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LMI Monthly update: March

Claire Aitchison
6 April 2022

LMI Market News

IIR Reaffirms Recommended Plus Rating for Pengana Private Equity Trust (ASX: PE1)

IIR has reaffirmed its Recommended Plus rating for Pengana Private Equity Trust (ASX: PE1). The Trust has performed strongly in its nearly three years since listing, delivering on its strategy to mitigate the J-curve nature of private equity returns through its investment across a range of private market strategies to deliver returns in the initial years of the Trust. The Trust provides access to a highly diversified portfolio of private market investments with the benefit of a regular distribution expected to be paid semi-annually.

IIR views Grosvenor to be a highly experienced manager of private market investments with a strong track record across private market asset classes. Grosvenor has developed a sizable investment platform that provides it with unprecedented access to fund managers and co-investment opportunities in the private equity market which retail investors have access to through the Trust.

PE1 is seeking to raise up to $74m through a 1-for-5 Entitlement Offer. New units will be issued at a price of $1.54, which is the rounded up NAV per unit at February-end 2022. The capital raised will provide the Trust with the ability to capitalise on opportunities arising from the current market environment, increase portfolio diversification and provide improved liquidity for investors. The Offer is scheduled to close on 31 March 2022.

PIMCO Launching First Australian Listed Investment Trust

PIMCO are seeking launch the PIMCO Global Income Opportunities Trust (Proposed ASX Code: PMX). The PDS was lodged with ASIC on 14 March 2022 with the Broker Firm and General Offer scheduled to close on 1 April 2022. Units are expected to commence trading on the ASX on a normal settlement basis on 21 April 2022.

The Trust is seeking to raise up to $502.5m (up to $703.5 with Oversubscriptions) through the issue of up to 250m (up to 350m with Oversubscriptions) at a price of $2.00.

The Trust seeks to provide attractive risk-adjusted returns and a regular income stream by investing predominantly in a portfolio of globally sourced fixed interest securities, which may include government and government-related debt, corporate debt, mortgage-related and other credit securities of varying maturities.

The Trust will have a distribution target of 4.75%-5.75%p.a. (net
of fees and expenses). The Responsible Entity (PIMCO Australia Management Limited) has advised the market that given the recent market volatility, the Responsible Entity expects distributions to be in the upper half of the target distribution range (5.25-5.75%p.a.).

Argo Investments Limited (ASX: ARG) Raises $191.8m from Share Purchase Plan

ARG completed a Share Purchase Plan on 29 March 2022, with applications totalling $191.8m from 14,544 eligible shareholders. 20.63m new ARG shares will be issued on 31 March 2022 at the issue price of $9.30 per share. The capital raised will be invested in line with the investment strategy.

ECP Emerging Growth Limited (ASX: ECP) Seeing to Raise Up to $12.5m through Convertible Note Issue

On 4 March 2022, ECP announced it is seeking to raise up to $12.5m through a listed unsecured redeemable convertible note offer (the “Notes”). The Notes will have a price of $1.43 and will pay a fixed interest rate of 5.50%p.a., paid quarterly until the Step Up Date of 11 April 2025. The Step Up Date will be 3 years after the issue at which time the interest rate will increase to 6.50%p.a. in the event the 2 year Bank Bill Swap Rate (BBSR) is above 2.5859%. In the event the BBSR is not above this rate the interest rate will remain at 5.50%. The Notes will have a Maturity Date of 11 April 2027, at which point all outstanding Notes will be redeemed at face value.

The Notes will be convertible into ECP ordinary shares on a one-for-one basis (subject to adjustment for certain dilutionary and other capital transactions) during the conversion period, which will commence two years after issue and finish ten business days prior to the Maturity Date.

The Notes may be redeemed prior to maturity if a change of control event or tax event occurs. ECP may also redeem the Notes prior
to maturity on the first Step Up Date or any subsequent interest payment date, or if a Clean-Up Event occurs at face value.

The proceeds of the Offer will be invested in the existing portfolio and used to pay the costs associated with the Offer. ECP believes the Notes provide the opportunity to grow the assets of the Company without diluting shareholder positions.

The Notes will be listed with the ticker ECPGA. The Offer is subject to shareholder approval which will be sought at the EGM scheduled for 6 April 2022.

PM Capital Asian Opportunities Fund Limited (ASX: PAF) Removed from ASX

During February, WAM Capital Limited (ASX: WAM) announced that it had succeeded with its off-market takeover offer for PAF. WAM compulsorily acquired the remaining shares of PAF to complete the acquisition and PAF was removed from the ASX on 28 March 2022.

Amcil Limited (ASX: AMH) Raised $10m through SPP

During the month, AMH announced that it had raised $10m through the Share Purchase Plan (SPP). Approximately 530 shareholders participated in the SPP, representing a participation rate of 16%. Shares were issued at $1.15 per share with new AMH shares issued on 9 March 2022.

