10th Mar 2020 13:42
(Alliance News) - Urban Exposure PLC on Tuesday said it intends to cancel its AIM shares amid the disposal of its Urban Exposure Lendco Ltd and Urban Exposure Amco Ltd businesses.
The firm, which provides finance to property developers, will then change its name to Residential Property Finance Realisation PLC and be "placed into a solvent member's voluntary liquidation".
Urban Exposure expects to pay a 72 pence per share initial distribution to shareholders, followed by a final distribution of 1 penny per share for a total of 73p per share. The interim distribution of 73p represents a 13% discount to Urban Exposure's net tangible asset value per share of 82.7p per at the end of 2019.
Shares in Urban Exposure were up 5.6% at 68.64p in London on Tuesday afternoon.
Lendco owns Urban Exposure's loan portfolio, as well as its interest in a joint venture with KKR & Co, and will be acquired by Honeycomb Holdings Ltd for GBP113.8 million. This figure is equal to Lendco's loan portfolio par value on February 18 minus a GBP2.7 million discount, plus Lenco's net cash. The discount reflects asset management fees to be paid to loan portfolio managers.
Amco, meanwhile, provides asset management services and employs all of Urban Exposure's employees. Amco will be acquired by Urban Exposure founders, namely Chief Executive Randeesh Sandhu, Chief Risk Officer Ravi Takhar, Chief Operating Officer Daljit Sandhu, and Victor Librae - New Business partner at Urban Exposure.
The founders will pay GBP1.6 million for Amco on the basis that, upon the sale's completion, Amco will have net working capital of GBP7.1 million available to it. For a nominal GBP1 consideration, Urban Exposure will also transfer "certain legacy receivables, office equipment, intellectual property rights and business records" relating to Amco to the founders.
With Lendco and Amco disposed of, Urban Exposure will no longer have any continuing operations. As such, its is planned that the company's share will be cancelled from AIM trading and the firm will seek shareholder approval for a wind-up.
The explanation given for the disposals and wind-up were that its "significant investment" in personnel in order to satisfy AIM trading requirements "has held back near-term profitability" by increasing Urban Exposure's cost base.
"Further, the market in which the company operates - including the large size of deals, the unpredictability of timing for closing loans, the profile of revenue generation from lending and asset management activity and the accounting treatment of this revenue - together mean that it is not always possible to predict the company's and its group's anticipated volume of business and, therefore, profitability for specific financial periods. The Board believes that these factors, together with the company's increased cost base, resulted in an underperformance compared with expectations set at the time of admission. These challenges have been further exacerbated by a volatile political climate in the UK, with sector specific uncertainty arising both from Brexit and the run-up to the UK general election in December 2019, and negative sentiment towards small-cap investment due to market events," Urban Exposure added.
Given this, Urban Exposure's shares have traded at a "discount" to NAV in 2019, prompting an operations review.
By Anna Farley; [email protected]
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