Update on C Share Conversion and Notice of EGM

RNS Number : 6024A

SQN Asset Finance Income Fund Ltd

30 May 2019

 

30 May 2019

SQN Asset Finance Income Fund Limited

Progress on Suniva Investment

and

Update on C Share Conversion

SQN Asset Finance Income Fund Limited (the "Company"), the leading diversified equipment leasing fund listed in the UK, is pleased to announce significant progress on the Suniva investment and an update regarding the C Share conversion.

Following the last update provided in the Company's release of half-year financial accounts in March, the following positive developments have occurred:

-     Litigation with the co-debtor-in-possession ("DIP") lender has reached a satisfactory conclusion.

-     The property tax dispute has been resolved in a favourable manner for the Company.

-     Suniva has exited bankruptcy.

-     Two new asset leases have been entered into for a term of two years and fifteen years respectively.

-     The new owners of Suniva have committed a substantial amount of capital to pursue the distribution of already collected US tariffs to Suniva.

-     Rights under the DIP loan (which amount has already been written off in the Company's books) have been sold for $2.5 million.

-     Court proceedings against the Guarantor have progressed favourably for the Company and direct settlement discussions have begun.

Executed Settlement Agreement

In conjunction with the court-approved plan of reorganisation, the Company has entered into a settlement agreement with the consortium of three hedge funds which now own Suniva. The new owners have committed to recapitalise Suniva and vigorously pursue distributions of the substantial tariffs already collected under the various US trade cases.

Under the terms of the agreement, the Company has entered into a two-year lease with the first quarterly payment of $120,000 due in July 2019. During the term of this lease, the new owners of Suniva have committed to infuse $15 million to $20 million for the sole purpose of collecting the tariffs. The second lease with a term of up to 15 years, will be repaid by a percentage of the tariffs received by Suniva. The new owners of Suniva are strategically positioned in a way that leads them to believe that the two-year term of the first lease should be a sufficient amount of time to facilitate distribution of the tariffs.

As part of the agreement, the Company also has the right to work with a third-party operator, subject to the approval of the new owners, to utilise the equipment as another source of recovery proceeds.  A third-party operator has been identified and a non-binding term sheet has been executed but progress has been slower than expected.

In addition, the Company has sold the rights granted to it under the DIP financing for $2.5 million.

Guarantee

Court proceedings have commenced in New York for enforcement of the guarantee. All rulings to date have been favourable to the Company. Counsel on both sides have encouraged direct settlement discussions between the Company and the Guarantor. The initial meeting between the parties took place in New York in April 2019. An invitation has been extended for the Company to go to China to continue negotiations. This meeting is expected to take place in June 2019. Prior to that, both parties intend to work remotely to enter into a framework agreement for a settlement.

C Share Conversion

Despite these positive developments, there remains uncertainty as to the timing and sources of recovery.  Given the current momentum on the settlement discussions with the Guarantor and the progress in realising value from the Suniva assets, the Board expects a greater level of clarity over the valuation within a reasonable timeframe.  Accordingly, it is proposing that the conversion of the
C Shares be delayed until an agreement is reached with the Guarantor or the court orders an enforcement action which will quantify the amount of the recovery from the guarantee and allow the Company to assess the timing and the amounts required from the other recovery sources, if any, to achieve a full recovery. In the meantime, the C Shares continue to perform well with a high degree of diversification and a covered dividend.

The Company, as advised by the Investment Managers, continues to believe that a combination of the all these initiatives should generate sufficient proceeds to recover the Group's current principal balance outstanding over time. 

General Meeting, Ordinary Class Meeting and C Class Meeting

In order to effect the C Share Conversion Extension, the Board is proposing to amend the Company's Articles to extend the date on which the C Shares in issue will convert into New Ordinary Shares (the "Proposal").  

The Proposal is subject to Shareholder approval to amend the Company's Articles at a General Meeting.  The Resolution will be proposed as a special resolution.

As the Proposal involves an amendment to the Articles and certain amendments to the rights attaching to the C Shares, it is also necessary for each class of the Company's shares to approve the Proposal at a separate class meeting of the holders of the Shares of the respective class. At each such class meeting a special resolution will be proposed.

The General Meeting, the Ordinary Class Meeting and the C Class Meeting will each be held at BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey GY1 1WA on 17 June 2019 at 2.00 p.m., 2.05 p.m. and 2.10 p.m., respectively.

The Proposal will only proceed if the resolutions proposed at each of the General Meeting, the Ordinary Class Meeting and the C Class Meeting are passed by Shareholders.  In the event that any one or more resolutions does not pass, then Conversion will occur by 28th June 2019, as previously approved by Shareholders.

Publication of Circular

A circular in connection with the Proposal (the "Circular") will today be posted to Shareholders. A copy of the Circular will shortly be submitted to the National Storage Mechanism and will be available for inspection at http://www.morningstar.co.uk/uk/NSM and also at the Company's webpage http://www.sqncapital.com/managed-funds/sqn-asset-finance-income-fund.

Terms used in this announcement shall, unless the context otherwise requires, bear the meanings given to them in the Circular.

For further information please contact:

SQN Capital Management, LLC Jeremiah Silkowski Neil Roberts	01932 575 888
Winterflood Securities Limited	020 3100 0000
Neil Langford Chris Mills
Buchanan Charles Ryland Vicky Hayns Henry Wilson	020 7466 5000

Notes to Editor

The Company invests in equipment lease and asset finance arrangements across a diverse portfolio of assets and industries predominantly in the UK, Northern Europe and US. The Company focuses on business-essential, revenue-producing (or cost saving) equipment and other assets with high in-place value and long economic life relative to the investment term.

The Company's Investment Managers are SQN Capital Management, LLC, a Registered Investment Advisor with the United States Securities and Exchange Commission and its subsidiary, SQN Capital Management (UK) Limited. The principals responsible for managing the portfolio are Neil Roberts and Jeremiah Silkowski.

 

END

 

 

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