TIDMPSD
RNS Number : 9588A
PSource Structured Debt Limited
05 April 2012
PSOURCE STRUCTURED DEBT LIMITED
WINDING DOWN PROPOSALS
5 APRIL 2012
Further to its announcement of 30 March 2012, PSource Structured
Debt Limited announces further details of its proposals for a
managed winding down and consequential changes of the Company's
investment objective and policy, and amendments to the investment
management and management agreements.
The Proposals
Subject to the Resolution being duly passed, the Company will
implement the Proposals, which comprise the following
components.
Change of the Investment Objective and Policy
It is proposed that the Investment Objective and Policy be
replaced by the following:
"The Company will be managed with a view to realising its
existing investments comprised in its Portfolio in an orderly and
timely manner (such realisations to be effected in such manner as
the Investment Manager may determine, acting in its discretion
under the control and supervision of the Board) and return the
proceeds of such realisations to shareholders at such times and
from time to time and in such manner as the Board may in its
absolute discretion determine.
The Company will not make any new investments, but may at the
Board's discretion invest in or advance additional funds to or
otherwise participate in the financial restructuring of companies
in which the Company has Investments at the Restatement Date and to
use its discretion to hold cash or short-term money market
instruments from time to time for such purposes as the Board
determines appropriate, including for the payment of dividends, the
meeting of expenses, and the funding of share buybacks. Cash will
be held in accounts with institutions which are rated BBB (or
above) by Standard & Poor's or an equivalent rating by another
reputable agency (or wholly owned subsidiary of such
institutions).
The Company will not enter into long term borrowing, but
reserves the right to use overdraft facilities on a short term
basis for liquidity management purposes."
The Winding Down
During the Winding Down, the Company will continue actively to
seek the realisation of Investments. The timing and value of such
realisations will be subject to asset-specific factors and to
market conditions.
Specifically the Company's ability to realise maximum value for
Shareholders will be dependent on a successful exit of its
investment in Parabel.
The potential timing and value realisable from Parabel and other
investments will be regularly monitored by the Board and
Shareholders will be informed of all material developments through
a Company announcement to a RIS.
Shareholders should expect that, under the terms of the Winding
Down, the Board will be committed to distributing as much of the
available cash as quickly as reasonably practicable, having regard
to cost efficiency and working capital requirements. However, in
order to minimise the administrative burden and costs, whilst
returns of cash are expected to be made regularly, this will not
necessarily be as soon as cash becomes available.
The Board currently envisages returning capital to Shareholders
by way of dividends, share buybacks or tender offers. Details of
any such proposals and any resolutions required to implement them
will be circulated by the Board as and when it considers, at its
sole discretion, that the Company has sufficient funds to return
capital to shareholders.
No Liquidator will initially be appointed and the Portfolio will
continue to be managed by the Investment Manager (under the control
and supervision of the Board).
Costs
The Board has taken, and will continue to take, such measures as
it believes are available to reduce the costs borne by the Company.
Specifically the Board has:
-- negotiated amendments to the Management Agreement and
Investment Management Agreement, which are described in detail
below;
-- amended or given notice of termination of the arrangements
with a number of the Company's other service providers; and
-- reduced the aggregate Directors' fees payable in the year
ended 31 March 2013 by 37.4% to GBP67,000.
Continuation of listing
During the Winding Down it is expected that the Shares would
continue to be admitted to the Official List and to trading on the
London Stock Exchange until such time as the Company no longer
meets the requirements of the Listing Rules (in particular by
reason of not having an adequate spread of investment risk).
The Board believes that maintaining the listing of the Shares is
in the best interests of Shareholders for the following
reasons:
-- the listing should allow the Shares to remain eligible for
ISAs and SIPPs;
-- the listing will allow for the maintenance of a daily market
price in the Shares, as required by certain Shareholders, and
allows for continued trading in the Shares; and
-- maintaining the listing may help prevent certain Shareholders
from breaching their own investment restrictions, for example where
they are required to hold listed securities or instruments with
daily liquidity.
