Placing & Open Offer - Part 1
10 Outubro 2000 - 5:00AM
UK Regulatory
RNS Number:2649S
Aberdeen Preferred Income Trust PLC
Aberdeen Preferred Securities PLC
10 October 2000
Part 1
ABERDEEN PREFERRED INCOME TRUST PLC ("Abpref")
ABERDEEN PREFERRED SECURITIES PLC ("Abpref Securities")
Placing and Open Offer and other Proposals
Interim Results
PART 1 - HIGHLIGHTS
*** The Abpref Group is to become the largest (approx. #479 million)
geared investment trust of its type by raising new funds via:
* a Placing and Open Offer sponsored by Brewin Dolphin Securities of:
- new Ordinary Shares in Abpref at 136p per share
- a new class of zero dividend preference ('ZDP') shares in Abpref
Securities repayable in 2008
to raise up to #67 million before expenses
* additional bank borrowings of up to #70 million
*** From April/May 2001 annualised net dividends on the Ordinary Shares
are forecast to rise from the current 17.6p net to 19.2p net per share
(an increase of 9.1%), and will be paid on a monthly, instead of
quarterly,basis. At the issue price of 136p, the prospective
annualised yield is 14.1%.
*** The 2008 ZDP Shares are entitled to 199p per share on 31 October 2008
which, at the issue price of 100p, equates to a Redemption Yield of
9%.
*** Abpref has negotiated an extension to new maturity dates of a large
part of its existing bank borrowings. This, together with the issue of
2008 ZDP Shares, the existing 2023 subordinated loan stock and the
formal "undating" of Abpref Securities, should re-emphasise that the
Group has an indefinite life, with no mandatory or scheduled wind-up
date.
*** Abpref's investment policy is to be adjusted to allow investment in
high-yielding euro-denominated fixed interest securities, to be
matched by low-cost euro-denominated borrowings.
*** Existing Shareholders are expected to benefit from the above factors,
and in addition (on the basis set out in Part 2 below):
* the 2003 ZDP Shares will have improved cover
* as well as the dividend improvements, the Ordinary Shares will
receive an immediate uplift in net asset value of approximately
4.9p
*** The Placing and Open Offer and certain other proposals are subject to
relevant Shareholder approvals at meetings on 3 November 2000.
*** The Group's unaudited interim results for the 6 months ended 31
August 2000 are set out in Part 4 below.
Enquiries:
Chris Fishwick, Aberdeen Asset Managers 020 7463 6000
Piers Currie, Aberdeen Asset Managers 020 7463 6000
David Thomas, Brewin Dolphin Securities 020 7246 1115
Jonathan Maxwell, Brewin Dolphin Securities 020 7246 1030
PART 2 - THE PROPOSALS
BENEFITS OF THE PROPOSALS FOR EXISTING SHAREHOLDERS
2003 ZDP Shareholders
As no further 2003 ZDP Shares are being issued pursuant to the Proposals, and
since the new 2008 ZDP Shares will rank for repayment behind the 2003 ZDP
Shares, the whole of the net proceeds of the Placing and Open Offer will
contribute to the cover of the existing 2003 ZDP Shares. On the bases and
assumptions which will be set out in the Shareholder circular
("Assumptions"), this would result in the cover of the 2003 ZDP Shares being
increased from its current 1.52 times to 1.64 times upon implementation of
the Proposals. For this purpose cover is the number of times by which the
value of the total assets of the Group exceeds the aggregate of (i) Abpref's
bank borrowings and the RPI-Linked Debenture, (ii) the final capital
entitlement of the 2003 ZDP Shares and (iii) the net costs expected (assuming
no capital or income growth in Abpref's investment portfolio but otherwise on
the basis of the Assumptions) to be charged to capital account over the
period to the 2003 ZDP Repayment Date.
Ordinary Shareholders
The Directors believe that the Proposals should have a favourable impact on
the market perception of the Ordinary Shares, not least from the
re-emphasising of the indefinite life of the Group by the rescheduling of
bank borrowings, the issue of longer dated ZDP Shares and the formal
"undating" of Abpref Securities. This, together with the higher level of
income generation as a result of the adjustment to Abpref's investment policy
and the switch to monthly dividends, should improve expectations as to the
future performance of the Ordinary Shares. The Directors regard these effects
as ongoing, over and above the impact of an uplift in net asset value as an
immediate result of the implementation of the Proposals as referred to below.
As a result of the Proposals, the dividend payments on the Ordinary Shares
are, from next April, expected to increase from the current level of 17.6p
net per share to 19.2p net, an increase of 9.1 per cent. The change from
quarterly to monthly dividend payments should also be of advantage, as
outlined under "Dividend policy and forecasts" below.
