Information  X 
Enter a valid email address

PSource Struct Debt (PSD)

  Print      Mail a friend

Friday 19 April, 2013

PSource Struct Debt

Notice of EGM

RNS Number : 8171C
PSource Structured Debt Limited
19 April 2013
 



PSOURCE STRUCTURED DEBT LIMITED

(Registration Number) 47075

 

 

 

For immediate release             

19 April 2013

RECOMMENDED WINDING UP PROPOSAL

Further to the statement in the announcement of interim results dated 27 February 2013, PSource Structured Debt Limited confirms that a circular (the "Circular") has been published regarding a recommended proposal for the winding up of the Company.

The expected timetable of principal events and key extracts from the Circular are set out below. The Circular will shortly be available to view on the Company's website (http://www.psourcestructureddebt.com/) and at the National Storage Mechanism (www.morningstar.co.uk/uk/NSM).

Defined terms used in this announcement shall, unless the context otherwise requires, have the same meanings set out in the Circular.

ENQUIRIES

PSource Capital Limited

Soondra Appavoo, Tel. +44 20 7925 3156

Numis Securities

Nathan Brown, Tel. +44  20 7260 1426

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Latest time and date for receipt of Forms of Proxy in respect of the EGM

 11:00 a.m. on 14 May 2013

Suspension of listing and trading of Shares

7:30 a.m. on 16 May 2013

EGM

11:00 a.m. on 16 May 2013

Cancellation of listing and trading of Shares

8:00 a.m. on 17 May 2013

Each of the times and dates above are references to London time and (other than those relating to the holding of meetings) may be extended or brought forward without further notice.  Any material changes to the above times and/or dates will be notified to a regulatory information service.

 

EXTRACTS FROM CIRCULAR DATED 19 APRIL 2013

CHAIRMAN'S LETTER

 

1.    Introduction

This Circular includes notice of an extraordinary general meeting of the Company, to be held at 11:00 a.m. on 16 May 2013 at Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA at which a special resolution will be proposed to wind up the Company (the "Proposal").

As part of the Proposal, the Board intends to terminate the Investment Management Agreement and the Management Agreement (the "Agreements") as at 1 April 2013 and to settle any performance fee accruals under those Agreements as described in more detail under "Termination of the Agreements" below. Because the Manager and the Investment Manager are classified as related parties of the Company under the Listing Rules this part of the Proposal is classified under the Listing Rules as a "related party transaction", which amongst other things requires the approval of Shareholders. 

The Proposal is subject to Shareholder approval at the EGM.  The purpose of this Circular is to provide Shareholders with details of the Proposal and of the Resolutions required to implement the Proposal and to recommend that Shareholders vote in favour of the Resolutions.

2.    Background

The Company is a Guernsey-registered, closed-ended investment company incorporated on 5 June 2007 and listed on 3 August 2007.  The Company's issued share capital currently comprises shares denominated in US Dollars, which are admitted to the Official List and to trading on the Main Market on the London Stock Exchange.

The Board recognised in September 2011 that a continuation of the Company in its current form was not in the interests of Shareholders and on 5 April 2012 put forward proposals to Shareholders for the Winding Down, changes to the Investment Objective and Policy, and amendments to the Agreements.  At an extraordinary general meeting held on 16 May 2012, Shareholders duly passed the resolution implementing these proposals.

In the Company's annual report dated 27 September 2012, the Board committed to consult with major Shareholders and report by the end of March 2013 on the options to put the Company into liquidation at an appropriate point. 

The Board has today announced recommended proposals for the winding up of the Company and the termination of the Agreements.

This circular sets out the background to and details of the Proposal, and convenes the EGM at which Shareholders will be asked to vote on the Resolutions.

3.    The Proposal

Liquidation of the Company

The process to liquidate the Company commences with a board meeting at which the Directors confirm that they have made a full inquiry into the affairs of the Company and that, in their opinion, the Company will be able to pay its debts in full.  The board meeting has now been held and the Directors have so confirmed, and have resolved to recommend to the Shareholders that the Company be wound up.

