DJ M&G Credit Income Investment Trust plc: Publication of Prospectus
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M&G Credit Income Investment Trust plc (MGCI)
M&G Credit Income Investment Trust plc: Publication of Prospectus
26-Sep-2018 / 14:08 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
26 September 2018
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY
OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA,
NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION
WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT. PLEASE SEE THE
IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.
This announcement is an advertisement for the purposes of the Prospectus
Rules of the UK Financial Conduct Authority ("FCA") and not a prospectus.
This announcement does not constitute or form part of, and should not be
construed as, an offer for sale or subscription of, or solicitation of any
offer to subscribe for or to acquire, any ordinary shares in the Company in
any jurisdiction, including in or into the United States, Canada, Australia,
New Zealand, the Republic of South Africa or Japan. Investors should not
subscribe for or purchase any ordinary shares referred to in this
announcement except on the basis of information in the prospectus (the
"Prospectus") published by M&G Credit Income Investment Trust plc (the
"Company") in connection with the proposed admission of its ordinary shares
to the premium listing segment of the Official List of the FCA and to
trading on the main market for listed securities of London Stock Exchange
plc (the "London Stock Exchange"). A copy of the Prospectus will shortly be
available for inspection from the Company's registered office and on its
website (www.mandg.co.uk/CreditIncomeInvestmentTrust [1]).
LEI: 549300E9W63X1E5A3N24
M&G Credit Income Investment Trust plc
Publication of a prospectus and intention to IPO
M&G Credit Income Investment Trust plc (the "Company") announces the
publication of a prospectus (the "Prospectus") in connection with an initial
placing, offer for subscription and intermediaries offer (the "Initial
Issue") of ordinary shares of one penny each in the capital of the Company
(the "Ordinary Shares"). The Company is targeting an issue of in excess of
250 million Ordinary Shares at 100 pence per Ordinary Share (the "Issue
Price") to raise gross proceeds in excess of GBP250 million. The minimum size
of the Initial Issue in GBP100 million (before expenses).
The Company has appointed M&G Alternatives Investment Management Limited
(the "Investment Manager" or "M&G") to manage the Company's portfolio (the
"Portfolio") with effect from admission. The Investment Manager is one of
the longest established asset managers in Europe and has particular
expertise in fixed income, with c.GBP188 billion under management as at 30
June 2018.
The Company aims to provide regular and attractive income with low asset
value volatility by investing in a diversified Portfolio of public and
private credit opportunities. Over the longer term, it is expected that the
Company will be mainly invested in private debt instruments and that the
Portfolio will typically consist of 100+ holdings, with a minimum of 50
holdings. The Company will target an annualised dividend yield of LIBOR plus
2.5% (on the Issue Price) in respect of the Company's first financial period
to 31 December 2019 while the net proceeds of the Initial Issue are being
deployed. The Company will target an annualised dividend yield of LIBOR plus
4% (on the opening Net Asset Value per Ordinary Share) in respect of each
financial year thereafter.*
The Prudential Assurance Company Limited intends to subscribe for the lower
of (i) 80,000,000 Ordinary Shares and (ii) 25% of the Ordinary Shares to be
issued pursuant to the Initial Issue. The Directors believe that this
proposed investment strongly aligns the interests of the M&G with
shareholders.
William Nicoll, Co-Head of Alternative Credit, M&G Investments, says: "The
great financial crisis ten years ago has significantly changed Europe's
financing landscape. Due to regulatory and other pressures, banks are no
longer as dominant in some financing markets and new sources of private
capital are now available to British businesses. By lending to businesses,
projects and institutions, the Company has been designed with the aim of
generating a regular and attractive level of income to investors through a
diverse range of credit opportunities, most of which are sourced via our
extensive in-house private credit teams."
David Simpson, Chair of the Company, says: "M&G is one of the most
experienced and established managers in the private credit arena with a
history of investing in these markets for over 20 years. We are excited to
be able to offer exposure to this increasingly interesting and influential
asset class and to provide non-institutional investors with access to M&G's
expertise in private credit markets for the first time. The private credit
markets can provide investors with assets that have strong covenants, lower
volatility compared to corporate bonds and, in some cases, there is a
premium when investing in assets with reduced liquidity. Many of these
private credit assets are suited to the closed-ended structure."
Applications will be made to the UK Listing Authority and to the London
Stock Exchange for all of the Ordinary Shares issued pursuant to the Initial
Issue to be admitted to the premium segment of the Official List and to
trading on the premium segment of the London Stock Exchange's main market
("Admission"). It is expected that Admission will become effective, and that
dealings in the Ordinary Shares issued pursuant to the Initial Issue will
commence, at 8.00 a.m. on 14 November 2018.
