UK Mortgages Ltd Notice of EGM
November 16 2020 - 2:00AM
UK Regulatory
TIDMUKML
THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION,
RELEASE OR DISTRIBUTION (IN WHOLE OR IN PART) DIRECTLY OR INDIRECTLY IN OR INTO
OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A
TAKEOVER OFFER OR AN OFFER OF SECURITIES.
16 November 2020
UK MORTGAGES LIMITED
(a closed-ended investment company incorporated in Guernsey with registration
number 60440) LEI 549300388LT7VTHCIT59
Circular to Shareholders and Notice of Extraordinary General Meeting relating
to proposals for the Company's future strategy
Following the further consultation with Shareholders which was announced on 27
October 2020, the Board of UK Mortgages Limited ("UKML" or the "Company") is
recommending that the Company should continue operating as a publicly traded
investment company under a revised mandate offering increased focus on
enhancing liquidity and returns whilst continuing to seek to narrow the
discount to net asset value at which the Company's Ordinary Shares trade.
The Board is therefore convening an Extraordinary General Meeting of the
Company to be held at 11 a.m. on Friday, 4 December 2020 at the offices of
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands GY1 3QL
in order to approve the proposal.
Christopher Waldron, Chairman of UKML, said: "Following the launch of the
review of strategy, the Board has consulted with the Company's Shareholders
over the appropriate future direction for the business. I am pleased to say
they have strongly supported our proposals to take the Company forward with a
revised mandate for increased dividend cover and enhanced liquidity and
returns."
Details of the Proposal
Subject to approval by Shareholders at the Extraordinary General Meeting, the
Board intends that:
1. Additional shareholder protections
· If the Ordinary Shares trade at a discount of 5% or wider to the
prevailing NAV in the period of 20 Business Days preceding any Board
consideration of a refinancing of a Mortgage Securitisation, then the Board
will not approve such refinancing and instead will pursue a realisation with
the proceeds (net of expenses) intended to be returned to Shareholders
· If the Ordinary Shares are not trading at an average price per Ordinary
Share which is equal to or above the most recent published NAV in the period of
20 Business Days preceding the second anniversary of the Extraordinary General
Meeting, the Board intends to place the Company into a managed wind down.
2. Realisation of Cornhill No. 6 & Malt Hill No. 2
It is intended that Cornhill No. 6 and Malt Hill No. 2 will be disposed of on a
timely basis with a view to optimising Shareholder value. Whilst these are high
quality assets, the yield is below the current Shareholder requirements. The
proceeds (net of expenses) are intended to be distributed to Shareholders
through a tender offer by the Company to repurchase Ordinary Shares. It should
be noted that in general the loan portfolios were purchased at a premium and a
sale at below that level may have a negative effect on the NAV in the short
term. The combined portfolios are expected to have a nominal value of
approximately GBP500 million at the time of sale and therefore a 1 per cent
variation in price would amount to approximately GBP5 million. TwentyFour's
estimates for the resulting available capital released from this sale, in
relation to returns to shareholders in or around May 2021, range between GBP35
million and GBP40 million. These returns would be distributed through a tender
offer at a price expected to be materially above 70 pence per Ordinary Share.
The making of any tender offer and the price at which it is made are at the
Board's discretion, would require approval by Shareholders (which is expected
to be by way of ordinary resolution) and are subject to the requirements of
Guernsey law.
3. Securitise current Keystone pool
Notwithstanding what is said in paragraph 1 (Additional shareholder
protections) above it is intended to securitise the current Keystone pool
(Cornhill No. 4) at an appropriate time to optimise funding costs and lock-in
attractive potential returns which the Portfolio Manager estimates under
current market conditions to be in the low-to-mid teens per annum over
approximately 3 years.[1] The target size of this securitisation is estimated
to be approximately GBP350 million.
4. Expand and Securitise 2nd Keystone pool
Subsequently, it is intended to take advantage of foreseeable favourable
origination and funding conditions to continue to fund and securitise a second
pool of mortgages through Keystone in order to access further attractive
potential returns. The Portfolio Manager currently estimates that potential
returns from this pool to be in the mid-to-high teens per annum, within the
existing appetite for credit and structural risk.
Paragraphs 1 to 4 above are referred to together as the "Proposal".
Dividend and NAV performance
The Board intends to continue to pay dividends of 4.5p per annum per Ordinary
Share and expects based on current market conditions and reasonable assumptions
that this level will be covered by
income in the current financial year and will increase progressively
thereafter.[2] The NAV is estimated to increase gradually following completion
of the intended sale of Cornhill No. 6 & Malt Hill No. 2.
Benefits of the Proposal
The Board considers the Proposal to offer a compelling proposition and has the
potential to deliver better value to Shareholders than the alternative of
winding down the Company. The UK mortgage market is going through a period
where margins have materially improved, enabling generation of significant
returns. UKML offers exposure to a hard-to-compile, high performing portfolio
which is difficult to replicate. Continuing to fund Keystone, including funding
a second pool as described above, is expected to generate significant income
and become central to UKML's marketing proposition. The Proposal will generate
income that means the 4.5p per annum dividend is covered and dividend cover is
expected to increase progressively thereafter. The Portfolio Manager expects an
IRR in the region of 11.5-13.5% over the next three years as compared to an IRR
for managed winding down of the Company of 6-10%.[3] To the extent that the
share price does not respond and trade at or above NAV by the second
anniversary of the Extraordinary General Meeting, the Proposal includes
provisions for further liquidity to be generated provided through the sale of
assets or a managed wind down.
