11th Nov 2008 07:02
Avanti Capital plc
Investment Management Agreement
Avanti Capital plc (the "Company"), the private equity company, announces that the Company has today agreed with Odyssey Partners Limited ("OPL") to change the terms of the existing investment management agreement between the Company and OPL (the "Agreement"). The principal terms of the Agreement were set out in the Company's announcement on 9 October 2006. OPL is owned and managed by Richard Kleiner and Julian Fellerman, both of whom are non-executive directors of the Company.
The principal terms of the Agreement were that OPL would provide all of the functions previously carried out by the management team of the Company. OPL was paid an annual fee equal to 3% of the net asset value of the Company (as at October 2006). In addition, OPL had a carried interest by reference to the realisations achieved in relation to the assets. The threshold, after which the carried interest became payable, was based on realisations of not less than £12.7m or 150 pence per share. There was a look back hurdle of 6% per annum. Consequently provided that the realisations would be at least £12.7m together with the look back hurdle, then in relation to all realisations in excess of £12.7m, OPL was entitled to 25% of such excess up to £15.2m of realisations. OPL's share was increased by 5% for each £2.5m in excess of £15.2m up to a maximum of 40% for realisations over £20.2m.
The changes were initiated in response to the environment which now exists following the economic and market events of the last few months. Having reviewed each investment, the board believes that the time horizon for realisations has been pushed out significantly. Accordingly, the board has reviewed the resources of the Company with a view to ensuring that these will be sufficient to allow for an orderly exit from the portfolio over time.
Accordingly, the independent directors of the Company entered into discussions with OPL with a view to agreeing changes to the Agreement. As a result of these discussions, a new investment management agreement has been entered into under which the annual advisory fee paid to OPL has been reduced by 45% to £264,000 per annum. For this, OPL continues to both manage the portfolio and the Company generally. The Company has no employees. In order to recognise this substantial reduction, the terms of the carried interest entitlement have been amended by reducing the realisation target from 150p per ordinary share to 82.5p per ordinary share, a 19% premium to the current mid market share price of 67p.
The reduction will not come fully into effect until after 30 November 2009, so that up to 28 February 2009, if there are realisations in excess of 82.5p per ordinary share, OPL will receive only 40% of the carried interest entitlement it would otherwise have received. Up to 31 May 2009, it will receive only 55% of the carried interest entitlement it would otherwise have received, up to 31 August 2009, 70% and up to 30 November 2009, 85%. It is only after 30 November 2009 that the reduction to 82.5p applies in full.
Accordingly, after 30 November 2009, provided that the realisations exceed 82.5p per ordinary share, then in relation to any excess realisations over 82.5p per ordinary share, OPL is entitled to 25% of such excess up to £9.1m of realisations. OPL's share is increased by 5% for each £2.5m in excess of £9.1m up to a maximum of 40%.
On any change of control, termination by the Company of the new agreement or resolution to liquidate the Company, OPL has the option to maintain the carried interest entitlement or the carried interest becomes due based on the net asset value of the Company at the date of the change of control as agreed between the Company and OPL or in the absence of agreement, determined by an expert. In the case of a change of control as a result of a takeover for cash consideration, OPL does not have the option to maintain the carried interest which becomes due based on the realisation proceeds by reference to such consideration. The reduction in the carried interest entitlement prior to 1 December 2009 does not apply on any change of control, termination by the Company of the new agreement or resolution to liquidate the Company.
The independent directors of the Company believe that the changes achieved represent a prudent outcome in response to the changed environment which now prevails.
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ENQUIRIES: |
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Avanti Capital plc |
Tel: +44 (0) 20 7299 1459 |
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Julian Fellerman |
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Richard Kleiner |
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Collins Stewart Europe Limited |
Tel: +44 (0) 20 7523 8350 |
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Adrian Hadden |
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