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RNS Number : 5009I
Life Settlement Assets PLC
02 April 2020
Life Settlement Assets PLC
LEI: 2138003OL2VBXWG1BZ27
(the "Company" or "LSA")
Publication of circular
Further to the announcement on 18 December 2019 relating to the
Company's share capital structure, the Company has today posted a
Circular (the "Circular") in respect of the recommended proposals
for the Merger of the A, D and E Ordinary Share Classes and notice
of a General Meeting and A, D and E Ordinary Share Class
Meetings.
Introduction and background
The Company announced on 18 December 2019 that it was
considering merging the Company's four Share Classes in order to
enhance liquidity and eliminate certain of the administrative costs
and inefficiencies of operating multiple portfolios comprised of
similar assets.
Reflecting the development of the Company through the
acquisition of different portfolios of whole and fractional
interests in life settlement policies at different times, where
each was placed into a separate asset trust and reflected by a
separate Share Class, the Company now has a resulting structure
which investors find difficult to navigate and is both more complex
and modestly more costly to administer. The Ordinary Shares in
issue as at the date of this Circular, and their attributable NAVs
as at 29 February 2020, are as follows:
Share Class NAV (US$m) Ordinary Shares in
issue
A Ordinary Share Class 89.2 39,891,391
----------- -------------------
B Ordinary Share Class 14.1 14,596,098
----------- -------------------
D Ordinary Share Class 7.7 8,792,561
----------- -------------------
E Ordinary Share Class 3.6 1,566,603
----------- -------------------
The Board has considered whether to include the B Ordinary Share
Class in the proposed Merger of Share Classes, but after careful
analysis the Board believes there would be no material benefit to
the B Ordinary Shareholders in including the B Ordinary Share Class
in the proposed Merger at this stage because of the shorter
maturity profile of this portfolio. However, this will be kept
under review and may be reconsidered at a later date depending on
how the projected maturities develop.
Overall, the Directors believe that the simplified share class
structure should provide both improved liquidity for the holders of
the merged Share Classes and a clearer investment case for new
investors in the future as well as the potential for nearer term
cashflow enhancements to the existing A Ordinary Shareholders.
Accordingly, after careful consideration of these factors, based on
the terms set out below, the Board has determined that it is in the
best interests of the Shareholders as a whole to merge the A, D and
E Ordinary Share Classes (the "A/D/E Merger").
Benefits of the A/D/E Merger
Merging the relatively small D and E Ordinary Share Classes
would provide a helpful simplification of the Company's structure.
Also, the A Ordinary Shareholders will benefit from expected
improved cash flows over the next few years and a reduced focus on
HIV-related maturities arising from the inclusion of the D and E
Ordinary Share Class portfolios. Shareholders of the merged Share
Classes will also achieve an additional benefit of consolidating
the underlying fractional Policies into the larger asset portfolio
resulting from the Merger, reducing the reliance on the performance
of third parties (which are exposed to the same Policies as the
Company) for the creation of value.
In addition to achieving some modest cost savings from merging
the A, D and E classes, the Board has already undertaken the merger
of the underlying trusts which hold the Company's investments into
one trust which is expected to yield more significant cost savings
in the region of US$250,000 per annum.
Terms of the A/D/E Merger
In considering the terms of the A/D/E Merger, the Board has
discussed the proposals with its Investment Manager, Acheron
Capital Limited, and has been mindful that Jean-Michel Paul, the
principal of the Investment Manager, indirectly holds approximately
2.79% of the A Ordinary Shares, 2.43% of the B Ordinary Shares,
80.9% of the D Ordinary Shares, and 95.8% of the E Ordinary Shares,
noting that he has a controlling position in both the D and E
Ordinary Share Classes. He also holds a 30% non-controlling
interest in a company which holds approximately 28.8% of the B
Ordinary Shares. All the members of the Board are independent of
the Investment Manager and none are interested in either the D or E
Ordinary Shares.
