RNS Number:7762Q
ACP Capital Limited
06 February 2007
Date: 6 February 2007
On behalf of: ACP Capital Limited ("ACP Capital or "the Company")
For immediate release
ACP Capital Limited (AIM: APL)
ACP Capital announces intended development plans
ACP Capital Limited ("ACP Capital" or the "Company") is pleased to announce its
intended development plans for the future roll-out of its integrated finance
strategy, including proposals for further funding facilities, managed vehicles
and strategic platforms (the "Intended Development Plans"). By implementing
these plans, the Company's directors (the "Directors") believe that the Company
would be able to create further origination and funding opportunities as well as
further value creation for shareholders.
In relation to the implementation of the Intended Development Plans, it is the
Company's intention to raise approximately #150 million before costs through a
placing of new ordinary shares on AIM (the "Proposed Placing"). Following a
successful placing, the Directors believe that the Company would be well
positioned to implement the Intended Development Plans.
Intended Development Plans
In order for the Company to develop further its integrated finance and asset
management business in the European SME market, the Company has established
plans for the intended development of its strategic platforms, funding
facilities and managed vehicles. In progressing its Intended Development Plans,
the Company has entered into advanced discussions or heads of terms in relation
to a number of potential investments or joint ventures as described below. In
addition, the Company is developing its infrastructure in continental Europe
with the intention of opening offices in Milan and Munich, which is also
described below. The Company may also consider acquisitions or investments, as
originally stated in the admission document of the Company dated 20 December
2005 (the "Admission Document"), in complementary asset management businesses.
The Directors believe that the successful implementation of the Intended
Development Plans would allow the Company to:
* establish its presence as a specialised integrated finance provider in
the European SME market where the Directors believe that a significant
market opportunity exists;
* offer, through its own and its managed vehicles' funding facilities, a
comprehensive range of financing alternatives to the SME market;
* broaden, through additional strategic platforms, the origination of
investment and funding opportunities for itself and its managed vehicles;
and
* achieve substantial revenue diversification, with a particular focus on
the expansion of cash revenue primarily from its asset management business
and funding lines, targeted to represent in excess of 50 per cent. of total
revenue by the end of 2008.
In order to implement the Intended Development Plans, the Company proposes to
raise approximately #150 million in the Proposed Placing. Subject to market
conditions, the Company may wish to raise up to #200 million.
Intended Development of funding facilities
ACP Capital currently has full equity underwriting capabilities in addition to
ACP Mezzanine's dedicated mezzanine capabilities. The Company intends to expand
these facilities to include comprehensive senior debt funding lines in order to
finance the origination flow generated by the Company's proposed managed
vehicles and strategic platforms. These additional "Facilities" would include:
Senior Debt Underwriting Vehicle - (the "SDV"): The Company intends to put in
place a leveraged loan underwriting facility of up to Euro150 million, which the
Directors believe may require up to Euro75 million of equity and up to Euro75 million
in third party debt, in order to provide non-investment grade senior funding to
the SME sector. The SDV would provide this capability and would generally
syndicate a majority of the loans that it underwrites. This facility would, when
combined with ACP Mezzanine's underwriting capabilities of up to Euro75 million for
an individual transaction and up to Euro25 million of equity provided by the
Company or a managed vehicle, enable the Company and its managed vehicles to
offer an underwritten finance package of up to an aggregate of Euro250 million per
transaction. This would represent the development of the Company's ongoing
underwriting and syndication activities in which the Company's management has
significant experience.
Investment Grade Funding Vehicle - (the "IGV"): The Company intends to put in
place the IGV by taking a first loss equity position and raising a credit line
(AAA to BBB rating equivalent) with third party banks which will enable the
Company to offer funding lines for diversified pools of assets to the SPs, such
as equipment leasing or container/railcar leasing. The Directors believe that
these funding lines may be a series of individual facilities which could be
pooled once critical mass is achieved, thus generating economies of scale. The
equity position required will vary depending on the asset type concerned, but is
expected to range between approximately 3.0 per cent. and 12.0 per cent. The
Company anticipates an equity requirement of up to Euro40 million by 2008 for the
IGV.
