TIDMPBLT
RNS Number : 7159R
TOC Property Backed Lendng Tst PLC
10 March 2021
For release - 10 March 2021
The information communicated in this announcement is inside
information
TOC PROPERTY BACKED LING TRUST PLC
(the "Company" or "PBLT")
Portfolio update
Dividend policy
Proposed investment policy amendment
Continuation Vote
Notice of General Meeting and Posting of Circular
The board of directors of PBLT (the "Board" or the "Directors")
is pleased to provide a portfolio update and to announce a number
of proposed changes to the Company's dividend policy, investment
focus and strategy ahead of the 2021 continuation vote
("Continuation Vote"). A circular (the "Circular") convening a
general meeting of the Company to be held at 10 a.m. on 29 March
2021 ("General Meeting") includes details of the proposals referred
to in this announcement and will shortly be sent to shareholders.
In addition to the Continuation Vote, the Circular will include a
number of other proposals including capital management processes
and proposed changes to the Company's investment policy (the
"Proposals").
Portfolio update
The Company is pleased to announce that a new facility of GBP3.8
million was provided to Horizon Cremation (East Renfrewshire) Ltd,
to facilitate the building of a modern and environmentally
efficient crematorium at East Renfrewshire, Glasgow. The borrower
is backed by private equity and property managers Maven Capital
Partners LLP, and demonstrates the Company's continuing commitment
to supporting both residential and commercial developments. The
Board, as advised by its investment adviser, Tier One Capital Ltd
(the "Investment Adviser") considers that while in general the
residential building sector is likely to offer better risk weighted
opportunities for the Company this financial year than commercial
property, each opportunity will continue to be examined on its own
merits. Consequently, it was determined that this opportunity has a
number of attractive attributes. The Company is further able to
announce the successful redemption of its facilities with
Dinosauria Ltd and Rare Earth Medburn Ltd, which are the eighth and
ninth loans to be repaid from the portfolio. These were repaid in
December 2020 and January 2021 respectively and generated an
Internal Rate of Return (IRR) of 8.23% and 8.24% respectively.
Dividend policy
The Board has also considered the appropriate dividend policy
for the Company both for the current and for future financial
years. Since June 2019, the Company has had the objective of paying
dividends on a quarterly basis at the rate of 1.5 pence per quarter
per share. In the current environment, however, not only have
underlying base rates and LIBOR dropped, but the Company is
reducing the risk of its loans by requiring a higher equity
component from its borrowers, and this will have the effect of
lowering interest earnings from the loans. As a consequence, the
Board and the Investment Adviser have considered the likely
dividend capacity of the Company. Bearing in mind that the Company
intends to distribute at least 85 per cent. of its eligible income
in accordance with Chapter 4 of Part 24 of the Corporation Tax Act
2010 in order to retain its investment trust status, the Board has
resolved to adopt a new dividend policy for the Company (further
details of which will be set out in the Circular).
It is anticipated that the new policy will first take effect in
respect of the dividend due to be declared in respect of the first
quarter of the current financial year (expected to be declared in
May 2021). As a result, the Company expects to pay dividends a rate
of 1 penny per share per quarter, equivalent to 4 pence per share
per year in aggregate. At the end of each financial year, the Board
will consider whether payment of an additional dividend (to be paid
alongside the final fourth quarter dividend for that year) is
appropriate and/or required for the Company to maintain its
investment trust status.
Proposed amendments to the investment policy
The proposed changes to the Company's investment policy will
allow for greater flexibility to allocate capital to sectors that
the Board, as advised by the Investment Adviser, has assessed as
potentially more attractive within existing risk management
parameters. The proposed changes will:
-- reduce restrictions on sector caps imposed by the current
investment policy. The current sector caps require a heavier
exposure to lending to the commercial property sector than, the
Board as advised by the Investment Adviser, considers is favourable
in the current economic climate. The Board, as advised by the
Investment Adviser, anticipates more attractive opportunities in
small and medium-sized enterprise (SME) housebuilding, and has
observed latent demand for the Company's lending in the local
market. Commercial property opportunities will nevertheless
continue to be examined on merit, as with the crematorium project
referred to above under the heading "Portfolio update".