 

An extraordinary general meeting of the Company is then held (notice of which is set out in this Circular) in order to pass a special resolution to approve, amongst other things, the voluntary winding up of the Company and the appointment of a liquidator. The voluntary winding up is deemed to commence at the time of the passing of this resolution. The Company will then cease to carry on its business (except as required for the winding up), but will retain its corporate state and powers until dissolution. Within 7 days of the Resolutions being passed, the Resolutions shall be advertised in the Gazette Officielle.

Entitlement of Shareholders on the Winding up

The Net Asset Value as at 31 December 2012 was USD$0.1371 per Share.

The Company currently has very limited cash resources, as detailed below, and therefore it is not expected that there will be any distribution to Shareholders either prior to or immediately following the appointment of the Liquidators.

Shareholders should note that the timing and value of any distributions to Shareholders during the Winding Up will be subject to the disposal of Investments (which are illiquid and whose realisation will be subject to asset-specific factors and to market conditions) and to the Company's ongoing working capital requirements.

Any distributions to Shareholders during the Winding Up will be paid pro rata to Shareholders as listed in the register on the date the register closes.  Distributions will be made by cheque and sent to the relevant Shareholder's at their registered address. If any Shareholder's entitlement on the distribution is less than £5, such amount will not be distributed to such Shareholder but instead will be donated to a charity to be selected by the Liquidators.

It is not currently possible, due to the illiquid nature of the Investments, to estimate the expected timing of any distribution or of the conclusion of the Winding Up. Any  distribution will only be made subject to the Liquidators' statutory duties to seek out, adjudicate and pay creditors' claims.

Portfolio realisation

The Portfolio comprises private debt and equity securities issued by North American companies. The majority of the Company's assets are held in syndication with other funds associated with the Company's Investment Manager.

These funds (principally, Laurus Master Fund Limited, Valens Offshore Fund and Valens US Fund) are also in wind down or liquidation. All of the assets in the Portfolio are therefore in some kind of disposal process. Given that in all cases, these are private assets (although in some cases held in publically traded companies), the time taken to exit from these positions is difficult to estimate.

The Board intends to terminate the Agreements (see below). It is the intention of the nominated Liquidators to engage the Investment Manager to act as an investment adviser during the liquidation, with a mandate of actively seeking to realise the Investments. Such engagement is subject to contract, but it is the intention of the nominated Liquidators and the Investment Manager to enter into the Investment Advisory Agreement with the following terms:

·      no periodic management fee

·      a cash realisation fee of 2.5 per cent. of net cash proceeds received by the Company during the Winding Up

·      for assets other than Parabel, an incentive fee of 10 per cent. of the net cash proceeds realised on each asset in excess of the balance sheet valuation at 31 December 2012

Stock exchange dealings

The last day for dealings in the Shares on the London Stock Exchange on a normal three day settlement basis will be 10 May 2013.  After 10 May 2013, dealings should be for cash settlement only and will be registered in the normal way if the transfer, accompanied by the documents of title, is received by the Registrar by close of business on 15 May 2013. Transfers received after that time will be returned to the person lodging them.

Application will be made to the UKLA for suspension of listing of the Shares on the Official List of the UKLA and application will be made to the London Stock Exchange for suspension in trading in the Shares as from 7:30 a.m. on 16 May 2013.  The register of members will be closed at 5:00 p.m. on 16 May 2013 and the Shares will be disabled in CREST at start of business on 17 May 2013. In addition, an application will be made for the listing and trading of the Shares to be cancelled on the first business day following the passing of the Resolutions, at 8:00 a.m. on 17 May 2013.

After liquidation of the Company and making the final distribution to Shareholders, existing certificates in respect of the Shares will cease to be of value and any existing credit of such shares in any stock account in CREST will be redundant.

4.    Termination of the Agreements

As part of the Proposal, the Board intends to terminate the Agreements as at 1 April 2013 and to settle any performance fee accruals under those Agreements as described below.

