TIDMRC2
RNS Number : 3915R
Reconstruction Capital II Ltd
19 November 2012
19 November 2012
Reconstruction Capital II Limited
("RC2" or the "Company")
Circular to Shareholders and Notice of Annual General
Meeting
RC2 today announces that it has posted a circular to
shareholders which sets out the board's proposals for the
continuation of the life of the Company and the amendment of the
Company's investment objective and policy.
Accordingly, subject to Shareholder approval, it is proposed
that:
-- the life of the Company be continued for a further two years; and
-- the investment objective and policy of the Company be amended
such that no new investments will be made, further investments into
existing portfolio companies will be permitted in certain
circumstances pending their realisation and, following each
realisation, all proceeds will be returned to Shareholders after
setting aside a sufficient amount for working capital purposes.
The circular includes a Notice of the Company's Annual General
Meeting which is to be held at 10.00am at the offices of Sanne
Trust Company Limited at 13 Castle Street, St Helier, Jersey JE4
5UT on Friday 14(th) December 2012.
The key parts of the circular are presented below. The circular
will also be posted on the Company's website:
http://www.reconstructioncapital2.com/
For further information, please contact:
Reconstruction Capital II Limited
Ion Florescu / Anca Moraru
Tel: +44 (0) 207 244 0088/ +40 21 3167680
Grant Thornton Corporate Finance (Nominated Adviser)
Philip Secrett / David Hignell
Tel: +44 (0) 20 7383 5100
LCF Edmond de Rothschild Securities (Broker)
Hiroshi Funaki
Tel: +44 (0) 20 7845 5960
Continuation of the Life of the Company and Proposed Change to
the Investment Policy of the Company
Introduction
The Company was incorporated in 2005 to invest in private and
listed equity securities and fixed income securities primarily in
Romania and Bulgaria. The Articles provided that, at the 2012
Annual General Meeting and at a general meeting of the Company in
each second subsequent year, a resolution would be proposed for the
Company to continue as presently constituted. Should the resolution
not be passed, the Directors would be required to formulate
proposals to be put to Shareholders to reorganise, unitise or
reconstruct the Company or for the Company to be wound up.
The Directors believe that the Company should continue for at
least a further two years but believe that it would now be
appropriate to amend the investment objectives and policy of the
Company in order to focus on the realisation of investments and the
return of proceeds to Shareholders.
Accordingly, subject to Shareholder approval, it is proposed
that:
-- the life of the Company be continued for a further two years; and
-- the investment objective and policy of the Company be amended
such that no new investments will be made, further investments into
existing portfolio companies will be permitted in certain
circumstances pending their realisation and, following each
realisation, all proceeds will be returned to Shareholders after
setting aside a sufficient amount for working capital purposes,
(together the "Proposals").
Background to and Reasons for the Proposals
The Company's primary strategy since inception has been to
invest in, and subsequently dispose of, significant or controlling
stakes in companies in South East Europe where the Company's
Investment Team believe they can add value to companies by
implementing operational and/or financial restructuring over a
three to five year horizon prior to achieving an exit.
Whilst most of the Company's investments were made prior to
2009, the financial crisis has delayed the achievement of exits.
Meanwhile, the strong general change of sentiment towards South
East Europe, and listed private equity funds, has resulted in the
Company's Shares trading at a significant discount to their NAV.
Therefore, the Board believes that it is not appropriate for the
Company to be making further investments. Rather, the Board
believes the Investment Team should focus its efforts on finalising
the operational and financial restructuring of current investments
and on completing exits, thereby enabling the Company to return
cash to Shareholders.
However, at the same time, due to the highly illiquid nature of
the Company's investments and the possible complexity of exits, the
Board believes that the Company's investments cannot be liquidated
or disposed of quickly without risking a large scale destruction of
their value. The Board believes that some exits will require a
trade sale, while others may require a reorganisation and break up
and subsequent disposal of separate divisions or assets. Also the
Company's investments are at different stages of realisation: (i)
some investments are already in a good position to be sold by way
of a trade sale and are indeed currently being marketed to trade
buyers; and (ii) other investments still require their operational
and financial restructuring programmes to be completed by the
Investment Team before being offered for sale.
Therefore, in order for the Investment team to realise the best
value from the Company's investments, the Board anticipates that
the overall exit process will last between two and four years and
that, due to the concentrated nature of the portfolio, subsequent
distributions will take place periodically when there are
sufficient funds to warrant a return of cash to Shareholders.
Continuation of the Life of the Company
In order to allow for the orderly realisation of the Company's
investments, the Directors propose that the Company continue for at
least a further two years. During this time, the Company's
investments may be realised in accordance with the proposed new
investment objective and policy. If the realisation programme has
not been completed by 2014, when the next continuation vote falls
due, the Directors will review the then current position of the
Company and appropriate proposals will be put to Shareholders at
that time,
New Investment Objective and Policy
The Board is proposing that the investment objective be restated
as follows:
"The investment objective of the Company is to conduct an
orderly realisation of the assets of the Company, to be effected in
a manner that seeks to achieve a balance between an efficient
return of cash to Shareholders and maximising the value of the
Company's investments."