Pfandbrief - Real Estate Investment Grade facility: The Company is currently in
discussions with a view to acquiring a strategic equity stake in a small German
bank which holds a license to issue Pfandbrief (the principal funding instrument
used by German mortgage bankers). Alternatively, the Company may opt to obtain a
Pfandbrief licence itself through the creation of a dedicated vehicle, a process
which the Directors believe could take approximately 9 to 12 months. Either
approach is expected to require an initial minimum equity investment of
approximately Euro50 million. The Directors believe that Pfandbrief issuance offers
a competitive source of low risk investment grade real estate financing and is
the largest uniform asset class in the European bond market. The Company expects
to offer this product as part of its comprehensive financing platform as a
source of senior debt funding for real estate assets.
Further strategic platforms
The Company set out as an objective in its Admission Document the development of
strategic platforms (the "SPs"). These targeted vehicles, in which the Company
may take significant minority equity stakes, would take the form of origination
platforms focusing primarily on the provision of a series of financing products
to the SME sector. The Company believes that it could, as a preferred funder,
provide competitive financing to enable these SPs to expand their various loan
products into areas such as senior and subordinated corporate loans (secured and
unsecured), off balance sheet financing (i.e. sale- leasebacks), and equipment
financing (such as IT hardware, telecommunications and motor vehicles). By
enabling such SPs to increase their product ranges, the Company would seek to
benefit from an ongoing source of funding origination that it is hoped will
provide a flow of opportunities for its funding facilities and its managed
vehicles. The Directors believe that the Company would also benefit, as a
shareholder, from any potential increase in the equity value of these SPs.
However, equity investments inherently carry a high degree of risk and it is
also possible that such investments could decline in value.
In expectation of the proposed placing raising approximately #150 million, the
Company is currently actively pursing the following SP initiatives whilst
working with external investment banks to identify further opportunities for SPs
in key markets such as the UK, France, Italy and Germany.
UK SME focused finance business: The Company intends to allocate up to #30
million to invest in a strategic equity stake in at least one UK finance
business. The Company is currently in discussions with two such companies with a
view to taking a minority equity stake and/or providing a series of financing
facilities funded through the Facilities and ACP Mezzanine. The Company has
recently announced that it has acquired a shareholding in excess of 8 per cent.
in one of these companies, namely Davenham Group plc, a lender to the UK SME
sector. The Directors intend for the Company to target a flow of assets to the
Company and its managed vehicles from such opportunities (if completed and once
fully operational) of approximately #100 million in its first year and
approximately #250 million in its second year of operations.
Italian SME focused finance business: The Company intends to allocate up to Euro20
million to the development of a dedicated Italian SME financing platform. To
this end, the Company is currently in discussions to create a joint venture with
Eurinvest, an established Italian investment house, with a view to gaining a
foothold in the Italian SME market. The Company is currently reviewing an
opportunity to acquire a stake of approximately 50 per cent. stake, alongside
one of Eurinvest's investment vehicles, in an Italian SME financing business for
approximately Euro5 million with a potential further capital investment of around
Euro15 million to finance the business's growth. The Directors intend to target a
flow of assets to the Company and its managed vehicles from such an Italian
finance business (if completed and once fully operational) of approximately Euro50
million in its first year and approximately Euro125 million in its second year of
operations.
In parallel, Eurinvest, has proposed, subject, inter alia, to board and
regulatory approval, to invest approximately Euro5 million in the Proposed Placing
and has expressed an interest in placing a non--executive director on the
Company's Board of Directors. If Eurinvest participates in this way in the
Proposed Placing, it is expected that Eurinvest would be invited to nominate a
non-executive director to the Company's Board of Directors.