As part of the restructuring of the Agreements in April 2012, the board negotiated a 25 per cent. write-off in the historically accrued performance fee, reducing it to US$4,185,888 and further, negotiated that its payment would be deferred until either Parabel achieved an IPO or a trade sale which resulted in a majority stake (i.e. greater than 50 per cent.) being acquired by a third party.  The Board also negotiated an entitlement to elect on termination of the Investment Management Agreement to discharge the performance fee liability in specie rather than in cash, either in Parabel common stock or PetroTech securities based on a valuation per share of Parabel common stock of US$8.70 per share.

There is a further provision that, in the event of an IPO or majority control transaction taking place within six months of such a transfer, which results in Parabel being sold at a different price to US$8.70 per share of Parabel common stock, then the Company would either receive a refund by means of a return of some of the Parabel shares or would top up the fee paid (subject always to the US$4,185,888 cap) (the "True Up Obligation").

Upon termination of the Agreements, the Board has agreed to a revised settlement of the performance fee accrual of US$4,185,888 in specie by transferring 20.8 per cent. of its PetroTech equity (96 out of every 460 shares of participating stock and common stock held). Based on the 31 December 2012 balance sheet valuation, these securities have a valuation of zero.

This proposed settlement of the performance fee accrual is equivalent to a valuation per Parabel share of US$4/share. If the settlement had been based on the valuation per Parabel share of US$8.70/share set out above, the Company would have transferred 7.9 per cent. of its PetroTech equity to the Manager and Investment Manager.

In return for the revised valuation basis of the settlement, the Manager and the Investment Manager have agreed that:

(a) the True Up Obligation will be waived; and

(b) approximately US$70,000 of the management fees accrued to 31 March 2013 will not be payable until a disposal of the Company's investment in North Texas Steel, or another cash disposal of in excess of $100,000, occurs.

The effect of the True Up Obligation being waived is that the Company will no longer have an obligation to adjust its transfer of Parabel shares in the event of Parabel being sold (or floated in an IPO) within six months of the Winding Up. A sale (or IPO) at a price below US$8.70 per share of Parabel common stock would have resulted in the Company transferring additional Parabel shares to the Manager and Investment Manager (subject to the US$4.185 million cap). Conversely if Parabel was sold (or floated in an IPO) at a price higher than US$8.70 per share of Parabel common stock, this would have resulted in the Company receiving a return of some of the Parabel shares transferred.

Under this proposal the Company would retain 100 per cent. of its PetroTech preference shares (currently held at US$4.6m and representing 100 per cent. of the value of the Company's holding in PetroTech/Parabel).

5.    Current cash balances

There have been only limited disposals during the half year ended 31 December 2012, the only significant sale being the disposal of the Company's holdings in BioDelivery Sciences for net proceeds of US$671,309.

The Company had a small cash balance of US$336,683 at 31 December 2012. As at 17 April 2013, this cash balance had reduced to US$254,169.

The Company has no debt or overdraft facility with its bankers, Investec Specialist Private Bank.

The monthly expenses of the Company in its current form equate to approximately US$37,000. In the absence of any further cash inflows (none of which can be guaranteed), the Company does not have the cash resources to continue operation in its current form for an extended period.

6.    Significant investment in Parabel

The Group has a significant holding in PetroTech, a Delaware corporation. PetroTech is a privately held holding company whose principal asset at 30 June 2012 was 100,000,000 shares of the common stock of Parabel and US$101,000,000 of debt issued by Parabel.  PetroTech is owned jointly by the Group, Laurus Master Fund and Valens (which are funds managed by the Investment Manager).

Parabel is registered with the SEC and quoted on OTC Link (PABL:US), following a reverse merger into a quoted shell in December 2008. OTC Link is an electronic quotation system that displays quotes from broker dealers for many over-the-counter securities

On 1 February 2013, Parabel announced an investment of US$15m by Dhabi Cayman One Ltd., a Cayman domiciled entity linked to an Abu Dhabi partner into Parabel Ltd. which is a wholly owned subsidiary of PA LLC, which is a subsidiary of Parabel.