Mirrabooka Investments Limited (ASX: MIR) Seeks to Raise Capital through SPP

On 3 March 2022, MIR announced a Share Purchase Plan (SPP) Offer. Eligible shareholders will be able to invest up to $30,000 in MIR shares. The share issued under the SPP will be eligible for 50% of the final dividend that may be declared for FY22. As a result, shares issued under the Offer will trade under a separate code (ASX: MIRNB), until shares trade ex to the final dividend expected to be in July 2022.

Shares will be issued at the lower of $3.18 per share or by applying a 10% discount to the VWAP of MIR’s share price over the 5 trading days up to and including the day on which the SPP closes (scheduled to close 4 April 2022). Therefore, the maximum price for shares under the Offer is $3.18 per share.

Bailador Technology Investments Limited (ASX: BTI) Sells its Investment in SMI

On 11 Match 2022, BTI announced it had entered into an agreement to sell all of its interest in Standard Media Index (SMI) for approximately $20m. The sale price represents an uplift of approximately 67% to the current carrying value of SMI. The sale price is subject to final adjustments and the agreement is subject to certain conditions, including foreign investment regulatory approval.

BTI’s portfolio has performed strongly over the 12-months to 28 February 2022, with the pre-tax NTA (including dividends) increasing 23.4%. This compares to the 10.0% increase in the ASX All Ordinaries Accumulation Index over the period. Over the last six months, the pre-tax NTA has increased 17.3%, however, the share price has declined 23.7%, resulting in the share price trading at a substantial discount to pre-tax NTA of 32.4% and a discount to post-tax NTA of 21.7% at February-end. The sell off comes with a market correction in the Information Technology sector. The S&P/ASX 200 Information Technology Accumulation Index declined 28.5% over the six-month period.

In its February monthly update to the market, the Manager reiterated that the BTI portfolio is conservatively valued, most of the companies in the portfolio are cashflow positive or cashflow breakeven, all are well-financed and the most recent investments have been in the health care sector. We note that SiteMinder remains the largest holding in the portfolio and the share price has experienced a continued decline in March which will have a negative impact on the March NTA, however, this will be offset
to some degree by the valuation uplift of InstantScripts that was announced on 31 March 2022. BTI has made a follow-on investment in InstantScripts of $7.7m on top of the existing $7.8m investment.

VGI Partners and Regal Funds Management Set to Merge

On 30 March 2022, VGI Partners (VGI) and Regal Funds Management (Regal) entered into a Merger Implementation Deed in relation to the merger of the two firms. On implementation of the merger, VGI will acquire 100% of the shares in Regal in consideration for the issue

of new VGI ordinary shares. Immediately following the merger, VGI shareholders will represent approximately 33.3% of the merged entity and Regal shareholders will represent the remaining ~66.7%. VGI will remain listed however will seek to be renamed post the merger and a new ticker assigned.

The merger is subject to VGI shareholder approval. The VGI Board intend to unanimously recommend that VGI shareholders vote in favour of the merger, in the absence of a superior proposal, to create a market-leading alternative investment manager.

Post the merger, Phillip King (Co-Founder and CIO of Regal) will hold approximately 43% of the shares on issue and Robert Luciano will hold approximately 20% of the shares on issue. Neither Phillip nor Robert will be on the Board of the merged entity allowing them to focus on their investment roles.

The total consideration payable by VGI will be the issue of 139,612,338 new VGI shares to Regal shareholders, which equated to a value of $614.3m based on the share price of VGI at the close of the date of the announcement.

VGI believes the merger will provide benefits for VG1 and VG8 with key investment staff able to reduce non-investment related activities and the ability for the VGI team to leverage Regal’s experience and expertise in Asia.

We view the merger to be a positive, particularly for VGI, with VGI able to leverage the distribution platform and investment expertise of the Regal investment team.

Resignation of Portfolio Manager of Perpetual Loan Fund

On 29 March 2022, the Perpetual Credit Income Trust (ASX: PCI) announced that the Portfolio Manager of the Perpetual Loan Fund and Head of Corporate High Yield, Anne Moal, has resigned and will be leaving on 10 June 2022.

Anne’s responsibilities will be transitioned to Michael Korber, the Portfolio Manager for PCI. Michael will continue to be supported by the broader credit and fixed income team.

Head of Investments at Clime Asset Management Moves On

After the completion of Clime Asset Management Limited’s (ASX: CIW) investment in Ralton in January 2022, Will Riggall was appointed as the Chief Investment Officer of the Manager. This resulted in the previous Head of Investments, Adrian Ezquerro, moving on from the Manager. Will is also the CIO of Ralton Asset Management and has over 15 years experience in funds management.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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