The cost efficiency of retaining the listing of the Shares
during the Winding Down will continue to be monitored and reviewed
by the Board on an ongoing basis. The Board may propose a
cancellation of that listing before it ceases to comply with the
Listing Rules although any such proposal, if ahead of an
appointment of a Liquidator, would be subject to approval of
Shareholders. It is not currently possible for the Board to provide
Shareholders with an estimated timing for such a delisting
proposal, as it has no certainty as to the evolution of the
Portfolio's spread of investment risk during the Winding Down.
Once investments have been realised such that the Board believes
that the Company then no longer fulfils, or will no longer fulfil,
the requirements of the Listing Rules for the continued admission
of the Shares on the Official List, the Board will notify the UK
Listing Authority and the London Stock Exchange and request the
suspension and subsequent cancellation of the listing and trading
of the Shares. As soon as reasonably practicable thereafter, the
Board will convene a meeting of Shareholders to consider a
resolution for the winding up of the Company, and if such a
resolution is required by the Listing Rules, a resolution for the
cancellation of the Company's listing.
In the event that the Proposals are not approved the Board will
give consideration to the eligibility of the Shares for continued
admission to the Official List. The Board does not consider that
the Portfolio currently has an adequate spread of investment risk
to enable ongoing compliance with the Listing Rules and therefore,
absent any material developments at the Portfolio level and in
particular a material reduction of the size of the Company's
investment in Parabel, it is likely that the Company will be
ineligible for continued admission to the Official List and a
delisting will be required.
Amendments to Investment Management Agreement and Management
Agreement
If the Resolution is approved by the Shareholders, it is
proposed that the Company makes certain amendments to the
Investment Management Agreement and Management Agreement as
summarised below.
Change of the Investment Objective and Policy
Management of the Portfolio by the Investment Manager will
change so that the Investment Manager will (i) not make any new
investments (other than additional funds advanced to or other
participation in the financial restructuring of the Investments,
and cash and near cash equivalent securities) and (ii) will manage
the existing investments with a view to realising such investments
in an orderly and timely manner.
Change of the Termination Provisions
The Agreements will be amended so that either the Company or the
Investment Manager or Manager (as relevant) can terminate the
relevant agreement by giving to the other written notice to be
effective on 31 March 2013. The Agreements would be further amended
so that at any time after 31 March 2013, notice in writing will
take immediate effect. Except as described below, the termination
provisions of the Agreements will otherwise be unaltered.
Management fee
The Management Agreement will be amended so that the annual
management fee would be paid at the rate of 2 per cent. per annum
of NAV for 12 months and will thereafter drop to a rate of 1.25 per
cent. per annum of NAV. The management fee will continue to be
accrued daily and calculated and paid monthly.
Performance Fee
The basis for calculating the performance fee will not
change.
The Company will waive the condition (agreed in January 2009 and
summarised above) that any performance fee payments would be
deferred until such date as the Company has resumed payment of
dividends to Shareholders.
The Manager (and in turn the Investment Manager) has agreed to
waive 25 per cent. (being US$ 1,395,296) of its entitlement to the
deferred Performance Fee. The Manager (and in turn the Investment
Manager) has further agreed that it will only be entitled to
receive the remaining 75 per cent. (being US$ 4,185,888) of its
entitlement to the deferred Performance Fee if following such
waiver:
-- Parabel is the subject of an IPO whereby its shares are
listed on either NASDAQ or the NYSE or another stock exchange
approved by the Company, and the proceeds of such IPO are
distributed to the Company by PetroTech; or
-- more than 50 per cent. of the shares of common stock in
Parabel, attributable to the Company by virtue of its investment in
PetroTech, are sold by private sale and the proceeds of such sale
net of the proportion of expenses of PetroTech in respect of such
sale attributable to the Company which were sold are distributed to
the Company by PetroTech.
The Manager (and in turn the Investment Manager) has agreed that
if any additional Performance Fee becomes due to it following the
date of this document, it will be paid such amount only if one of
the events above occurs prior to termination of the Management
Agreement (and in turn the Investment Management Agreement) in
accordance with its terms. Any further entitlement to Performance
Fees would be subject to the Company achieving a trigger NAV per
Share, which as at the date of this document was $2.23 and will
continue to compound at 5% per annum. By way of comparison the NAV
per Share as at 29 February 2012 was $1.27.