French SME focused finance business: The Company has submitted an offer letter
for a minority equity investment in a French finance business. The Company
anticipates equity funding of up to Euro40 million to invest in and grow the
target. The Directors intend for the Company to target a flow of assets to the
Company and its managed vehicles from such a French finance business (if
completed and once fully operational) of approximately Euro150 million in its first
year and approximately Euro275 million in its second year of operations.
German SME focused finance business: The Company is currently in discussions
with regards to (a) acquiring a stake in a small but established German bank
with experience in corporate SME and real estate lending, including the ability
to issue Pfandbrief or (b) acquiring its own German banking licence. The Company
also intends to provide funding lines for identified loan products to
independent German SME loan originators.
Intended Development of Managed Vehicles
As part of its Intended Development Plans, the Company intends to expand its
asset management business through the establishment of additional managed
vehicles, capitalised predominantly with third party equity and managed by the
Company. The managed vehicles are intended to be designed to take advantage of
the planned flow of asset opportunities from the expansion of the Company's
funding facilities and strategic platforms. Certain of the managed vehicles may
also create a flow of finance opportunities in their own right.
In 2007, it is intended that the managed vehicles the Company proposes to launch
will include ACP Strategic Equity and ACP High Income, both of which are
described below. The Company has already begun acquiring and warehousing assets
on its balance sheet which are intended to be transferred to both ACP High
Income and ACP Strategic Equity. The Company intends to warehouse assets on its
balance sheet until such time as the volume of assets held justifies, in the
opinion of the Directors, the launch of the relevant dedicated managed vehicle
and the resulting raising of third party equity. The Company is currently in
discussions regarding the launch of two additional managed vehicles, a real
estate vehicle ("ACP PropCo"), and an infrastructure vehicle ("ACP
Infrastructure I"), which are also described below.
The Company may also participate in subsequent fundraisings by ACP Mezzanine and
also in fundraisings by future managed vehicles. The Company expects to maintain
an equity holding in each managed vehicle of approximately 25 per cent. on a
long term basis.
ACP High Income: The Company is targeting an initial #25 million to #30 million
to warehouse assets for a proposed high income managed vehicle ("ACP High
Income") which the Company expects to be the first of a number of listed funds
geared primarily towards retail investors. It is intended that ACP High Income
will invest in a portfolio comprised primarily of senior debt instruments from
the Company's leveraged loan business, and through the primary and secondary
markets. In order to make ACP High Income more attractive to the retail market,
the Company may take a first loss position in ACP High Income which would offer
investors a degree of capital protection. In addition, the Company is currently
in the documentation phase for a funding line with a third party institution to
support ACP High Income with leverage of up to 75 per cent. The Company is
presently in the process of warehousing assets intended for ACP High Income
including a #6 million investment in the Colonnade II CDO and a Euro10 million
portion of the Nordsee senior debt package, both of which have been identified
for transfer to ACP High Income.
ACP Infrastructure I: The Company intends to launch a series of dedicated
infrastructure vehicles that would fund equity holdings in infrastructure
assets. The Company has signed a term sheet with an international operator in
the shipping container and railcar sectors with a view to developing an off
balance sheet capability for that operator. The Company currently intends to
launch ACP Infrastructure I late in 2007 or early in 2008 following the
warehousing of approximately Euro100 million of such assets with the intention of
additional funding being provided by the Company's Facilities and managed
vehicles.
ACP PropCo: The Company intends to develop a dedicated real estate vehicle that
will act as the preferred partner for the Company's managed vehicles and SPs,
focusing primarily on the provision of sale/leaseback products. Similarly to ACP
Infrastructure I (see above), the Company is targeting to warehouse
approximately Euro100 million of assets before launching the vehicle.