The Board and the Investment Team believe that the Company's
portfolio will require careful management in order to achieve the
Company's proposed new investment objective.
Any material change to the investment policy of the Company
requires Shareholder approval in accordance with the AIM Rules.
Resolution 2 will therefore be proposed at the Annual General
Meeting pursuant to which, if passed, the Company's entire existing
investment policy will be replaced and the Company will adopt and
adhere to the following amended and restated investment policy.
"The Company's investments will be realised in an orderly manner
that seeks to achieve a balance between an efficient return of cash
to Shareholders and maximising the value of the Company's
investments.
The Company may not make any new investments save that (a)
investments may be made to honour commitments under existing
contractual arrangements; (b) further investments may be made into
the Company's existing portfolio companies in order to protect or
enhance the value of such investments or facilitate the orderly
realisation of such investments; and (c) cash (including realised
cash) may be invested in liquid cash-equivalent securities,
including short-dated corporate bonds, government bonds or cash
funds, or in bank cash deposits and/or in other permitted
investments as set out above, pending its return to Shareholders in
accordance with the Company's investment objective.
The Company will maintain a sufficient cash reserve for working
capital and in order to fund any further investments falling within
sub-paragraphs (a) and (b) above. The Board currently estimates
that this reserve will not exceed EUR4 million."
This policy will involve a continuing evaluation of the
portfolio in order to assess the most appropriate realisation
strategy to be pursued in relation to each investment. Whilst some
investments may be considered appropriate for sale in the shorter
term, other investments may require more work to enable their
inherent value to be realised successfully.
The strategy for realising individual investments will be
flexible and may need to be altered to reflect changes in the
circumstances of a particular investment or in the prevailing
market conditions. The Board will meet regularly to review progress
in implementing the Company's new investment objective and policy
and the then current position of unrealised holdings.
The Board and the Investment Team regard the orderly realisation
of the Company's assets as the best strategic option in all the
circumstances. However, should Shareholders reject the proposed
change, the Board and the Investment Team will continue to deliver
the existing investment strategy and work to identify other options
for developing the Company.
The Board aims to realise the portfolio and return cash in an
efficient manner to ensure that a balance between value and speed
is achieved. Due to the illiquid nature of private equity
investments, it is very difficult to provide any certainty on the
timeframe for realisation. However, the Board is aware that
Shareholders expect some guidance on the expected timeframe for the
return of capital. With this in mind, the Board, assisted by the
Investment Team, has undertaken an exercise to estimate a
realisation timetable. Although Shareholders should place only
limited reliance on this information, it is the Board's current
estimate that the overall timeframe for realisation will be
approximately two to four years. As the portfolio realisation will
be an on-going process, the Board intends to provide Shareholders
with regular updates on the exit process in the Company's annual
reports and through the quarterly reports prepared by the
Investment Team.
Return of Proceeds to Shareholders
The Board intends to return the net proceeds of realisations to
Shareholders by means of a series of maximum price tenders
structured using a strike price mechanism. Accordingly,
Shareholders will be invited to tender some or all of their Shares
at such price or prices they determine, following which the strike
price will be fixed at the lowest price proposed by Shareholders
that will permit the Company to purchase the maximum number of
Shares for a total cost not exceeding the amount of cash available
to return to Shareholders. All tenders at or below the strike price
will be accepted.
The current intention of the Board is that tender offers would
occur periodically when there are sufficient funds to warrant a
return of cash to Shareholders. Prior to launching any such tender
offer, the Company may use the proceeds of asset realisations to
make market purchases of the Company's Shares at a discount to NAV
as described in the Articles and the Company's Admission Document.
At the same time, the Company will seek to retain sufficient funds
to ensure the continuation of the Company and to cover necessary
expenses relating to the running of the Company and maintaining
investments effectively.
The proposed tender offers and permitted market purchases noted
above are separate from the Annual Buyback Programme, pursuant to
which realised profits may be returned to Shareholders on an annual
basis by way of tender offers to repurchase Shares at NAV, which
will remain in place in order to distribute any realised profits if
applicable. Consequently, unlike tender offers carried out under
the Annual Buyback Programme, the proposed tender offers will
require the prior approval of the Company's Shareholders by an
ordinary resolution.
Benefits of the Proposals
The Board believes that the Proposals offer the following
significant potential benefits to Shareholders:
-- The realisation process and return of proceeds to
Shareholders will enable Shareholders to liquidate their
investments over a period of time.
-- Continuing the life of the Company and commencing a managed
realisation of assets, rather than winding up the Company and
seeking immediate sale of the portfolio, should enable the Company
to increase the value realised on the sale of its investments.
