VPC Specialty Lending proposes wind-down
VPC Specialty Lending Investments is proposing to enter a managed wind-down, following investor pressure to address its low share price.
The alternative finance-focused investment fund said due to the current level of the discount of the share price to net asset value (NAV), it would be better to wind down the company rather than implement the 25 per cent exit opportunity which it had previously proposed.
In 2020, VPC put forward an exit plan enabling shareholders to realise the value of 25 per cent of their shares that would take effect in 2023.
Read more: VPC Specialty Lending posts loss driven by equity volatility
However, it said today that it did not believe the 25 per cent exit opportunity alone would have a lasting impact on the discount and that it could have a detrimental impact for the company’s shareholders. It said it would cause the company to shrink in size, resulting in the company’s shares potentially becoming less liquid and the ratio of fees and other costs increasing as a proportion of NAV.
“The board has been consistently focused on the issue of the continuing discount, and the provisions and thresholds established in 2020 were designed to provide clear measures of future performance,” said chairman Graeme Proudfoot in a stock exchange announcement.
“Two of the three performance thresholds have been met. The third, being the discount measure, is not due to be assessed until the end of March 2023. Over the last three years, shareholders have received an annualised share price total return of 13.8 per cent and an annualised NAV total return of 11.3 per cent together with a dividend that has been maintained for over four years.
“Notwithstanding, as a board, we need to take decisions that we feel are in the best long-term interests of our shareholders, and we have decided that, rather than to shrink the size of the trust and decrease liquidity through the 25 per cent exit opportunity, the better course of action is for a wind down of the company which will provide a managed exit for all shareholders.”
Earlier this month, three investors – Global Value Fund, Staude Capital Value Fund and Metage Funds – said VPC’s 25 per cent exit opportunity proposal was insufficient and called for a general meeting to review the company’s investment policy and share capital structure.
Speaking to Peer2Peer Finance News, Tom Sharp from Metage Funds and Miles Staude, representing the two other signatories to the request, said the fund had been trading at a discount to the value of its assets since 2015, and that they had been trying to resolve the issue in negotiation with the board for at least two years.
They called for the creation of a realisation share class, enabling shareholders to opt into 100 per cent realisation opportunity every three years, starting from next year.
VPC said it has engaged with the three investors and they have agreed to withdraw their request as it will not be necessary due to the planned wind-down.
Read more: Victory Park Capital makes a double hire for its investment team
The wind-down proposal will be put forward to shareholders, who will need to approve the plan at a general meeting.
“If approved by shareholders, the board will then endeavour to realise all of the company’s investments in a cost-effective manner that achieves a balance between maximising the value received from investments and making timely returns of capital to shareholders,” the company said.
A further announcement containing full details of the proposals will be made when the circular is published in due course.