7.    Valuation

The Group owns 8.24 per cent. of the common stock and US$7.2 million in preferred stock in PetroTech. The Board has undertaken a review of the valuation of Parabel as at 31 December 2012. It set the valuation at 31 December 2012 at US$4,600,000 (including accrued income).  This is based on a valuation of the Parabel debt held by Petrotech of US$100m and no value being ascribed to the common stock of Parabel held by PetroTech. This represents 64 per cent. of the par value of the preference shares the Company holds in PetroTech (with accrued interest held at nil).

Notwithstanding the significant write-down in valuation at 31 December 2012, the Board believes that following the investment by the Abu Dhabi Group, the Company's holding in Parabel may have upside potential.

8.    Risks associated with the Proposal

Material risk factors associated with the Proposal and which are known to the Company are set out below. Shareholders should carefully consider all such risk factors (although there may be others which are of equal or greater magnitude which are not known to the Company or which the Company deems to be immaterial and which, accordingly, are not set out in this document or which may be applicable to certain Shareholders or types of Shareholders and of which the Company is unaware). Further, as the market conditions change or develop over time, these matters may be subject to risk factors not currently contemplated. However, the Board considers the following to be material risk factors relating to the Proposal:

·      The actual amount of the liquidation costs may differ from the Board's estimate, which may impact the amount of any final distribution to Shareholders. In particular, Shareholders should note that  the costs and expenses of the Company during the Winding Up may be significant, given the length of time it may take to realise the holdings.

·      Due to the illiquid nature of many of the Investments, it may take a significant time to effect a realisation of Investments in the Portfolio and hence to make any payments under the liquidation of the Company.  Furthermore the amounts received by the Company on such realisations may vary significantly from their valuation in the NAV and the costs involved in releasing assets (which would be borne by Shareholders) may be significant.

·      The Company currently holds only limited cash balances.  It would therefore be unable to continue to operate in its current form for an extended period and, even in the event of a Winding Up, it may therefore not be able to protect its Investments from dilution by further funding rounds.

·      The Company's assets may not be realised at the values at which they have been included in the calculation of the Net Asset Value. The financial position of investee companies may deteriorate before the Company's Investment can be realised. Some of the Investments may be incapable of realisation at any material value.

·      All bar one of the Investments are held in syndication with other funds managed by the Investment Manager which may make it more difficult or impossible for the Company to dispose of such Investments independently.

·      During the Winding Up the Portfolio is likely to become more concentrated as the number of Investments reduces, so increasing the exposure of the Company to the Investments remaining in the Portfolio.

9.    Extraordinary general meeting

At the EGM, it is intended that the following will be proposed as to Resolution 1 as an ordinary resolution and as to Resolution 2 as a special resolution for Shareholders' approval:

Resolution 1:

"THAT the proposal to terminate the management agreement dated 31 July 2007 between the Company and PSource Capital Guernsey Limited ("PSource Guernsey"), as amended and restated from time to time and as novated to PSource Capital Limited (the "Manager") on 26 July 2012 (the "Management Agreement") and the investment management agreement dated 31 July 2007, between the Company, PSource Guernsey and Laurus Capital Management, LLC, as amended from time to time and as novated to the Manager on 26 July 2012 and to settle any accrued performance fees under those agreements, as more fully described in the circular with the title "Recommended winding up proposal and notice of extraordinary general meeting", sent to shareholders of the Company on 19 April 2013, be and are hereby approved."

Resolution 2:

"THAT:

(a) the Company be wound up voluntarily;

(b) James Robert Toynton and Alan John Roberts of Grant Thornton Limited, Lefebvre House, Lefebvre Street, St. Peter Port, Guernsey, GY1 3TF be and are hereby appointed as joint liquidators (the "Liquidators") for the purposes of winding up the Company's affairs;

(c) the remuneration of the Liquidators be calculated by reference to the time properly given by the Liquidators and its staff in attending to matters arising in the winding up and the Liquidators be and is hereby authorised to draw such remuneration monthly or at such longer intervals as it determines;

(d) the Company's records and books be held to the order of the Liquidators until the expiry of six years after the date of dissolution of the Company after which the Liquidators may destroy records as they see fit in accordance with the requirements of the Companies (Guernsey) Law 2008 (as amended from time to time);

(e) any distribution amounts due to the shareholders of £5.00 or less be donated to a charity of the Liquidators' choice.

