Publication of Circular

RNS Number : 6533M

SQN Asset Finance Income Fund Ltd

01 May 2018

 

1 May 2018

SQN Asset Finance Income Fund Limited

C Share Redemption and C Share Conversion Extension

Publication of Circular

SQN Asset Finance Income Fund Limited (the "Company"), the leading diversified equipment leasing fund listed in the UK, today announces a proposed capital return of £40 million to holders of C Shares (the "Capital Return") and an extension of the date at which the Company is required to convert the C Shares in issue into New Ordinary Shares (the "C Share Conversion Extension").

Background to the Capital Return

The Capital Return

While the Board is pleased with the performance of the underlying investments made to date in the C Share portfolio and the investment discipline in developing the portfolio, the speed of deployment has been slower than anticipated. At the date of this letter, approximately £66 million of the C Share proceeds has been invested with a further £20 million of commitments expected to be funded in May 2018 and a significant proportion of the outstanding commitments of £36 million expected to be funded prior to the end of June 2018.

In light of the current investment level of the C Share pool and near term pipeline, the Board and the Investment Managers have determined that excess cash of £40 million could be made available within the C Share class ("Excess Capital").

The Board is seeking to distribute the Excess Capital to the holders of C Shares in a cost efficient manner. Having received professional advice, the Board believes that it would be in the best interests of the Company and its Shareholders to return such surplus cash to holders of C Shares by means of a one-off compulsory redemption of a proportion of C Shares at the Redemption Price pro rata amongst all the holders of C Shares on the C Share register at the close of business on 25 May 2018 (the "Redemption Date") being the record date for the Capital Return.

As at the date of this document, there are 180,000,000 C Shares in issue which were all issued under the same tranche.

Approximately 22.82 per cent. of the issued C Share capital will be redeemed on the Redemption Date. Fractions of shares will not be redeemed and so the number of C Shares to be redeemed from each holder of C Shares will be rounded down to the nearest whole number of C Shares.

Payments of redemption proceeds are expected to be effected either through CREST (in the case of C Shares held in uncertificated form) within 10 working days after the Redemption Date, or sent by cheque (in the case of C Shares held in certificated form) 10 working days after the Redemption Date.

The C Shares will be disabled in CREST at close of business on the Redemption Date and the existing ISIN number - GG00BYNJG147 - for the C Shares (the "Old ISIN") will expire. The new ISIN number - GG00BFXYHJ13 - (the "New ISIN") in respect of the remaining C Shares which have not been redeemed will be enabled and available for transactions on 29 May 2018. For the period up to and including the Redemption Date, the C Shares will be traded under the Old ISIN and, as such, a purchase of such shares may have a market claim for a proportion of the redemption proceeds following the activation of the New ISIN. CREST will automatically transfer any open transactions as at the Redemption Date to the New ISIN.

New share certificates will be sent to Shareholders who hold their C Shares in certificated form 10 working days after the Redemption Date, with their old certificates becoming void at close of business on the Redemption Date. 

The Redemption Price

The Company intends to return £40 million (less the costs of the Capital Return) to holders of C Shares at a price equal to 98.32 pence per C Share (the "Redemption Price") which is the aggregate of: (i) the net asset value of 97.28 pence per C Share as at 31 March 2018 (after adjusting for the March 2018 dividend to be paid prior to the Redemption Date); and (ii) a contribution from the Investment Managers to the Company for the benefit of the C Shares equivalent to 1.04 pence per C Share expected to be redeemed. The costs associated with the Capital Return are not expected to be material.

The Investment Managers have agreed to make a contribution to the Capital Return of £425,455, which is equivalent to the management fees earned by the Investment Managers on the Excess Capital since admission of the C Shares to 31 March 2018. This contribution is payable in equal instalments over the period of 12 months from the date the Proposal becomes effective. In addition, the Investment Managers have agreed to waive the management fees in relation to the Excess Capital for the period from 31 March 2018 to the date of the Capital Return. 