ACP Strategic Equity: The Company intends to establish a strategic equity
vehicle through which it would intend to hold strategic equity investments in
companies and vehicles, such as IFR Capital. The Directors believe that through
ACP Strategic Equity, the Company could generate significant returns which are
expected to be achieved through the combination of the Company's integrated
finance capabilities and commitment to assisting these companies in growing
their businesses. ACP Strategic Equity is expected to warehouse approximately Euro
60 to Euro80 million of equity holdings (including its stake in IFR Capital),
before it is launched, which is anticipated to occur by the end of 2007. The
Company's intention is that ACP Strategic Equity will differentiate itself from
private equity in that it (a) will not, generally, seek majority control of
target companies, (b) can have a longer term investment period, and (c) will
usually invest as part of an overall integrated finance approach, which the
Directors believe to be a distinct advantage in the European SME market.
The above descriptions of the strategic platform, funding facilities and managed
vehicles do not constitute financial projections of any kind, but instead
represent the Company's strategic business objectives and targets. Although the
Company will use all reasonable endeavours to establish the strategic platforms,
funding facilities and managed vehicles to meet the cash flow and strategic
business targets described above, they may not be achieved and actual results
may vary significantly from targeted results. The Company does not provide
assurance of or guarantee the formation of or the success of any of its
strategic platforms, funding facilities or managed vehicles. In parallel, the
Company's anticipated "flow of assets" may take at least one year post the
initial investment to such SME being made.
Anticipated investment requirement under the Intended Development Plans
Further to the Company's plans to develop its strategic platforms, funding
facilities and managed vehicles described above, the Company's estimated
investment requirements during 2007 and 2008, and estimated sources of funds are
summarised as follows:
Illustrative Sources and Uses of Funds (2007 & 2008 combined)
Sources of funds
Cash on Balance Sheet #10m
Repayment of Loans #14m
Net Proceeds from proposed Placing #144m
Corporate Debt #72-92m
Total #240-#260m
Uses of funds
Equity Investments in Strategic Platforms #100m-#115m
Equity to Funding lines #70m-#80m
Net Equity Investments in Managed Vehicles #70m-#80m
Total #240m-#275m
As set out in the table above, a part of the Company's required funding is
intended to be financed by corporate debt facilities, which the Company intends
to limit to 3 times EBTDA (but before interest income from cash on balance sheet
and interest cost of corporate debt).
Anticipated financial effects of the Intended Development Plans
The Directors believe that the Company's financial performance will benefit
under the Intended Development Plans in the following key respects:
* increased assets under direct investment or management, on which the
Company is able to generate its targeted returns and investment management and
performance fees; and
* enhanced diversification of revenue generation.
Financial Targets of the Company
Under the Intended Development Plans, the Company's financial targets are to:
1. have funds under management and direct investments in strategic
platforms in excess of #1.5 billion in terms of gross asset value by the end of
2008; and
2. generate total revenues in excess of #70 million by the end of 2008, of
which at least 50 per cent. would consist of cash income
Diversified Revenue Generation
In adopting its planned strategy under the Intended Development Plans, the
Company targets that by the end of 2008 it will have put in place a diversified
revenue stream consisting of recurring revenues such as asset management and
incentive fees, dividend flow from various managed vehicles, underwriting fees,
net interest margin from loans, and, in parallel, capital gains (through
mark-to-market or realisation) on its strategic equity holdings and equity
holdings in managed vehicles.
Organisational Build-Up
The Group currently has 11 contracted employees. Given its increasing advisory
role, ACP Capital UK LLP, the advisor to the Company, intends to continue to
recruit in London with an intention to increase its team by a further three to
five people in 2007.
The Company is putting in place its administrative functions in Jersey and has
hired its Financial Controller, Antony Perez, who will commence employment at
the end of March 2007. Antony Perez will work closely with R&H Fund Services (
Jersey) Limited, who act as the Company's administrators and company secretary.
The Company is currently intending to open up offices in both Milan and Munich,
either independently or alongside its joint venture partners, as part of its
continued focus on developing its activities in these key markets.
Nikolaj Larsen, the Company's Head of Strategic Investments will relocate to the
Munich office in March 2007. In parallel, the Company has made one local hire
and is currently in discussions with a further individual with a goal of
building a 5 to 7 person team in 2007.
Derek Vago intends to relocate to Geneva by the end of April 2007, in order to
be more closely located to the German, Italian and French markets.