The proposed terms of the A/D/E Merger are that the D and E
Ordinary Share Classes be merged into the A Ordinary Share Class by
re-designating a proportion of the D and E Ordinary Shares as A
Ordinary Shares on a share-for-share basis at the NAVs attributable
to the A, D and E Ordinary Shares as at 30 April 2020. The
attributable NAVs will be calculated using the audited NAVs as at
31 December 2019 and adjusting for subsequent maturities and other
trading events that have arisen between 31 December 2019 and 29
February 2020, and will be subject to such further adjustments as
the Board considers to be necessary in order to reflect significant
changes in the financial position of the relevant Share Class
between 1 March 2020 and the Calculation Date. Any remaining D and
E Ordinary Shares will be re-designated as Deferred Shares with
nominal value.
As part of the arrangements negotiated with the Investment
Manager for the proposed A/D/E Merger, the Board has considered the
accrued but unpaid investment management performance fees
attributable to the D and E Ordinary Share Classes and also the
existing prepayment of annual premiums in respect of the policy
interests of those Share Classes. The Board has agreed that these
accrued performance fees should be paid as a result of the
implementation of the A/D/E Merger and note that it would in any
event be impracticable to continue to monitor performance fees on
the pre-Merger basis. In addition, the D and E Share Classes will
be entitled to a proportion (based on cash availability) of the
approximately $1.53 million of premiums prepaid in respect of the
current financial year for the Policies in which they have
beneficial interests, such amount to be paid by way of a special
dividend. Repayment of prepaid premiums is considered normal in
settling contracts for the transfer of policies, and, in any case,
the amount of this special dividend will be reflected in
calculating NAV for the purposes of the Merger. The accrued
performance fees will be partly paid out of available cash held by
the D and E Ordinary Share Classes after payment of the special
dividend with the remainder payable no later than 31 December 2020
and funded from cash receipts post-Merger.
The implementation of the A/D/E Merger is conditional upon the
Company having received certain Shareholder approvals. If the
Company receives all requisite Shareholder approvals except for
those proposed at the A Ordinary Share Class Meeting, the Company
will instead merge the D Ordinary Share Class with the E Ordinary
Share Class (the "D/E Merger"). The D/E Merger is similarly
expected to reduce administrative inefficiencies in respect of the
D and E Ordinary Share Classes. In this Circular, the capitalised
term "Merger" means either the A/D/E Merger or the D/E Merger (as
the case may be).
If neither the A/D/E Merger nor the D/E Merger is approved, the
Company will continue operating as it has done to date.
Coronavirus pandemic
The Board is very much aware of the current coronavirus
pandemic. Whilst there can be no guarantee that there will be no
business interruption, to date there has been no impact on the
administration of the Company or its assets and the Board has
received details from its key service providers of the steps they
are taking to protect their employees and operations. In addition,
the Board draws the attention of Shareholders to the fact that the
outbreak of coronavirus could (under certain scenarios) cause a
rise in mortality rates which would accelerate the maturity profile
of the Company's life settlement interests over the forthcoming
months.
Amendments to The Articles
The Articles do not currently contemplate the ability to merge
Share Classes and will therefore need to be amended in order to
facilitate the Merger. Accordingly, the New Articles will:
(a) reflect the changes to the Share Classes resulting from the
Merger;
(b) set out the rights attaching to the Deferred Shares; and
(c) allow for future mergers of Share Classes (subject to
Shareholder approval).
At the same time, the Company proposes to make certain minor
changes to the Articles to remove definitions and articles which
refer to redeemable preference shares and the restructuring and
liquidation of Acheron Portfolio Corporation (Luxembourg) S.A., as
these definitions and articles are now redundant.
Shareholder Meetings and recommendation
Notices convening the General Meeting and the separate A
Ordinary Share Class Meeting, D Ordinary Share Class Meeting and E
Ordinary Share Class Meeting, to be held at 14.00 p.m., 14.05 p.m.,
14.10 p.m. and 14.15 p.m. respectively on 28 April 2020, each at
Isca Administration Services Limited, Suite 8, Bridge House,
Courtenay Street, Newton Abbot, TQ12 2QS, are set out in the
Circular.