The Manager (and in turn the Investment Manager) has agreed that
(subject to applicable law) if any Performance Fee (including the
balance of deferred Performance Fee) becomes payable to the Manager
under the Management Agreement (and in turn the Investment Manager
under the Investment Management Agreement), the Company may, at its
absolute discretion, discharge its obligation to pay such amount by
transferring to the Manager (and in turn the Investment Manager) of
shares in PetroTech or Parabel (to the extent directly held by the
Company at the time of payment) in number, as agreed between the
Company, the Manager and the Investment Manager, having an
aggregate value equal to the Performance Fee due to the Manager
under the Management Agreement (and in turn the Investment Manager
under the Investment Management Agreement), calculated by reference
to:
-- The price per share at which shares of common stock of
Parabel were offered in respect of IPO; or
-- The price per share at which shares in Parabel were sold by
private sale.
In each case, the calculation of the aggregate value of any
PetroTech and/or Parabel shares delivered to the Manager (and in
turn to the Investment Manager) will take into account the
proportion of the expenses of PetroTech in respect of the IPO or
private sale attributable to those shares and the proportion of the
taxes attributable to those shares that would have been incurred by
PetroTech had the allocable proceeds of the IPO or private sale
been distributed to the Company which will be the "Additional Value
Considerations".
The Manager (and in turn the Investment Manager) has agreed that
if no event as set out above has occurred prior to the termination
of the Management Agreement (or Investment Management Agreement, as
relevant) the Company may satisfy the whole of its obligation to
pay any Performance Fee due or which may in future become due by
transferring to the Manager (and in turn the Investment Manager) of
shares in Parabel and/or PetroTech (to the extent directly held by
the Company at the time of payment) having an aggregate value equal
to the amount of such Performance Fee calculated on the basis that
one share of common stock of Parabel is valued at US$8.70 plus any
Additional Value Considerations, provided that in the event that
within six (6) months of the date of transfer of shares in payment
of the Performance Fee hereunder, either an IPO or private sale
(the "Revaluation Events") has occurred or there is a binding
contract or agreement for the same, the number of shares in
PetroTech and/or Parabel Inc., as applicable, required to pay in
full the Performance Fee then due and owing will be recalculated
using the per share Parabel Inc. value used in such applicable
Revaluation Event (and subject to any Additional Value
Considerations). To the extent that the recalculated number of such
payment shares is greater than the number of payment shares
previously transferred to the Manager, the Company will transfer to
the Manager (and in turn to the Investment Manager) such number of
shares as equals the difference between the two share calculations.
To the extent that the recalculated number of such payment shares
is lower than the number of payment shares previously transferred
to the Manager, the Manager (following a transfer from the
Investment Manager) shall transfer to the Company such number of
shares as equals the difference between the two share calculations.
The obligations referred to in the previous two sentences are
referred to in this Agreement as the "True Up Obligation".
The Manager and Investment Manager have agreed with the Company
to execute all such documents and to do all such acts and things as
for the time being lie within their power as may be reasonably
required, taking into consideration applicable law and their
obligations to treat all customers fairly, in furtherance of a
transfer of such shares in PetroTech Holdings or Parabel to the
Manager (and in turn the Investment Manager).
The Manager and Investment Manager have acknowledged and agreed
for the avoidance of doubt that the Performance Fee payable to the
Manager (and in turn to the Investment Manager) by the Company may
be reduced if an event as set out above occurs and the aggregate
value or amount (the "Relevant Value") calculated as set out above
of the Company's retained holding of shares in PetroTech or Parabel
or the proceeds of sale as the case may be is less than the amount
of Performance Fee due to the Manager, the amount of Performance
Fee due and payable will not exceed the Relevant Value and may be
satisfied in full by transfers in accordance with the above.
The Manager and Investment Manager have acknowledged and agreed
that such shares in PetroTech or Parabel, as referred to above,
shall be subject to the same lock-up period (if any) and any other
relevant restrictions as that apply to any shares in PetroTech or
Parabel, as applicable, held by the Company following the
occurrence of either of the events set out above.
Subject to the True Up Obligation the Manager and Investment
Manager have agreed that upon completion of the transfer of shares
of PetroTech and/or Parabel, if the Management Agreement (and the
Investment Management Agreement) has been terminated, the Company
shall have no further obligation to pay any amount by way of
Performance Fee.