(f) subject to the passing of resolution 1, the Liquidators be authorised to settle amounts under the termination agreement in respect of the Management Agreement entered into between the Company and the Manager, on or around the date of the Circular."

10.   Meeting and Resolutions

The Proposal is subject to the approval of the Resolutions by Shareholders at the EGM. Further, because the proposed settlement of any performance fee accruals upon termination of the Agreements is a related party transaction it is conditional upon, amongst other things, the approval of Shareholders in general meeting. You will find set out at the end of this document a notice of extraordinary general meeting convening the EGM.

All persons holding Shares at 11:00 a.m. on 14 May 2013, or if the EGM is adjourned, on the register of members of the Company 48 hours before the time of any adjourned meeting, shall be entitled to attend or vote at that meeting and shall be entitled to one vote per Share held.

A quorum consisting of two Shareholders present in person or by proxy and being entitled to vote is required for the EGM. In order for Resolution 1 to be passed, it must be approved by more than 50 per cent. of the votes cast or, if on a poll, by Shareholders representing more than 50 per cent. of the votes cast, by those Shareholders present in person or by proxy and being entitled to vote. In order for Resolution 2 to be passed, it must be approved by at least 75 per cent. of the votes cast or, if on a poll, by Shareholders representing at least 75 per cent. of the votes cast, by those Shareholders present in person or by proxy and being entitled to vote.

Because each of the Investment Manager and Soondra Appavoo, who is an associate of the Manager under the Listing Rules by reason of his wife's shareholding in PSource Guernsey, the holding company of the Manager, are precluded from voting in relation to the proposed settlement of any performance fee accruals upon termination of the Agreements, each of the Investment Manager and Soondra Appavoo have undertaken to abstain and ensure that its and his associates will abstain from voting on Resolution 1 in the event that either they or their respective associates own Shares. As at 18 April 2013, being the last practicable day prior to publication of this document, the Investment Manager and its associates held 500,000 Shares and Soondra Appavoo held 20,000 Shares.

11.   Communication

Shareholders will be able to view all notices and communication in relation to the Proposal on the Company's website - www.psourcestructureddebt.com.

12.   Action to be taken by Shareholders

Enclosed with this letter is a Form of Proxy for use at the EGM. Shareholders are urged to complete the Form of Proxy and return it to the Company's registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham BR3 4TU either by personal delivery or post, so as to arrive not later than 48 hours before the time fixed for the EGM.

The return of a Form of Proxy will not prevent a Shareholder from attending the EGM and voting in person if he/she is entitled to do so and so wishes.

13.   Importance of vote

As set out above, the Company does not have the cash resources to continue operation in its current form for an extended period. The Board believes that there is a very limited possibility of the Company securing cash resources through disposals from the Portfolio in the near term, and no foreseeable possibility of the Company securing debt or equity funding. The Board therefore believes that it is important that Shareholders approve the Resolutions in order that the Company may implement the Winding Up and concurrently terminate the Agreements and cease the other expenditures associated with operating as a listed company.

If the Resolutions are not passed by the Shareholders and the Winding Up does not proceed the Company would incur unnecessary additional expenditure in respect of its continuing operations and in respect of developing and implementing alternative proposals for the Company's future. In the absence of any further cash inflows the insolvency of the Company may also result, which would reduce the possibility of Shareholders receiving distributions.

RECOMMENDATION

The Board, which has received advice from Numis to this effect, considers the Proposal to be fair and reasonable as far as Shareholders are concerned and that the Resolutions to be proposed at the EGM to be in the best interests of the Company and its Shareholders as a whole. Soondra Appavoo has not taken part in the Board's consideration of the matter for the fair and reasonable statement in relation to the amendment to the Investment Management Agreement because he is an associate of a related party. In providing advice to the Board,


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
NOENKCDPNBKDQQD

a d v e r t i s e m e n t