The Capital Return at the Redemption Price, when aggregated with the total dividends paid to holders of the C Shares prior to the Redemption Date of 1.9876 pence per C Share, will result in the holders of C Shares on the Redemption Date receiving a total of 100.31 pence per C Share redeemed.

Background to the C Share Conversion Extension

As reported at the time of the Company's half-year report, considerable interest in Suniva and its assets has been expressed from a large number of parties since the tariffs were announced and there are various options which could enable the Company to monetise its investment. These include a sale, a joint venture, a merger or a repositioning of the assets with a new operator.

In order to be in a position to monetise the assets in a reasonable timeframe, the Company has initiated a process which, when completed, will deliver clean title of those assets to the Company and permit the completion of a transaction with an interested party. Negotiations are ongoing with multiple credible parties in parallel. 

The Investment Managers are working towards providing clarity over the outcome of any transaction regarding the Suniva holding and are making every effort to achieve this in as short a time scale as possible, however, the timetable is not certain.

At a general meeting of the Company held on 20 November 2017, the "Calculation Time" in the Articles that sets out the date on which the C Shares shall convert into Ordinary Shares (the "Conversion") was extended to 29 June 2018. This was to ensure that the Conversion would be effected following the ruling from the White House on Suniva's petition under Section 201 of the Trade Act of 1974.

Therefore, the Board feels that it is prudent to allow for Conversion beyond 29 June 2018 and, as such, is proposing to extend the date of Conversion to 28 June 2019, or such earlier time as many be determined in accordance with the Articles.

In the event that the Board believes that it is unlikely that Suniva will be resolved in a reasonable time period post June 2018, the Company will consider alternative options to allow for Conversion.

General Meeting, Ordinary Class Meeting and C Class Meeting

In order to effect both the Capital Return and the C Share Conversion Extension, the Board is proposing to amend the Company's Articles by (i) varying the rights of the C Shares of the Company to enable them to be compulsorily redeemed at the absolute discretion of the Company and (ii) further extending the longstop date on, or before, which the C Shares in issue are to convert into New Ordinary Shares (the "Proposal").  

The Proposal is subject to Shareholder approval to amend the Company's Articles at the 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 22 May 2018 at 2.00 p.m., 2.05 p.m. and

2.10 p.m., respectively.     

Publication of Circular

The Board announces that 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.

Expected Timetable

	2018
Publication of the Circular	1 May
Latest time for receipt of Forms of Proxy from Shareholders for use at the General Meeting	2.00 p.m. on 18 May
Latest time for receipt of Forms of Proxy from Shareholders for use at the Ordinary Shareholders' Class Meeting	2.05 p.m. on 18 May
Latest time for receipt of Forms of Proxy from Shareholders for use at the C Shareholders' Class Meeting	2.10 p.m. on 18 May
General Meeting	2.00 p.m. on 22 May
Ordinary Shareholders' Class Meeting	2.05 p.m. on 22 May
C Shareholders' Class Meeting	2.10 p.m. on 22 May
Record Date	5.30 p.m. on 25 May
Redemption Date	5.30 p.m. on 25 May
Dealings of C Shares cease under the Old ISIN	5.30 p.m. on 25 May
Dealings of C Shares commence under the New ISIN	8.00 a.m. on 29 May
Latest date for receipt of payment of redemption proceeds to be effected through CREST (in the case of C Shares held in uncertificated form)	11 June
Cheques expected to be despatched in respect of the redemption proceeds (in the case of C Shares held in certificated form)	as soon as practicable on or after Monday 11 June
New share certificates to be sent to Shareholders who hold their C Shares in certificated form	as soon as practicable on or after Monday 11 June

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:

BNP Paribas Sarah Hendry	01481 750 822
Winterflood Securities Limited	020 3100 0000
Neil Langford Chris Mills
Buchanan Charles Ryland 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 Jeremiah Silkowski and Neil Roberts.

 

END

 

 

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