-- remove reference to profit share agreements in the investment
policy, including that the Directors, as advised by the Investment
Adviser, anticipate that the Company will have the benefit of
associated profit shares for approximately 80 per cent. of its
future loan advances, as the anticipated evolution of the portfolio
toward lower LTV loans is likely to result in fewer situations
where an equity position can reasonably be achieved; and
-- increase the maximum exposure to bridging loans, selected
loan financings and other debt instruments so as to increase the
flexibility available to the Investment Adviser for adding new
secured loans to the portfolio that meet their risk adjusted return
criteria/objectives.
The Company intends to maintain the existing policies that
provide for risk management through diversification, in particular
maintaining the current maximum exposure level of 20% of the Net
Asset Value in respect of any one borrower or related borrowers or
developer or related developer entities (calculated at the time of
investment).
Full details of the proposed changes to the investment policy
are set out in the appendix below.
The Listing Rules require any proposed material changes to the
Company's published investment policy to be submitted to the
Financial Conduct Authority ("FCA") for prior approval. The Company
has received written approval from the FCA to make the proposed
amendments to the Company's investment policy set out above and,
accordingly, in accordance with the Listing Rules, it intends to
seek shareholder approval for those amendments at the General
Meeting.
Capital management
The Board has the discretion to seek to manage, on an ongoing
basis, the premium or discount at which the Company's shares may
trade to their net asset value ("NAV") through further issues and
buy-backs, as appropriate.
Premium management
When the Company's shares trade at a premium to NAV, the Company
may issue new shares as long as no shares are issued at a price
below NAV per share. It will therefore be proposed at the
forthcoming General Meeting that shareholders authorise the
Directors to issue shares representing up to approximately 20 per
cent. of the issued share capital of the Company on a
non-pre-emptive basis. If such authority is granted, the Directors
will not be obliged to offer such new shares to shareholders pro
rata to their existing holdings. The reason for this is to provide
flexibility if issuing new shares to investors. Unless previously
authorised by shareholders, no shares will be issued at a price
less than the prevailing NAV per share at the time of the issue
unless they are offered pro rata to existing shareholders.
Investors should note that the issuance of new shares is
entirely at the discretion of the Board, and no expectation or
reliance should be placed on such discretion being exercised on any
one or more occasions.
Discount control
The Board obtained a discretionary share buyback authority at
the general meeting of the Company held on 11 August 2020 (the
"2020 GM") and this authority will expire on the earlier of the
conclusion of the 2021 Annual General Meeting ("AGM") and 15 months
from the passing of the resolution. It is the intention of the
Directors to renew the authority obtained at the 2020 GM at the
2021 AGM. The Directors will consider repurchasing shares in the
market if they believe it to be in shareholders' interests as a
whole and as a means of correcting any imbalance between supply of
and demand for shares. The Directors will only make such
repurchases through the market at prices (after allowing for costs)
below the relevant prevailing NAV per share under the guidelines
established by the Board.
Shareholders should note that the purchase of shares by the
Company is at the absolute discretion of the Directors and is
subject, amongst other things, to the amount of cash available to
the Company to fund such purchases. Accordingly, no expectation or
reliance should be placed on the Directors exercising such
discretion on any one or more occasions.
Continuation Vote
The Company's articles of association (the "Articles") provide
that the Directors are required to propose an ordinary resolution
that the Company continue its business as presently constituted
(the "Continuation Resolution") at the fifth annual general meeting
of the Company and at each third annual general meeting of the
Company thereafter. The fifth annual general meeting of the Company
is due to be held in May 2021. The Directors intend to bring this
proposal forward to be considered at the General Meeting along with
the other Proposals.
Articles of association
As a result of the Continuation Resolution being proposed early
at the General Meeting, the Directors are also proposing to amend
the Articles so that they are not required to propose another
Continuation Resolution at the AGM to be held later this year in
May. The Company is also taking the opportunity to update the
Articles in order to reflect changes to market practice since its
initial public offering, further details of which will be set out
in the Circular. The proposed amendments to the Articles require
Shareholder approval which will be sought at the General
Meeting.
General Meeting
The General Meeting will be held on 29 March 2021 at 10 a.m. at
the offices of Tier One Capital Ltd, Keel House, Garth Heads,
Newcastle upon Tyne NE1 2JE.
The Circular will shortly be available for viewing on the
Company's website at www.tocpropertybackedlendingtrust.co.uk. and
on the National Storage Mechanism at
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.
As a result of the current restrictions in connection with
COVID-19, in particular on public gatherings, the General Meeting
will be run as a closed meeting and shareholders must not attend
the General Meeting in person. Any person who does attempt to
attend the General Meeting in person will be refused admission.