The Proposals will, on the basis of the Assumptions, result in an immediate
uplift in the net asset value of an Ordinary Share of 4.92p. Also, as most of
the new gearing is being provided by new bank borrowings as opposed to zero
dividend preference shares, the prospects for growth in the net asset value
of the Ordinary Shares should be improved since the cost of bank borrowings
is shared between the capital and revenue accounts rather than being charged
exclusively to capital account. The Projected Asset Value of an Ordinary
Share (that is, its projected net asset value on 31 October 2008 calculated
on the basis of different portfolio growth rates and otherwise on the basis
of the Assumptions) will be as follows:
Investment PAV before PAV after
portfolio growth* Admission Admission
% change
0% p.a. 34p 50p +47.1%
5% p.a. 128p 143p +11.7%
* the growth rates in the table apply to all of Abpref's investments
except for the UK convertibles and bonds portfolio and the euro-denominated
fixed interest portfolio whose income and capital are assumed to grow at a
fixed rate of 2 per cent. per annum.
THE OPEN OFFER
Brewin Dolphin Securities will invite Qualifying Shareholders to apply to
subscribe for a total of 41,227,049 New Ordinary Shares at 136p per share
and/or a total of 10,085,948 2008 ZDP Shares at 100p per share (as
appropriate), free of all expenses and payable in cash in full on
application.
Qualifying Shareholders may apply for any whole number of New Ordinary Shares
or 2008 ZDP Shares (as the case may be) up to or in excess of their pro rata
entitlement of:
8 New Ordinary Shares for every 25 existing Ordinary Shares held at the
Record Date
1 2008 ZDP Share for every 4 2003 ZDP Shares held at the Record Date
and so in proportion for any other number of Shares of the relevant class
then held.
The New Ordinary Shares will rank pari passu in all respects with the
existing Ordinary Shares save that the New Ordinary Shares will not rank for
the second or third interim dividends expected to be paid in November 2000
and January 2001 respectively. The 2008 ZDP Shares will have the rights set
out in the articles of association of Abpref Securities as amended by the
Resolution to be proposed at the Abpref Securities EGM and will rank for
repayment after the 2003 ZDP Shares.
Applications may be made for any number of New Ordinary Shares or 2008 ZDP
Shares (as appropriate) in excess of a Qualifying Shareholder's pro rata
entitlement and will be satisfied to the extent that corresponding
applications by other Qualifying Shareholders are not made or are made for
less than their pro rata entitlements. If there is an over subscription
resulting from excess applications, allocations in respect of such excess
applications will be made pro rata according to the number of Shares of the
relevant class held by each applicant.
Qualifying Shareholders may apply to subscribe for less than their pro rata
entitlement to New Shares if
they so wish.
Applications are personal to the Qualifying Shareholders named thereon and
may not be assigned or transferred except to satisfy bona fide market claims
pursuant to the rules of the London Stock Exchange.
Holdings of Shares in certificated and uncertificated form will be treated as
separate holdings for the purpose of calculating entitlements under the Open
Offer. There will be no entitlement to fractions of New
Shares, which will be aggregated and may be taken up by placees pursuant to
the Placing.
The Open Offer of New Ordinary Shares is subject inter alia to satisfaction
of the following conditions not later than 13 November 2000, or such later
date (not being later than 30 November 2000) as Abpref and Brewin Dolphin
Securities may agree:
(i) the passing of the special resolution at the Abpref EGM (or at any
adjournments thereof);
(ii) the Placing Agreement becoming unconditional in all respects and not
being terminated in accordance with its terms;
(iii)a satisfactory definitive loan agreement being entered into with the
Bank prior to Admission; and
(iv) Admission of the New Ordinary Shares becoming effective.
The Open Offer of 2008 ZDP Shares is subject, inter alia, to satisfaction of
the conditions set out above and, additionally, to the passing of the special
resolution at the Abpref Securities EGM and the passing of the extraordinary
resolution at the Separate General Meeting (or at any adjournments thereof).
The Open Offer is made by Brewin Dolphin Securities on behalf of and as agent
for Abpref (in respect of the New Ordinary Shares) and Abpref Securities (in
respect of the 2008 ZDP Shares).
THE PLACING
Brewin Dolphin Securities has agreed to use its reasonable endeavours to
place conditionally on behalf of Abpref and Abpref Securities up to
41,227,049 New Ordinary Shares at 136p per share and up to 10,085,948 2008
ZDP Shares at 100p per share, subject to clawback in favour of Qualifying
Shareholders who make valid applications under the Open Offer. The placing of
the New Ordinary Shares is conditional on, inter alia, the passing of the
special resolution to be proposed at the Abpref EGM. The placing of the 2008
ZDP Shares is conditional on, inter alia, the passing of this resolution and
also upon the passing of the special resolution and the extraordinary
resolution to be proposed at the Abpref Securities EGM and at the Separate
General Meeting respectively.