The Prospectus also establishes a placing programme for the issue of up to
400 million Shares (which may be Ordinary Shares or C Shares) (the "Placing
Programme"). The Placing Programme is flexible and may have a number of
closing dates in order to provide the Company with the ability to issue
Shares over a period of time. The Placing Programme is intended to satisfy
market demand for Shares and to raise further money after the Initial Issue
to increase the size of the Company and invest in accordance with the
Company's investment policy. The Placing Programme will open on 15 November
and will close on 23 September 2019 (or any earlier date on which it is
fully subscribed, or otherwise at the discretion of the Directors).
The value of investments will fluctuate, which will cause share prices to
fall as well as rise and you may not get back the original amount you
invested. There is no guarantee that the Company's objectives will be
achieved. The Company may be exposed to the possibility that a debtor will
not meet their repayment obligations. Changes in interest rates may
adversely affect the market value of some of the Company's investments.
Loans may be prepaid by issuers at short notice, as a result it may be
difficult for the Company to locate and reinvest capital at an attractive
price or at all, which may affect the Company adversely. As Shares trade via
the secondary market, trading volumes may reduce, or Shares may trade at a
discount to their respective net asset value, due to a variety of factors,
such as market conditions, liquidity concerns or fund performance.
Shareholders may also be unable to realise their investment at quoted market
prices or at all. This is not an exhaustive list, and prospective investors
should ensure they understand the risk profile of the Shares.
The Prospectus is available to view at
www.mandg.co.uk/CreditIncomeInvestmentTrust [1] and the National Storage
Mechanism of the FCA at www.morningstar.co.uk/uk/nsm [2]. Copies of the
Prospectus will also be available from the Company's registered office at
Beaufort House, 51 New North Road, Exeter, EX4 4EP.
Winterflood Securities Limited is acting as sole sponsor, financial adviser,
bookrunner and Intermediaries Offer Adviser.
Expected Timetable
2018
Publication of Prospectus and 26 September
Initial Placing, Offer for
Subscription and Intermediaries
Offer open
Latest time and date for 1.00 p.m. on 7 November
applications under the Offer for
Subscription and from the
Intermediaries in respect of the
Intermediaries Offer
Latest time and date for receipt of 2.00 p.m. on 8 November
commitments under the Initial
Placing
Announcement of the results of the 8.00 a.m. on 9 November
Initial Issue
Initial Admission and dealings in 8.00 a.m. on 14 November
the Ordinary Shares issued pursuant
to the Initial Issue commence
Crediting of CREST stock accounts 14 November
in respect of the Ordinary Shares
issued pursuant to the Initial
Issue
Where applicable, definitive share week commencing 19 November
certificates despatched in respect 2018 (or as soon as
of the Ordinary Shares possible thereafter)
Terms used in this announcement shall, unless the context otherwise
requires, bear the meanings given to them in the Prospectus.
For further information please contact:
Winterflood Securities Limited 020 3100 0000
Darren Willis
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Andrew Marshall
Neil Morgan
Chris Mills
* The target dividend is a target only and not a profit forecast and there
can be no assurance that such target will be met.
Further information on the Company
Investment Policy
The Company seeks to achieve its investment objective by investing in a
diversified portfolio of public and private debt and debt-like instruments
("Debt Instruments"). Over the longer term, it is expected that the
Company will be mainly invested in private Debt Instruments, which are those
instruments not quoted on a stock exchange.
The Company operates an unconstrained investment approach and investments
may include, but are not limited to:
· Asset-backed securities, backed by a pool of loans secured on, amongst
other things, residential and commercial mortgages, credit card
receivables, auto loans, student loans, commercial loans and corporate
loans;
· Commercial mortgages;
· Direct lending to small and mid-sized companies, including lease finance
and receivables financing;
· Distressed debt opportunities to companies going through a balance sheet
restructuring;
· Infrastructure-related debt assets;
· Leveraged loans to private equity owned companies;
· Public Debt Instruments issued by a corporate or sovereign entity which
may be liquid or illiquid;
· Private placement debt securities issued by both public and private
organisations; and
· Structured credit, including bank regulatory capital trades.
The Company will invest primarily in Sterling denominated Debt Instruments.
Where the Company invests in assets not denominated in Sterling it is
generally expected that these assets will be hedged back to Sterling.
Investment restrictions
There are no restrictions, either maximum or minimum, on the Company's
exposure to sectors, asset classes or geography. The Company, however,
achieves diversification and a spread of risk by adhering to the limits and
restrictions set out below.
Once fully invested, the Company's portfolio will comprise a minimum of 50
investments.
The Company may invest up to 30% of Gross Assets in below investment grade
Debt Instruments, which are those instruments rated below BBB- by S&P or
Fitch or Baa3 by Moody's or, in the case of unrated Debt Instruments, which
have an internal M&G rating of below BBB-.
The following restrictions will also apply at the individual Debt Instrument
level which, for the avoidance of doubt, does not apply to investments to
which the Company is exposed through collective investment vehicles:
Rating Secured Debt Unsecured Debt
Instruments Instruments (% of
Gross Assets)
(% of Gross Assets)1
AAA 5% 5%2
AA/A 4% 3%
BBB 3% 2%
Below investment 2% 1%
grade
1 Secured Debt Instruments are secured by a first or
secondary fixed and/or floating charge.