As Shareholders cannot attend the General Meeting in person,
Shareholders are encouraged to vote on the resolutions to be
considered at the General Meeting by proxy.
The Board welcomes questions from shareholders with regard to
the resolutions being put to the General Meeting or to any other
matter relating to the Company. Given the unique circumstances
prevailing in connection with COVID-19, it is requested that any
such questions be submitted ahead of the General Meeting by email
to cosec@maitlandgroup.com .
For further information regarding the Company (Ticker: PBLT)
(LEI: 213800EXPWANYN3NEV68) please call:
Tier One Capital Ltd (Investment Adviser) +44 (0) 191 222
Ian McElroy/Brendan O'Grady 0099
finnCap Ltd (Financial Adviser and Broker) +44 (0) 207 220
William Marle/Giles Rolls 0500
Maitland Administration Services (Scotland) +44 (0) 1245 206
Limited (Secretary) 2014
Notes to Editors:
TOC Property Backed Lending Trust PLC is a closed-end investment
company listed on the main market of the London Stock Exchange and
specialises in providing finance to the residential and commercial
property sector.
The Company's investment adviser is Newcastle upon Tyne based
Tier One Capital Limited. Tier One Capital is a wealth management
and property lending firm providing financial advice services and
bespoke tailored lending to the property development market.
This announcement contains certain forward-looking statements.
In some cases forward-looking statements can be identified by the
use of terms such as "believes", "estimates", "anticipates",
"projects", "expects", "intends", "may", "will", "seeks" or
"should" or variations thereof, or by discussions of strategy,
plans, objectives, goals, future events or intentions. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances. Actual
outcomes and results may differ materially from any outcomes or
results expressed or implied by such forward-looking statements.
You should not place any reliance on forward-looking statements.
Any such forward-looking statements have not been independently
audited, examined or otherwise reviewed or verified and nothing in
this announcement should be construed as a profit forecast.
All views expressed in this announcement are based on financial,
economic, market and other conditions prevailing as of the date of
this announcement. The Company does not undertake to provide access
to any additional information or to update any future projections,
management targets, estimates or assessments of future prospects or
any other forward-looking statements to reflect events that occur
or circumstances that arise after the date of this announcement, or
to correct any inaccuracies in this announcement which may become
apparent. The information in this announcement is subject to
updating, completion, revision and amendment without notice. This
announcement contains information from third party sources. Past
performance is not indicative of future results and forward-looking
statements are not guarantees of future performance. Investment
losses may occur, and investors could lose some or all of their
investment.
Appendix: Proposed amendments to the investment policy
The proposed amendments to the investment policy, marked to show
the changes from the investment policy at the time of its IPO, are
set out below. Additions are indicated with underline and deletions
are indicated with strikethrough.
The Company will seek to achieve its investment objective
through: (i) a diversified portfolio of fixed rate loans
predominantly secured over land and/or property in the UK; and (ii)
receiving, in many cases, the benefit of an associated Profit
Share, usually obtained by acquiring (at nil cost) a minority
equity stake in the relevant borrower project development
vehicle.
The Company will attempt to reduce downside risk by focusing on
secured debt with both quality collateral and contractual
protection.
The Company will make investments primarily through senior
secured loans although other loans such as bridging loans,
subordinated loans, selected loan financings and other debt
instruments may be considered if appropriate.
The Company anticipates that the typical loan term will be
between one and five years. The Company retains absolute discretion
to make investments for either shorter or longer periods.
Loan to value
The Company will typically seek to originate debt where the
effective loan to real estate value ratio of any investment is
between 40 per cent. and 100 per cent. at the time of origination.
The Company will typically seek to achieve a blended LTV across the
Portfolio of no more than 75 per cent. (based on the initial
valuations at the time of loan origination) once fully
invested.
Sector
The Company's portfolio is intended to be appropriately
diversified by sector and will be predominantly split between:
-- regional residential housebuilding across the UK, with a
preliminary focus on non-London based property;
-- small to medium commercial property development across the UK
primarily focusing on small serviced office space, hotel
developments and wedding and conferencing venues; and
-- direct sale and leaseback vehicles primarily operating in the
professional sectors of dentists, accountants, solicitors and
finance professionals.