By the end of 2007, the Company, including ACP Capital UK LLP and, through joint
ventures, intends to have a total of approximately 25 employees.
The Proposed Placing
The Proposed Placing is intended to raise approximately #150 million (gross of
expenses) and the proceeds are intended to be used as described above. The
Company intends to hold meetings with potential investors with a view to
implementing the Proposed Placing during March 2007. The Proposed Placing is
dependent upon Shareholders passing the Special Resolutions at the AGM.
As at the date of this document, the Company has an authorised share capital of
#100,000 comprising 100,000,000 Ordinary Shares of which 77,237,497 Ordinary
Shares are in issue and fully paid. If the Special Resolutions are passed, the
authorised share capital of the Company will be increased to #350,000 divided
into 350,000,000 Ordinary Shares.
It is intended that new Ordinary Shares issued under the Proposed Placing will
not be offered generally to Shareholders, whether on a pre-emptive basis or
otherwise. The Directors believe that the additional cost and delay which a
rights issue or open offer would entail would not be in the best interests of
the Company at this time.
Preliminary results for the year ended 31 December 2006
The Company has today announced its first set of preliminary annual results, for
the period 30 August 2005 to 31 December 2006. The Company reported a net profit
for the period of approximately #15.0 million and proposed a dividend of 3p per
Ordinary Share, being a total distribution of approximately #2.0 million.
The record date in respect of the dividend declared for the year ended 31
December 2006 is 16 February 2007, which is prior to the anticipated issue date
of new Ordinary Shares expected to be subscribed for under the Proposed Placing.
Accordingly the dividend declared for the year ended 31 December 2006 will not
be paid in respect of new Ordinary Shares issued under the Proposed Placing. It
is anticipated that new Ordinary Shares issued under the Proposed Placing will
rank pari passu with all existing Ordinary Shares in respect of all future
dividends declared or made.
Current trading and prospects
In the current financial year, the Company is trading in line with the
Directors' expectations and the Directors continue to view the prospects of the
Company with confidence.
Dividend policy
In the Admission Document it was stated that the Directors would, subject to
satisfactory trading and the availability of distributable reserves, seek to
declare a dividend for the year ending 31 December 2007 of 6 pence per Ordinary
Share. If the Proposed Placing is completed, the Directors would, subject to
satisfactory trading under the Intended Development Plans and reserves as stated
above, seek to declare dividends for 2007 of 3 pence per Ordinary Share. In
subsequent years the Directors would seek to increase the level of declared
dividends and would, subject to trading and reserves as stated above, seek to
declare a dividend for 2008 of 5 pence per Ordinary Share.
Derek Vago, Chief Executive Officer said:
"The Company has developed strongly during its first year and exceeded the
objectives set out at the time of its admission and we have therefore increased
our dividend recommendation from 2.0 pence per ordinary share to 3.0 pence per
ordinary share.
In 2006 we have built an experienced team and launched our first two managed
vehicles. We now have a strong base from which to grow. We have today announced
plans to raise circa #150 million through a placing, which could enable us to
grow the company further, in order for it to attain its pan-European integrated
finance objectives for the SME sector and enabling it to generate cash revenue
from diversified sources such as management / performance fees, dividends, net
interest income and underwriting fees.
We believe in having a local presence in our key markets to develop our SME
business and therefore we aim to establish offices in Munich and, through a
potential joint venture with Eurinvest, in Milan during the first half of this
year.
By the year ending 31 December 2008, the Company targets total funds under
management and direct investments in strategic platforms in excess of #1.5
billion in terms of gross asset value, and targets revenue in excess of #70
million, of which more than 50% is targeted to be cash revenue from sources such
as management and performance fees, underwriting fees, dividends and net
interest margins from funding facilities.
Finally, I would like to take this opportunity to thank our shareholders for
their continued support and belief in us during the Period and look forward to
delivering increased value to them through the Company's development plans."
This release does not constitute an offer to sell shares in the Company.
