New funding in place
In its 17 February IMS City Of London Investment Group (CLIG.LSE) announced it had agreed a new, incremental funding of £5m. On 19 March it subsequently announced an increase in Macquarie’s debt facility and £3m of subordinated debt and equity for Trade Finance Partners. There will be a further £2m direct investment by CIN’s principal creditor, who reduced the previously announced increased other funding to £3m. The IMS noted CIN losses in the second half will be higher than the first half but liquidity has improved with the new funding arrangements.
New funding
CIN originally announced the issue of £5m of an unsecured 7% convertible loan, which can be converted into 8% redeemable preference shares at the company’s option. This follows the working capital loans of £4.8m (£3.5m net of maturing loans) that were arranged at the end of November. £2m had been allocated for TFP but CIN’s principal creditor decided to invest this directly into TFP.
H213 losses above H113 (IMS)
CIN advises losses in H213 will be above H113, with each platform reporting losses and the central costs of the aborted equity raise at end-2013. In the litigation funding business, Therium, cases continue to take longer to settle and therefore no performance fees are being earned in the period. The SME finance businesses Credit Asset Management Limited (CAML) and Professions Funding Limited (PFL) are of insufficient size to generate economies of scale. The trade finance business has seen margin compression from moving into lower spread, high volume commodity trade financing, and accounting changes on the recognition of revenue.
Revised funding of Trade Finance Partners (TFP)
Macquarie will immediately increase its TFP’s facility from £18m to £23m (with an agreement in principle for a further £25m). It will extend the facility for a further two years to 2017, increase the financial covenant headroom and provide £3m of debt and equity. Macquarie has exercised its option over 20% of the equity of TFP, acquired equity from a retiring director and subscribed for new equity resulting in Macquarie holding 33% of the ordinary equity on a fully diluted basis. As noted above, CIN’s principal creditor is providing a further £2m of debt capital directly. CIN has increased its holding in the intermediate holding company through which it held TFP from 87% to 100% seeing CIN’s economic interest in TFP fall from 44.0% to 43.0% on a fully diluted basis. The balance of 24% of the fully diluted equity is held by TFP management. As CIN will not be a majority shareholder it will not consolidate TFP’s results from the date of the transaction but will account for the business as an associated company.
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