THE NEW BANK LOAN
Abpref will continue to seek to enhance the returns to its Ordinary
Shareholders by utilising gearing in the form of bank borrowings, as well as
the gearing provided by the 2003 ZDP Shares and the 2008 ZDP Shares.
Abpref currently has in place borrowings totalling approximately #39 million
under the RPI-Linked Debenture and a subordinated unsecured loan stock (which
are repayable in 2007 and 2023 respectively), but the majority of its
indebtedness comprises borrowings from the Bank of #81 million under three
loan agreements, repayable in 2002. As Abpref has an indefinite life, the
Directors now consider it appropriate to extend the maturity of a large part
of Abpref's bank borrowings beyond 2002. The Directors also wish, so far as
is practicable, to match Abpref's euro-denominated assets with
euro-denominated liabilities.
To this end, Abpref and the Bank have in principle agreed to replace the
three loan agreements with one syndicated loan agreement, at the same time
increasing Abpref's borrowing from #81 million to up to #151 million. The
Bank is proposing to arrange a syndicate of banks to participate in the New
Bank Loan.
The New Bank Loan is intended to be split into three tranches consisting of:
1. #51 million term facility repayable in December 2002 ("Tranche A").
2. The equivalent in euros of #50 million term facility (the amount in
euros to be fixed at drawdown at the rates prevailing on the date of
drawdown) repayable sixty months after signing of the new syndicated
loan agreement ("Tranche B").
3. #50 million revolving facility drawable in sterling and euro and
repayable eighty-four months after signing of the new syndicated loan
agreement ("Tranche C").
The maximum amount available under the new syndicated loan agreement will be
the lower of #151 million and 37.5 per cent. of the adjusted total assets of
Abpref following completion of the Proposals. In the event that the amount
available is less than #151 million, each tranche will be scaled back pro
rata.
Abpref intends initially to draw down #131 million under the new agreement,
leaving #20 million undrawn under Tranche C. The sterling denominated
borrowings will be used to refinance the Existing Bank Loan. The euro
denominated borrowings will be used to fund euro-denominated fixed interest
investments, thereby minimising currency exposure on that portion of Abpref's
portfolio.
Under the indicative terms of the New Bank Loan, Abpref will pay interest on
any euros drawn down, at Abpref's option, at one, two, three or six months
LIBOR for euros plus a margin of 80 basis points for Tranche B and 90 basis
points for Tranche C. The Directors intend to fix the rate of interest
payable by Abpref entering into interest rate swap agreements. Based on euro
interest rate swap rates offered in the London Inter-Bank market at 11.00
a.m. on 5 October 2000 and the interest rate margins, the effective weighted
average interest rate on the euro drawings, if fixed at that time, would have
been 6.24 per cent. per annum.
Under the indicative terms of the New Bank Loan, Abpref will pay interest on
any sterling drawn down, at Abpref's option, at one, two, three or six months
LIBOR for sterling plus a margin of 55 basis points for Tranche A and 90
basis points for Tranche C. The Directors intend in respect of any sterling
drawn down, that Abpref enter into interest rate swap agreements. Based on
sterling interest rate swap rates offered in the London Inter-Bank market at
11.00 a.m. on 5 October 2000 and the interest rate margins, the effective
weighted average interest rate on the sterling drawings, if fixed at that
time, would have been 7 per cent. per annum.
The Placing and Open Offer are conditional on a satisfactory definitive loan
agreement being entered into with the Bank prior to Admission.
ADJUSTMENT OF INVESTMENT POLICY
Abpref's investment objective is to generate a high portfolio yield while
providing an exposure to the UK equity market. Its current investment policy
is to invest mainly in UK securities which produce high investment income,
including geared ordinary income shares of investment trusts and convertible
preference shares. Emphasis is placed on those geared ordinary income shares
of investment trusts whose characteristics should not result in significant
erosion of their capital value over their life.
The Manager has identified the euro-denominated fixed interest market as a
market in which attractive yields are available and currency exposure can be
hedged by relatively inexpensive euro-denominated bank borrowings. It is
anticipated that the introduction of these higher yielding fixed interest
securities into Abpref's investment portfolio will reduce the yield required
from Abpref's other fixed interest investments.
Accordingly the Board has provisionally approved an adjustment to Abpref's
investment policy to take effect on completion of the Proposals, whereby a
proportion of Abpref's total assets may be invested in euro-denominated fixed
interest securities. It is envisaged that, initially, up to 10 per cent. of
Abpref's total assets will be invested in euro-denominated fixed interest
securities. The change in investment policy will not be brought into effect
unless Abpref is in a position to draw down euro-denominated bank borrowings.
As at 5 October 2000, 54 per cent. of Abpref's assets was invested in the
Income Share Portfolio, 5 per cent. in UK equities and preference shares, 40
per cent in UK convertibles and bonds and 1 per cent. was uninvested.
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