Reference is made to the circular to shareholders dated today's date, which can
be accessed on the Company's website (www.acpcapital.com) and, in particular, to
the section headed "Risk Factors" in Part II thereof, and this release should be
read in conjunction with the information contained therein.
For further information please contact:
Redleaf Communications
Rob Bain: +44 (0) 20 7822 0200
Notes to Editors:
ACP Capital Limited
ACP Capital is a Jersey-incorporated niche integrated finance provider
specialising in the European SME market whose shares were admitted to trading on
AIM in January 2006. As an integrated finance specialist, ACP Capital can offer
a combination of equity, mezzanine and senior debt to companies in niche
markets, such as the German "Mittelstand" (small and middle-sized
privately-owned companies), and for asset backed transactions, for example, in
the real estate and infrastructure sectors.
As an asset manager, ACP Capital manages a series of investment vehicles that
can provide the required funding for its integrated finance capabilities. ACP
Capital intends to launch at least 2 managed vehicles each year in specific
sectors in its target markets.
ACP Capital's strategy is to develop strong synergies between its broad funding
capabilities and its various managed vehicles, providing optimal financing
solutions to its clients while securing a strong flow of recurring revenue for
its core business.
ACP Capital's CEO is Derek Vago, who is assisted on the Board by Non-executive
Directors Heiner Kamps, Francois Georges, Alan Braxton and Executive Directors
Nikolaj Larsen and Eric Youngblood (as well as two other Non-Executive
Directors). A further key team member is Jeff Bennett, who is the Chief
Investment Officer for ACP Mezzanine.
For more information please see www.acpcapital.com
ACP Mezzanine Limited
ACP Mezzanine Limited is a Jersey-incorporated company which listed on AIM in
July 2006 and whose strategy is to pursue a primary strategy as a mezzanine
lender, originating, structuring and underwriting the majority of its mezzanine
investments. ACP Mezzanine's investment strategy is implemented and managed by a
subsidiary of ACP Capital through an investment management Agreement. ACP
Mezzanine's strategy is different from that followed by a number of participants
in the mezzanine financing market, which focus on acquiring assets directly from
third parties through a syndication process.
ACP Mezzanine lends primarily across Europe, with origination arising through a
direct integrated finance approach alongside ACP Capital's strategic platforms
and managed vehicles, and, to a lesser extent, purchases assets in the secondary
market if the expected risk adjusted returns are attractive. It is expected that
the integrated finance approach will account for at least two thirds of ACP
Mezzanine's investments over time.
ACP Mezzanine's Board includes Derek Vago, Jeff Bennett, Christophe Tanghe and 2
other Non-Executive Directors. In addition, Wolfgang Mellinghoff is expected to
be appointed to the Board in the near future.
IFR Capital Plc
IFR Capital Plc ("IFRC"), which was admitted to the AIM list of the London Stock
exchange in a circa Euro135m flotation in November 2006, has been established to
act as an acquisition platform intending to target small and mid-sized
businesses in the continental European food industry, within three sub-sectors:
retail (mainly shops/restaurants), industry (wholesale and production) and
distribution. IFRC will firstly focus on the retail and industry segments as the
Directors of the Company believe that these areas offer an initial opportunity
for achieving synergies and shareholder returns. The Directors believe that the
distribution segment of the industry is to be relevant but only once IFRC has
reached a certain scale.
The Directors believe that there is a unique consolidation opportunity in the
food retail sector in Continental Europe, and especially Germany, and anticipate
a need for cross border consolidation with an increasing focus on brands and
chains. At the same time, the Directors believe that the succession problems for
many small and mid sized companies may lead to a number of potential acquisition
opportunities. The Directors believe that Heiner Kamps with his track record
will be viewed as a preferred bidder within the food industry, especially as the
Directors believe that there is a hesitant view both among owners and managers
of small and medium-sized enterprises towards private equity investment
companies. As such, the Directors believe that IFRC has an opportunity to
approach various targets in Germany 'off the market'.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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