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Notice of EGM

16th Nov 2020 07:00

UK Mortgages Ltd - Notice of EGM

UK Mortgages Ltd - Notice of EGM

PR Newswire

London, November 13

THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION (IN WHOLE OR IN PART) DIRECTLY OR INDIRECTLY IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER OFFER OR AN OFFER OF SECURITIES.

16 November 2020

UK MORTGAGES LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 60440) LEI 549300388LT7VTHCIT59

Circular to Shareholders and Notice of Extraordinary General Meeting relating to proposals for the Company’s future strategy

Following the further consultation with Shareholders which was announced on 27 October 2020, the Board of UK Mortgages Limited (“UKML” or the “Company”) is recommending that the Company should continue operating as a publicly traded investment company under a revised mandate offering increased focus on enhancing liquidity and returns whilst continuing to seek to narrow the discount to net asset value at which the Company’s Ordinary Shares trade.

The Board is therefore convening an Extraordinary General Meeting of the Company to be held at 11 a.m. on Friday, 4 December 2020 at the offices of Northern Trust International Fund Administration Services (Guernsey) Limited Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands GY1 3QL in order to approve the proposal.

Christopher Waldron, Chairman of UKML, said: “Following the launch of the review of strategy, the Board has consulted with the Company’s Shareholders over the appropriate future direction for the business. I am pleased to say they have strongly supported our proposals to take the Company forward with a revised mandate for increased dividend cover and enhanced liquidity and returns.”

Details of the Proposal

Subject to approval by Shareholders at the Extraordinary General Meeting, the Board intends that:

1. Additional shareholder protections

· If the Ordinary Shares trade at a discount of 5% or wider to the prevailing NAV in the period of 20 Business Days preceding any Board consideration of a refinancing of a Mortgage Securitisation, then the Board will not approve such refinancing and instead will pursue a realisation with the proceeds (net of expenses) intended to be returned to Shareholders· If the Ordinary Shares are not trading at an average price per Ordinary Share which is equal to or above the most recent published NAV in the period of 20 Business Days preceding the second anniversary of the Extraordinary General Meeting, the Board intends to place the Company into a managed wind down.

2. Realisation of Cornhill No. 6 & Malt Hill No. 2

It is intended that Cornhill No. 6 and Malt Hill No. 2 will be disposed of on a timely basis with a view to optimising Shareholder value. Whilst these are high quality assets, the yield is below the current Shareholder requirements. The proceeds (net of expenses) are intended to be distributed to Shareholders through a tender offer by the Company to repurchase Ordinary Shares. It should be noted that in general the loan portfolios were purchased at a premium and a sale at below that level may have a negative effect on the NAV in the short term. The combined portfolios are expected to have a nominal value of approximately £500 million at the time of sale and therefore a 1 per cent variation in price would amount to approximately £5 million. TwentyFour’s estimates for the resulting available capital released from this sale, in relation to returns to shareholders in or around May 2021, range between £35 million and £40 million. These returns would be distributed through a tender offer at a price expected to be materially above 70 pence per Ordinary Share. The making of any tender offer and the price at which it is made are at the Board’s discretion, would require approval by Shareholders (which is expected to be by way of ordinary resolution) and are subject to the requirements of Guernsey law.

3. Securitise current Keystone pool

Notwithstanding what is said in paragraph 1 (Additional shareholder protections) above it is intended to securitise the current Keystone pool (Cornhill No. 4) at an appropriate time to optimise funding costs and lock-in attractive potential returns which the Portfolio Manager estimates under current market conditions to be in the low-to-mid teens per annum over approximately 3 years.[1] The target size of this securitisation is estimated to be approximately £350 million.

4. Expand and Securitise 2nd Keystone pool

Subsequently, it is intended to take advantage of foreseeable favourable origination and funding conditions to continue to fund and securitise a second pool of mortgages through Keystone in order to access further attractive potential returns. The Portfolio Manager currently estimates that potential returns from this pool to be in the mid-to-high teens per annum, within the existing appetite for credit and structural risk.

Paragraphs 1 to 4 above are referred to together as the "Proposal".

Dividend and NAV performance

The Board intends to continue to pay dividends of 4.5p per annum per Ordinary Share and expects based on current market conditions and reasonable assumptions that this level will be covered by

income in the current financial year and will increase progressively thereafter.[2] The NAV is estimated to increase gradually following completion of the intended sale of Cornhill No. 6 & Malt Hill No. 2.