2This limit excludes investments in G7 Sovereign Instruments.
For the purposes of the above investment restrictions, the credit rating of
a Debt Instrument is taken to be the rating assigned by S&P, Fitch or
Moody's or, in the case of unrated Debt Instruments, an internal rating by
M&G. In the case of split ratings by recognised rating agencies, the second
highest rating will be used.
It is expected that the Company will typically invest directly, but it may
also invest indirectly through collective investment vehicles which are
expected to be managed or advised by an M&G Entity. The Company may not
invest more than 20% of Gross Assets in any one collective investment
vehicle and not more than 40% of Gross Assets in collective investment
vehicles in aggregate. No more than 10% of Gross Assets may be invested in
other investment companies which are listed on the Official List.
Unless otherwise stated, the above investment restrictions are to be applied
at the time of investment.
Borrowings
The Company is expected to be managed primarily on an ungeared basis
although the Company may, from time to time, be geared tactically through
the use of borrowings. Borrowings would principally be used for investment
purposes, but may also be used to manage the Company's working capital
requirements or to fund market purchases of Shares. Gearing represented by
borrowing will not exceed 30% of the Company's Net Asset Value, calculated
at the time of draw down, but is typically not expected to exceed 20% of the
Company's Net Asset Value.
Hedging and Derivatives
The Company will not employ derivatives for investment purposes. Derivatives
may however be used for efficient portfolio management, including for
currency hedging.
Cash management
The Company may hold cash on deposit and may invest in cash equivalent
investments, which may include short-term investments in money market type
funds ("Cash and Cash Equivalents").
There is no restriction on the amount of Cash and Cash Equivalents that the
Company may hold and there may be times when it is appropriate for the
Company to have a significant Cash and Cash Equivalents position. For the
avoidance of doubt, the restrictions set out above in relation to investing
in collective investment vehicles do not apply to money market type funds.
Changes to the investment policy
Any material change to the Company's investment policy set out above will
require the approval of Shareholders by way of an ordinary resolution at a
general meeting and the approval of the UK Listing Authority.
Dividend policy and target returns
The Company intends to pay two dividends in respect of the first financial
period following Initial Admission. The first interim dividend is expected
to be declared in July 2019 and paid in August 2019 and the second interim
dividend is expected to be declared in January 2020 and paid in February
2020. Thereafter the Company intends to pay dividends on a quarterly basis
with dividends typically declared in January, April, July and October and
paid in February, May, August and November in each financial year.
The Company will target an annualised dividend yield of LIBOR plus 2.5% (on
the Issue Price) in respect of the Company's first financial period to 31
December 2019. The Company will target an annualised dividend yield of LIBOR
plus 4% (on the opening Net Asset Value per Ordinary Share) in respect of
each financial year thereafter. Where LIBOR materially changes or ceases to
be provided, the Company shall determine a suitable replacement benchmark
and shall notify investors accordingly. The Directors intend to apply the
"streaming" regime to distributions of portfolio interest returns paid by
the Company, such that these distributions are expected to be designated as
payments of interest. If appropriate, in addition to, or instead of,
interest distributions, the Company may also pay ordinary corporate
dividends.
Investors should note that the target dividend is a target only and not a
profit forecast and there can be no assurance that such target will be met.
Use of Proceeds
The Initial Gross Proceeds will be utilised in accordance with the Company's
investment policy, to meet the costs and expenses of the Initial Issue and
for working capital purposes.
It is currently expected that the Net Proceeds will be deployed in
accordance with the Company's investment policy in the manner set out below.
The Company expects the Investment Manager to deploy the Net Proceeds in
readily available public lower yielding assets within a period of three
months after Initial Admission (subject to market conditions). Based on
current market conditions, the Investment Manager then intends to transition
the Company's portfolio of investments such that it mainly comprises private
Debt Instruments in accordance with the Company's investment policy. It is
currently expected that, subject to market conditions, such transition will
be completed by the end of the first accounting period of the Company, i.e.
by 31 December 2019. Once transitioned, the Company will seek to provide
Shareholders with a diversified exposure to a range of underlying private
Debt Instruments, many of which may not otherwise be accessible to
Shareholders, in particular to individual investors.
The exact composition of the fully invested portfolio post-transition and
the identity of specific investments will depend on market conditions and
the continued availability of investments which satisfy the Company's
investment policy. The Investment Manager will invest in a mixture of both
floating rate and fixed rate Debt Instruments, and may at times be more
heavily weighted towards one than the other depending on market conditions,
and will manage the interest rate exposure through the use of derivatives.
Share Capital Management
As set out below, the Board has put in place appropriate strategies to seek
to limit, as far as practicable, the extent to which the market price of the
Ordinary Shares diverges from the Net Asset Value per Ordinary Share.
Premium Management
Once the proceeds of the Initial Issue have been fully invested, the Company
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