If there is a dispute between any of the Company, the Manager
and the Investment Manager as to amounts payable or the number or
value of shares in PetroTech or Parabel to be transferred, the
certificate of the auditors to the Company acting as expert shall
be final and binding (absent manifest error).
The Company and the Manager have each agreed to consider in good
faith any proposals which the Investment Manager may make to
address and mitigate any potential tax risk that may arise as a
result of the transfer of shares in PetroTech or Parabel Inc. in
the payment of any Performance Fee prior to the transfer thereof to
the extent that such proposed transfer shares are either
non-marketable securities or are marketable securities that are
subject to restriction on resale for any reason at the time of
transfer. The Investment Manager has the right to waive its
entitlement to such shares or designate an alternative transferee
to receive such shares.
The effect of the changes to the Performance Fee will be that,
subject to the occurrence of either of the events set out above,
the deferred Performance Fee less the amount waived by the Manager
(and in turn the Investment Manager) will be payable (and subject
to the payment not exceeding the Relevant Value) even if no further
dividends are payable to Shareholders.
Publication of Circular and General Meeting
The Proposals are subject to Shareholder approval. A circular
convening a general meeting will be despatched once regulatory
approvals are granted.
Enquiries:
PSource Capital Limited
Soondra Appavoo
Tel. +44 20 7925 3156
Numis Securities
Nathan Brown
Tel. +44 (0) 20 7260 1426
DEFINITIONS
Agreements: the Investment Management Agreement and the
Management Agreement
Articles: the Company's articles of association
Company: PSource Structured Debt Limited
Directors or Board: the directors of the Company
EGM: the extraordinary general meeting of which notice is
attached to this document
Investments: the investments excluding cash comprised in the
property of the Company or any subsidiary of the Company
Investment Consultant: PSource Capital Limited
Investment Management Agreement: the investment management
agreement made between the Company, the Investment Manager and the
Manager, dated 31 July 2007, as amended from time to time
Investment Manager: Laurus Capital Management, LLC
Investment Objective and Policy: the investment objective and
policy as set out in the Company's most recent prospectus
IPO: an initial public offering of shares in a company
Law: the Companies (Guernsey) Law 2008 (as amended from time to
time)
Liquidator: such liquidator as may be appointed to carry out a
liquidation of the Company
Listing Rules: the listing rules made by the UK Financial
Services Authority under the Financial Services and Markets Act
2000
London Stock Exchange: London Stock Exchange plc
Management Agreement: the management agreement made between the
Company and the Manager, dated 31 July 2007, as amended from time
to time
Manager: PSource Capital Guernsey Limited
Managers: independent investment managers of the underlying
funds in which the Company has invested, as selected by the
Investment Manager
NASDAQ: The National Association of Securities Dealers Automated
Quotations stock exchange
Net Asset Value or NAV: the total assets of the Company less its
total liabilities (including accrued but unpaid fees) valued in
accordance with the Company's accounting policies or the proportion
of the same attributable to any class of Shares as the context
requires
NYSE: the New York Stock Exchange
Official List: the Official List of the UK Listing Authority
Parabel: Parabel Inc. (formerly PetroAlgae Inc.)
Performance Trigger: the Performance Trigger has been achieved
on a Performance Fee calculation date if on that date total return
NAV per Ordinary Share is equal to or exceeds trigger NAV
Performance Fee: the performance fee payable in accordance with
the Management Agreement (and in turn the Investment Management
Agreement)
PetroTech: PetroTech Holdings Inc.
Portfolio: the portfolio comprising all the Investments
Proposals: the proposals set out in this document for the
Winding Down, changes to the Investment Objective and Policy and
amendments to the Management Agreement and Investment Management
Agreement
RIS: a regulatory information service
Resolution: the ordinary resolution to be set out in the notice
of the EGM approving the Proposals
Restatement Date: 5 April 2012
Shares: ordinary shares of no par value in the capital of the
Company
United States, USA or US: the United States of America, its
territories and possessions, any state of the United States of
America and the District of Columbia
Winding Down: the proposed managed winding down of the Company
as described in this document
This information is provided by RNS
The company news service from the London Stock Exchange
END
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