Alternatives to the Proposal
The Board considers that the Proposal should deliver substantially higher value
to Shareholders than the alternative of winding down the Company. Winding down
accelerates the writing off of premiums paid on mortgages, initial set-up costs
for each SPV and would incur significant legal and advisory costs for each
portfolio sale. It should be noted that an orderly winding down would be
expected to take at least 3 years to coincide with the maturity dates of the
securitisations in which the Company invests.
Extraordinary General Meeting
The Company will only implement the Proposal if the Resolution is passed at the
Extraordinary General Meeting. If the Resolution is not passed at the
Extraordinary General Meeting, the Directors intend to put the Company into a
managed winding down.
Therefore, the Board is Recommending that Shareholders vote in favour of the
Proposal.
Enquiries:
UK Mortgages Limited
Christopher Waldron (Chairman) 020 7260 1000
Numis Securities Limited, Financial Adviser and Corporate Broker
Hugh Jonathan 020 7260 1000
Nathan Brown
Garfield Advisory, Public Relations Adviser
Andrew Garfield 079 7498 2337
Jason Nisse 077 6968 8618
Further information
This announcement is not intended to and does not constitute an offer to buy or
the solicitation of an offer to subscribe for or sell or an invitation to
purchase or subscribe for any securities or the solicitation of any vote in any
jurisdiction. The release, publication or distribution of this announcement in
whole or in part, directly or indirectly, in, into or from certain
jurisdictions may be restricted by law and therefore persons in such
jurisdictions should inform themselves about and observe such restrictions.
Numis Securities Limited ("Numis"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively for UK
Mortgages Limited and no one else in connection with the matters set out in
this announcement and will not regard any other person as its client in
relation to the matters in this announcement and will not be responsible to
anyone other than UK Mortgages Limited for providing the protections afforded
to clients of Numis, nor for providing advice in relation to any matter
referred to herein.
Publication on website and availability of hard copies
Copies can be downloaded from the Company's website:
https://twentyfouram.com/en/funds/uk-mortgages-fund/
Forward looking statements
This announcement, oral statements made regarding the Proposal, and other
information published by UK Mortgages Limited may contain statements which are,
or may be deemed to be, "forward-looking statements". Forward-looking
statements are prospective in nature and are not based on historical facts, but
rather on current expectations and projections of the management of UK
Mortgages Limited about future events, and are therefore subject to risks and
uncertainties which could cause actual results to differ materially from the
future results expressed or implied by the forward-looking statements. Often,
but not always, forward-looking statements can be identified by the use of
forward-looking words such as "plans", "expects" or "does not expect", "is
expected", "is subject to", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or variations
of such words and phrases or statements that certain actions, events or results
"may", "could", "should", "would", "might" or "will" be taken, occur or be
achieved. Although UK Mortgages Limited believe that the expectations reflected
in such forward-looking statements are reasonable, UK Mortgages Limited can
give no assurance that such expectations will prove to be correct. By their
nature, forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by such forward-looking
statements. Such forward-looking statements should therefore be construed in
the light of such factors. Neither UK Mortgages Limited, nor any of its
associates or directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed or implied
in any forward-looking statements in this announcement will actually occur. You
are cautioned not to place undue reliance on these forward-looking statements.
Other than in accordance with its legal or regulatory obligations (including
under the Disclosure Guidance and Transparency Rules of the FCA), UK Mortgages
Limited is under no obligation, and expressly disclaims any intention or
obligation, to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
MAR
The information contained within this announcement is deemed by UKML to
constitute inside information as stipulated under the Market Abuse Regulation.
Upon the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
[1] This is an estimate only and is based on current market conditions and
information and estimates available to the Company as at the date of this
document and is not a profit forecast. There can be no assurance that this
estimate will be met.. This estimate should not be taken as an indication of
the Company's expected or actual current or future results. The Company's
actual results, profits and dividends paid will depend upon a number of
factors, including but not limited to the Company's net income and the
Company's ongoing costs, expenses and charges.
[2] This is an estimate only and is based on current market conditions and
information and estimates available to the Company as at the date of this
document and is not a profit forecast. There can be no assurance that this
estimate will be met or that the Company will make pay dividends at the level
estimated or at all. This estimated should not be taken as an indication of the
Company's expected or actual current or future results. The Company's actual
results, profits and dividends paid will depend upon a number of factors,
including but not limited to the Company's net income and the Company's ongoing
costs, expenses and charges.
[3] This is an estimate only and is based on current market conditions and
information and estimates available to the Company as at the date of this
document and is not a profit forecast. There can be no assurance that this
estimate will be met. This estimate should not be taken as an indication of the
Company's expected or actual current or future results. The Company's actual
IRR will depend upon a number of factors, including but not limited to the
Company's net income and the Company's ongoing costs, expenses and charges.
END
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