Profit Shares
The Company anticipates that, for many of the fixed rate loans
it will make, it will have the benefit of an associated profit
share arrangement: usually obtained by acquiring (at nil cost) a
minority equity stake in the relevant borrower project development
vehicle. It is anticipated that each Profit Share will be with a
particular borrowing team pursuant to which the Company will have a
right of first refusal to provide the financing for that borrowing
team's next five projects via the relevant borrower project
development vehicle. The Directors (as advised by the Investment
Adviser) anticipate that the Company will have the benefit of
associated Profit Shares for approximately 80 per cent. of its
future loan advances.
The Directors intend to negotiate Profit Shares on a
developer-by-developer basis. The Company will have the benefit of
suitable minority protection rights (e.g. reserved matters
requiring shareholder approval and the ability to appoint
director(s) to the boards of the project development vehicle) in
order to protect its investment but neither the Company nor the
Investment Adviser will be involved in the day-to-day operations of
the project development vehicle or associated borrowing team.
Given the time frame required to fully maximise the value of a
Profit Share, the Board expects that the Company's interest in a
Profit Share will be held for the medium to long term. The Company
will only take the benefit of Profit Share investments where the
underlying loans are consistent with the investment objective and
investment policy of the Company, and following completion of
satisfactory due diligence, irrespective of whether a Profit Share
is available.
The Initial Portfolio of 10 loans includes loans associated with
3 borrowers who have previously entered into profit sharing
arrangements with the Investment Adviser. The Company will not have
a right of first refusal on any further loans to such borrowers.
However, Profit Share arrangements for future loans advanced by the
Company to projects associated with those borrowers would accrue
for the benefit of the Company and would not be retained by the
Investment Adviser.
Investment restrictions
The Company will observe the following investment
restrictions:
-- the Company will derive its income from a portfolio of not less than five loans;
-- no more than 50 100 per cent. of the Net Gross Asset Value
will be exposed to the regional residential housebuilding sector,
calculated at the time of investment;
-- no more than 50 100 per cent. of the Net Gross Asset Value
will be exposed to the small to medium commercial property
development sector, calculated at the time of investment;
-- no more than 30 per cent. of the Net Asset Value will be
exposed to direct sale and leaseback vehicles, at the time of
investment;
-- no more than 25 50 per cent. of the Net Asset Value will be
exposed to subordinated loans, calculated at the time of investment
and/or subsequent subordination;
-- no more than 10 50 per cent. of the Net Asset Value will be
exposed to bridging loans, selected loan financings and other debt
instruments, calculated at the time of investment;
-- no more than 5 per cent. of the Net Asset Value will be
exposed to unsecured loans, calculated at the time of
investment;
-- no single investment, or aggregate investments secured on a
single property or group of properties or connected with related
borrowers, will exceed 20 per cent. of the Net Asset Value,
calculated at the time of investment;
-- no more than 25 per cent. of the Net Asset Value for the
first six months after Initial Admission, and no more than 20 per
cent. of the Net Asset Value thereafter will be exposed to any one
borrower or related borrowers or developer or related developer
entities calculated at the time of investment;
-- no more than 10 per cent. of the Net Asset Value will be
exposed to any sector other than regional residential housebuilding
and , small to medium commercial property development and direct
sale and leaseback vehicles; and
-- the Company will not invest in other listed closed-ended investment companies.
Borrowing
The Company may use gearing if it believes it will enhance
Shareholder returns over the longer term. If the Company does
decide to introduce gearing it would intend to limit the Company's
borrowings to a maximum of 30 per cent. of the Net Asset Value at
the time of drawdown.
Cash management
The Company may from time- to-time have surplus cash. It is
expected that any surplus cash will be temporarily invested in cash
or cash equivalents, money market instruments, bonds, commercial
paper or other debt obligations with banks or other counterparties
having a single-A (or equivalent) or higher credit rating as
determined by an internationally recognised rating agency or gilts
or otherwise approved by the Board.
Use of derivatives and hedging
The Company may invest through derivatives for efficient
portfolio management. In particular, the Company may engage in
interest rate hedging or otherwise seek to mitigate the risk of
interest rate increases as part of the Company's efficient
portfolio management.
In the event of a breach of the investment policy or the
investment restrictions set out above, the Investment Adviser shall
inform the Directors upon becoming aware of the same and if the
Directors consider the breach to be material, notification will be
made to a Regulatory Information Service.
No material change will be made to the investment policy without
the approval of Shareholders by ordinary resolution.
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