Secured Income Fund PLC Review of Film Production Financing (2254B)
09 June 2021 - 2:02AM
UK Regulatory
TIDMSSIF
RNS Number : 2254B
Secured Income Fund PLC
08 June 2021
8 June 2021
Secured Income Fund plc
Review of Film Production Financing
Secured Income Fund plc (LSE: SSIF) (the "Company"), a
specialist secured lending income investment trust, listed in the
UK, announces the result of the review of its Film Production
Financing portfolio, which had a book value of GBP9,586,462 as of
April 30, 2021.
A review of the portfolio, comprising six film financings, was
considered necessary by the Board and the Fund Manager KKV
following the marked deterioration of the expected cash flows,
exacerbated by the restrictions and changed operating practices
resulting from the COVID pandemic.
Of the expected cash flow presented by the Borrower, the larger
proportion is considered "contracted cash flow" (comprising Tax
Credit, Receipts and Presold Income) and there is a smaller element
of "non-contractual Future Sales" which are effectively mezzanine
in nature and carry a higher risk profile. Future sales anticipated
large upfront payments but these are now considered highly unlikely
for the films in the portfolio and would, at best, be replaced by
longer tail earn outs. Following the review and analysis, and
recognizing the limitations on security, recovery and the mezzanine
nature of a large part of the expected cash flows, the Manager
recommended a substantial impairment on the positions.
The portfolio is held in two Special Purpose Vehicles and the
structure does allow for cross-subsidization of performing films to
non-performing films which has occurred in the past. However, this
is only relevant when all principal and interest on an individual
film loan has been repaid, and given it is unlikely that any of the
films will now repay in full, this mechanism is considered
redundant.
In undertaking the analysis, the Manager took the 30 April 2021
NAV of GBP9,586,462, applied May 2021 cash receipts but did not
accrue interest for the month, to establish a pro-forma 31 May 2021
NAV for the six loans of GBP8,973,093. This was then compared with
contracted cash flows, and expected future sales, adjusted for the
current uncertainty of likely future sale amounts, timing of the
payment (as noted above) and foreign exchange, to come to a
combined provision for all six financings of GBP5,878,837. This is
equivalent to an impairment of 11.16p per share.
To ensure maximum returns to shareholders and to reflect the
specialist nature of the sector, the Board has instructed the
Manager to seek the assistance of an external specialist to assist
in identifying the potential range of outcomes by way of income. In
addition, it is intended that these loans will be independently
valued in support of the audit for the financial year ending 30
June 2021.
Using the methodology above, the position value for 31 May 2021
will be GBP3,094,256. All the loans have been moved to stage 3
categorisation.
For further information please contact:
Directors
David Stevenson (Chair) tel: +44 7973 873 785
Susan Gaynor Coley tel: +44 7977 130 673
Brett Miller tel: +44 7770 447 338
KKV Investment Management Ltd Investor.communications@kkvim.com
Catherine Halford Riera
finnCap Ltd. tel: +44 20 7220 0500
Corporate Finance: William
Marle
Sales: Mark Whitfeld
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