-- Since the Company's Shares will remain traded on AIM
throughout the realisation process, Shareholders and prospective
investors will, subject to market conditions, continue to be able
to buy and sell the Company's Shares if they choose to do so.
Annual General Meeting
The Proposals are being made subject to the passing of the
resolutions to be proposed at the Annual General Meeting.
Recommendation
The Board considers that the Proposals are in the best interest
of the Company and its Shareholders as a whole and unanimously
recommends Shareholders to vote in favour of all the resolutions to
be proposed at the Annual General Meeting, as your Directors intend
to do in respect of their own beneficial holdings which, in
aggregate, amount to 7,833,125 Shares representing approximately
7.83 per cent of the issued share capital of the Company.
Reconstruction Capital II Limited
Notice of Annual General Meeting
Notice is hereby given that an Annual General Meeting of the
Company will be held at the offices of Sanne Trust Company Limited
at 13 Castle Street, St Helier, Jersey JE4 5UT at 10.00am on Friday
14(th) December 2012 for the purpose of considering and, if thought
fit, passing the following resolutions of which Resolution 1 will
be proposed as an extraordinary resolution in accordance with Note
1 and Resolution 2 will be proposed as an ordinary resolution:
RESOLUTIONS
1. That in accordance with Article 138.2 of the articles of
association of the Company, the Company continues as presently
constituted for a further two years until the Annual General
Meeting to be convened in 2014.
2. That, conditional on Resolution 1 being approved, the
proposed new investment objective and policy of the Company set out
in the circular to Shareholders dated 19 November 2012 to which
this notice forms part be adopted as the investment objective and
policy of the Company with immediate effect and the existing
investment objective and policy be and is hereby replaced.
By order of the Board
Secretary
19(th) November 2012
NOTES:
1. The vote on Resolution 1 will be taken on a poll and will be
deemed not to have been passed if the votes against the Resolution
constitute a majority against the Resolution and represent at least
25 per cent. of the total number of votes capable of being cast on
that Resolution.
2. A member entitled to attend and vote at the above mentioned
Annual General Meeting is entitled to appoint a proxy or proxies to
attend and, on a poll, vote in his/her place. A proxy need not be a
member of the Company. Completion and return of a proxy form will
not prevent a member from attending and voting at the meeting in
person.
3. A form of proxy is enclosed with this Notice. To be valid,
the form of proxy (together, if appropriate, with the power of
attorney or other written authority under which it is signed or an
office copy or a certified copy of such power or authority) must be
received at the office of the Company's Registrars, Sanne Trust
Company Limited, not later than 24 hours before the time appointed
for holding the meeting.
4. Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, only those shareholders on the Register of
Members at 9.00 a.m. on 13 December 2012 shall be entitled to
attend and vote at the Annual General Meeting in respect of the
number of Shares registered in their name at that time. Changes to
the entries in the register of members of the Company after 9.00
a.m. on 13 December 2012 will be disregarded in determining the
rights of any person to attend or vote at the Annual General
Meeting.
5. As at Friday 16(th) November 2012 (being the last business
day prior to the date of this notice) the Company's issued share
capital consisted of 100,000,000 ordinary shares each carrying one
vote per share. Accordingly the total number of voting rights in
the Company as at Friday 16(th) November 2012 was 100,000,000.
expected Timetable of principal events
Date of Posting of Circular 19(th) November 2012
Record date for voting at Annual General 9.00am on 13(th) December
Meeting, 2012
Latest time for receipt of Forms of Proxy 10.00am on 13(th) December
2012
Annual General Meeting 10.00am on 14(th) December
2012
Announcement of Results of Annual General 14(th) December 2012
Meeting
If any of the above times and/or dates change, the revised times
and/or dates will be notified to Shareholders by announcement
Definitions
In the Circular, unless the context otherwise requires, the
following expressions bear the following meanings:
Admission Document the document issued by the Company
on 19(th) December 2005 relating
to the admission of the Company's
Shares to trading on AIM
Annual Buyback Programme the programme to use realised
profits to effect buybacks of
Shares by means of an annual
tender offer as permitted by
the Articles and described in
the Admission Document
Annual General Meeting the annual general meeting of
the Company to be held at the
offices of Sanne Trust Company
Limited at 13 Castle Street,
St Helier, Jersey JE4 5UT on
14(th) December 2012
Articles the articles of association of
the Company as amended from time
to time
Circular the document dated 19(th) November
2012, addressed to the Shareholders
Company Reconstruction Capital II Limited
Directors or Board the directors of the Company
from time to time
Investment Team together New Europe Capital SRL,
New Europe Capital DOO and New
Europe Capital Limited
NAV the net asset value of the Company
and per Share as the case may
be determined in accordance with
the Articles
Resolutions the Resolutions to be put to
the Annual General Meeting as
detailed in the Circular and
in the notice of the Annual General
Meeting
Shareholders holders of Shares
Shares ordinary shares of EUR0.01 each
in the capital of the Company
This information is provided by RNS
The company news service from the London Stock Exchange
END
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