Net Asset Value and Company Update

17 December 2019

Hadrian's Wall Secured Investments Limited

Net Asset Value and Company Update

Further to the announcement made by Hadrian's Wall Secured Investments Limited (the "Company") on 9 December 2019, the board of the Company (the "Board") announces that as at 31 October 2019 the unaudited cum-income net asset value per Ordinary Share, as adjusted for the changes to the provisions set out in this announcement, was 81.54 pence.

In arriving at this NAV per Ordinary Share the Board has also consulted with the Company's auditor in respect of those loans and the provisions against them referred to in this announcement.

The Board would also like to provide further information on the current position of Biomass Optimum Fuels Limited ("BOFL") and Biomass Premium Fuels Limited ("BPFL"), together with an update on the remainder of the portfolio, as set out below.

Update on BOFL and BPFL

The Board has asked the Investment Adviser, Hadrian's Wall Capital Limited (the "Investment Adviser"), to evaluate the possible recovery outcomes for BOFL and BPFL. Whilst the Investment Adviser believes there will be some recovery from the assets, including the wood pellet heating systems which have potentially attractive government renewable heat initiative income streams attaching to them, and is now working to achieve this, there are likely to be additional costs as part of this process. However, the Company on advice from the Investment Adviser, is maintaining its provision on BOFL and BPFL at £18.1 million in aggregate, as announced on 20 November 2019, an increase to the previous provision of £3.27 million included in the 30 September 2019 NAV, the increase being equivalent to 10.33 pence per Ordinary Share.

Update on the rest of the portfolio

The Company announced on 27 June 2019 that one of the Company's borrowers was in the process of undertaking an equity raise or company sale. This is progressing, and it is hoped that it will conclude in the first quarter of 2020, which should ensure full repayment of the loan at its face value of £13 million, plus accrued interest of approximately £1 million, together with an early repayment fee such that it repays at more than face value. The Investment Adviser believes it more likely than not that the equity raise or company sale will conclude in the anticipated timeframe but, in the event that it does not, it is possible that the borrower might request the Company to provide additional capital for working capital purposes. Given the inherent uncertainty connected with any company sale or fund raise, the IFRS 9 general loss reserve has been increased from £1.3 million to £2 million (the increase being equivalent to 0.49 pence per Ordinary Share). Whilst the indicated valuations of the portfolio company support a full recovery, and the timeframe appears achievable, the borrower has limited liquidity and consequently a delay in the capital raise could expose the Company to the risk of further material loss. The Board continues to monitor this situation closely given the significance of this loan in the overall position of the Company's loan portfolio.

It has been agreed with the borrower of a loan with a face value of £4.1 million to defer some interest payments due to cash flow issues arising from unexpected mechanical failure at its plant which caused lower productivity and income for the borrower in recent months. It is expected that the plant will be fully operational again in January 2020. However, the Company has increased the IFRS 9 general loss reserve for this asset by circa £470,000 to £600,000 (the increase being equivalent to 0.33 pence per Ordinary Share).

The remaining loans in the portfolio are performing as expected.

Nonetheless, reflecting a more prudent approach to provisioning given recent experiences with the assets detailed herein, the Board has made an additional provision of £2.89 million (being equivalent to 2.02 pence per Ordinary Share) to the Company's IFRS 9 general loss reserves. 

The Board is continuing its strategic review of the options available to it as announced on 9 December 2019, and anticipates being in a position to provide a further update in the New Year. This exercise will include a review of the ongoing role of Hadrian's Wall Capital Limited, with the overall objective of maximising Shareholder value.

The information contained within this announcement constitutes inside information. The person responsible for arranging for the release of this announcement on behalf of the Company is Hannah Girard of Praxis Fund Services Limited.

LEI: 213800ABN7VKMVNOLG14

Contact Details

David Warr (Chairman)

Telephone 01481 737600

Winterflood Investment Trusts (Corporate Broker)

Joe Winkley / Neil Morgan

Telephone 020 3100 0000

Forward-looking statements

This press release may contain forward-looking statements with respect to the Company's future financial performance and position. Such statements are based on current expectations, estimates and projections of the Company and information currently available to the Company. The Company cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause actual performance and position to differ materially from these statements. The Company accepts no obligation to update the statements contained in this press release, unless required by law.