The Board considers that the A/D/E Merger, or the D/E Merger if
the A/D/E Merger is not approved, is in the best interests of the
Company and its Shareholders as a whole. Accordingly, the Board
unanimously recommends Shareholders to vote in favour of the
Resolutions to be proposed at the Shareholder Meetings.
Michael Baines, Chairman of LSA, said:
"The Board believes that there are important benefits to
shareholders arising from this transaction, including a simplified
share class structure, improved liquidity, and a clearer investment
case for new investors. Completion of the transaction should better
position the Company for the next phase of its development."
Expected timetable
2020
Latest time and date for receipt of 14.00 p.m. on 24 April
proxy votes for the General Meeting
-----------------------
Latest time and date for receipt of 14.05 p.m. on 24 April
proxy votes for the A Ordinary Share
Class Meeting
-----------------------
Latest time and date for receipt of 14.10 p.m. on 24 April
proxy votes for the D Ordinary Share
Class Meeting
-----------------------
Latest time and date for receipt of 14.15 p.m. on 24 April
proxy votes for the E Ordinary Share
Class Meeting
-----------------------
Latest date for dealing in D Ordinary 28 April
Shares and E Ordinary Shares in respect
of the A/D/E Merger, or dealing in D
Ordinary Shares in respect of the D/E
Merger
-----------------------
General Meeting 14.00 p.m. on 28 April
-----------------------
A Ordinary Share Class Meeting 14.05 p.m. on 28 April
-----------------------
D Ordinary Share Class Meeting 14.10 p.m. on 28 April
-----------------------
E Ordinary Share Class Meeting 14.15 p.m. on 28 April
-----------------------
Announcement of the results of the General 28 April
Meeting, A Ordinary Share Class Meeting,
D Ordinary Share Class Meeting and E
Ordinary Share Class Meeting
-----------------------
Calculation Date 30 April
-----------------------
Record Date for the entitlement of D Close of business on
Ordinary Shareholders and E Ordinary 30 April
Shareholders to their new holdings of
A Ordinary Shares in respect of the
A/D/E Merger, or the entitlement of
D Ordinary Shareholders to their new
holdings of E Ordinary Shares in respect
of the D/E Merger
-----------------------
CREST accounts credited for revised 5 May
holdings of new A Ordinary Shares or
new E Ordinary Shares (as applicable)
-----------------------
Expected despatch of share certificates Week commencing 11 May
for holdings of new A Ordinary Shares
or new E Ordinary Shares (as applicable)
-----------------------
Notes:
Each of the times and dates in the above timetable is subject to
change and may be extended or brought forward without further
notice. The Company will notify investors of any such changes to
these times and dates by making an announcement via a Regulatory
Information Service.
References to times are to London times unless otherwise
stated
Enquiries:
Life Settlement Assets plc
Michael Baines (Chairman)
020 7258 5990
Acheron Capital Limited (Investment Manager)
Jean-Michel Paul
020 7258 5990
Shore Capital (Financial Adviser and Broker)
Robert Finlay
020 7601 6115
ISCA Administration Services Limited
Company Secretary
01392 487056
Notes to Editors
LSA is a closed-ended investment company which manages
portfolios of whole and fractional interests in life settlement
policies issued by life insurance companies operating predominantly
in the United States. The life settlement market enables
individuals to sell their life insurance policies to investors at a
higher cash value than they would otherwise receive from insurance
companies (if they were cancelled or surrendered at the date of
sale). The Company aims to manage portfolios of life settlement
products so that the realised value of the policy maturities
exceeds the aggregate cost of acquiring the policies, ongoing
premiums, management fees and other operational costs. LSA was is
listed on the Specialist Fund Segment of the Main Market of the
London Stock Exchange.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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