets may be more difficult to buy or sell, so changes in their prices may be greater.  Due to the trust's investments in overseas securities, changes in the rates of exchange may also cause the value of investments to go down or up. Scottish Mortgage also invests in emerging markets and is only suitable for those investors prepared to accept a higher level of risk. The trust can borrow money to make further investments (sometimes known as 'gearing' or 'leverage'). The risk is that when this money is repaid by the trust, the value of the investments may not be enough to cover the borrowing and interest costs, and the trust will make a loss. If the trust's investments fall in value, any invested borrowings will increase the amount of this loss.

Baillie Gifford & Co Limited

Company Secretaries

7 April 2017

Regulated Information Classification: Additional regulated information required to be

disclosed under the laws of a Member State

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