Benefits of the Proposal

The Board considers the Proposal to offer a compelling proposition and has the potential to deliver better value to Shareholders than the alternative of winding down the Company. The UK mortgage market is going through a period where margins have materially improved, enabling generation of significant returns. UKML offers exposure to a hard-to-compile, high performing portfolio which is difficult to replicate. Continuing to fund Keystone, including funding a second pool as described above, is expected to generate significant income and become central to UKML’s marketing proposition. The Proposal will generate income that means the 4.5p per annum dividend is covered and dividend cover is expected to increase progressively thereafter. The Portfolio Manager expects an IRR in the region of 11.5-13.5% over the next three years as compared to an IRR for managed winding down of the Company of 6-10%.[3] To the extent that the share price does not respond and trade at or above NAV by the second anniversary of the Extraordinary General Meeting, the Proposal includes provisions for further liquidity to be generated provided through the sale of assets or a managed wind down.

Alternatives to the Proposal

The Board considers that the Proposal should deliver substantially higher value to Shareholders than the alternative of winding down the Company. Winding down accelerates the writing off of premiums paid on mortgages, initial set-up costs for each SPV and would incur significant legal and advisory costs for each portfolio sale. It should be noted that an orderly winding down would be expected to take at least 3 years to coincide with the maturity dates of the securitisations in which the Company invests.

Extraordinary General Meeting

The Company will only implement the Proposal if the Resolution is passed at the Extraordinary General Meeting. If the Resolution is not passed at the Extraordinary General Meeting, the Directors intend to put the Company into a managed winding down.

Therefore, the Board is Recommending that Shareholders vote in favour of the Proposal.

 

Enquiries:

UK Mortgages LimitedChristopher Waldron (Chairman) 020 7260 1000

Numis Securities Limited, Financial Adviser and Corporate BrokerHugh Jonathan 020 7260 1000Nathan Brown

Garfield Advisory, Public Relations AdviserAndrew Garfield 079 7498 2337Jason Nisse 077 6968 8618

Further information

This announcement is not intended to and does not constitute an offer to buy or the solicitation of an offer to subscribe for or sell or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction. The release, publication or distribution of this announcement in whole or in part, directly or indirectly, in, into or from certain jurisdictions may be restricted by law and therefore persons in such jurisdictions should inform themselves about and observe such restrictions.

Numis Securities Limited ("Numis"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for UK Mortgages Limited and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than UK Mortgages Limited for providing the protections afforded to clients of Numis, nor for providing advice in relation to any matter referred to herein.

Publication on website and availability of hard copies

Copies can be downloaded from the Company's website:

https://twentyfouram.com/en/funds/uk-mortgages-fund/

Forward looking statements

This announcement, oral statements made regarding the Proposal, and other information published by UK Mortgages Limited may contain statements which are, or may be deemed to be, “forward-looking statements”. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of UK Mortgages Limited about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as “plans”, “expects” or “does not expect”, “is expected”, “is subject to”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Although UK Mortgages Limited believe that the expectations reflected in such forward-looking statements are reasonable, UK Mortgages Limited can give no assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors. Neither UK Mortgages Limited, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations (including under the Disclosure Guidance and Transparency Rules of the FCA), UK Mortgages Limited is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

MAR

The information contained within this announcement is deemed by UKML to constitute inside information as stipulated under the Market Abuse Regulation. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

[1] This is an estimate only and is based on current market conditions and information and estimates available to the Company as at the date of this document and is not a profit forecast. There can be no assurance that this estimate will be met.. This estimate should not be taken as an indication of the Company’s expected or actual current or future results. The Company’s actual results, profits and dividends paid will depend upon a number of factors, including but not limited to the Company’s net income and the Company’s ongoing costs, expenses and charges.

[2] This is an estimate only and is based on current market conditions and information and estimates available to the Company as at the date of this document and is not a profit forecast. There can be no assurance that this estimate will be met or that the Company will make pay dividends at the level estimated or at all. This estimated should not be taken as an indication of the Company’s expected or actual current or future results. The Company’s actual results, profits and dividends paid will depend upon a number of factors, including but not limited to the Company’s net income and the Company’s ongoing costs, expenses and charges.

[3] This is an estimate only and is based on current market conditions and information and estimates available to the Company as at the date of this document and is not a profit forecast. There can be no assurance that this estimate will be met. This estimate should not be taken as an indication of the Company’s expected or actual current or future results. The Company’s actual IRR will depend upon a number of factors, including but not limited to the Company’s net income and the Company’s ongoing costs, expenses and charges.


Related Shares:

UKML.L
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