SQN Asset Finance Income Fund Ltd Outcome of KPMG Review & Release of December NAV (2488I)
31 Marzo 2020 - 02:01PM
UK Regulatory
TIDMSQN
RNS Number : 2488I
SQN Asset Finance Income Fund Ltd
31 March 2020
31 March 2020
SQN Asset Finance Income Fund Limited
("the Company")
Outcome of the KPMG review of AD Plants valuation
Release of the NAV of the Ordinary Shares for 31(st) December
2019
On 13(th) February 2020 the Company announced that it had
engaged KPMG Ireland ("KPMG") to undertake an independent valuation
of six Anaerobic Digestion ("AD") plants ("the AD Plants") as at
31(st) December 2019 including a review of the valuation model used
for those AD assets. The Board sought independent advice as a
result of the wide range of valuations, which were notably lower
than previously, presented to the Board by the Investment Managers
for the 31(st) December 2019 NAV. KPMG have significant experience
in the AD sector having been advisors in connection with the
purchase and sale of a number of AD plants, M&A, refinancings
and valuations.
Whilst the review was taking place, the Company was unable to
calculate and release the NAVs for 31(st) December 2019, 31(st)
January 2020 and 29(th) February 2020 for the Ordinary Shares. The
NAVs for the C Shares for those dates were released as usual as the
C Shares do not hold any AD assets.
The Board has now received the KPMG report. KPMG provided a
range of valuations of the AD Plants prepared on a Fair Value basis
of between GBP64.76m and GBP73.26m ("the FV Range") as at 31(st)
December 2019. This range is derived from a discounted cash flow
model using expert input as well as observed market transactions.
The valuations are reflective of the operational capability and
contractual positions of the AD Plants as at 31(st) December 2019,
taking account of prudent estimates of cash flow upside where KPMG
believe that a willing investor would likely attribute value as
part of a competitive acquisition process. A detailed paper and
va(D) luation model has been provided to the Company for each AD
Plant.
KPMG has further stated that should a point value be required,
as it is for the calculation of the NAV and for the production of
the Company's Interim Financial Statements to 31(st) December 2019,
the mid-point of the FV Range could be considered appropriate ("the
FV Mid-Point"). The Board has determined to use the FV Mid-Point
and, accordingly, the Fair Value of the Company's investment in AD
Plants is GBP55.33m, resulting in additional expected credit losses
on the related credit investments of GBP73.71m, equivalent to
20.71p per Ordinary Share or 22.20% of the Ordinary Share NAV. This
has been calculated taking into account other lenders on three of
the AD Plants, the outstanding debt held in the Company's books and
the Company's existing IFRS9 Expected Credit Losses.
As a result, the unaudited, estimated NAV per Ordinary Share as
at 31(st) December 2019 was 72.57p, representing a decrease of
21.11p per Ordinary Share or 22.53% from 30(th) November 2019.
The Investment Managers believe that there remain opportunities
to create value in excess of the FV Range based on a number of
factors that are not included in the KPMG Fair Value valuations.
These include measures that could add value to each AD Plant if
certain enhancements were to be undertaken such as, amongst other
things, private wire contracts, heat off-take contracts, digestate
contract cost reductions, additional RHI income from heat recovery
systems and recoveries from contractor guarantees for faulty work.
Based on these assumptions the valuation range is GBP97.09m to
GBP108.99m. Furthermore, there may be an opportunity to create
value beyond this range, in particular if the AD Plants were sold
as a portfolio of assets which might attract a valuation
premium.
The Board believes that using the FV Mid-Point is the most
appropriate value to use for the calculation of the Ordinary Shares
NAV as there is no assurance that the improvements that might lead
to value in excess of the FV Range can be achieved.
The Board has also determined that the FV Mid-Point remains
appropriate for the calculation of the Ordinary Shares NAVs for
31(st) January 2020 and 29(th) February 2020 and the NAVs for those
dates will be released shortly.
For further information please contact:
SQN Capital Management, LLC
Jeremiah Silkowski jsilkowski@sqncapital.com
Nicola Bird nbird@sqncapital.com
Catherine Halford Riera chalford@sqncapital.com 01932 575 888
Winterflood Securities Limited 020 3100 0000
Neil Langford
Chris Mills
Buchanan
Charles Ryland
Victoria Hayns
Henry Wilson 020 7466 5000
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