LONDON, Sept. 12,
2022 /PRNewswire/ -- On 12 September 2022, Staude Capital and Metage
Capital sent a letter to investors in VPC Speciality Lending
Investments Plc (LSE: VSL).
The full text of the letter is as follows:
12 September 2022
To our fellow institutional and professional investors in VPC
Speciality Lending Investments Plc. (the "Company"),
Re: Consultation with the Company's shareholders and Board on
potential alternative proposals to the discount-dependent tender
offer in 2023
We are writing this letter to make you aware of the constructive
discussions that we have had with the Board, and a significant
proportion of shareholders, regarding the issues that face the
Company and the current proposed discount-dependent tender next
year. Further, we are putting forward an alternative proposal for
consideration and recommend convening an informal meeting of the
Company's institutional and professional shareholders to agree the
best way forward.
Background
Portfolios managed by the investment teams at Metage Capital
Limited1 and Staude Capital Limited2 have
been long-term shareholders in the Company since 2016 and 2017
respectively. In June 2020, the
Company committed to undertake a discount-dependent tender offer
for 25% of the shares in issue immediately following the Annual
General Meeting in 2023 (the "2023 Tender Proposal").
The 2023 Tender Proposal, alongside a number of
performance-based measures and additional marketing efforts, were
introduced to address the discount between the Company's net asset
value per share and its share price. Despite these steps and strong
investment performance, the discount on the Company's shares
remains stubbornly wide. We therefore thought that it was a
sensible time to engage with other institutional and professional
shareholders, who are independent of the Company's investment
manager, to understand their views on the Company and whether the
2023 Tender Proposal was still appropriate and sufficient to
achieve its aim.
Key Issues facing the Company
From our discussions with other shareholders three key issues
arose:
- Discount: the discount between the Company's share price
and its net asset value per share is both too wide and too
volatile. The effect of this is that the returns from the Company's
stable credit portfolio are outweighed by discount volatility;
- Covered dividend: any proposal to address the discount
must maintain a covered dividend for income investors; and
- Creeping control: a universal concern expressed by the
independent shareholders was the risk that further buybacks and
tender offers would lead to the de-facto control of the Company by
its manager, through its ability to vote the shares held by the SVS
Opportunity Fund GP LP.
Our alternative proposal
Following these meetings, we believe that there is strong and
widespread support from independent shareholders for the
introduction of a periodic 100% realisation opportunity, via a
run-off share class. This could be listed or unlisted depending on
shareholders' needs. We do not envisage the premature sale of
assets, but to provide the opportunity to receive returns of
capital in the normal life cycle of the underlying investments.
This would enable shareholders to benefit from the same returns
received by the private funds managed by Victory Park Capital.
We believe that the first of these realisation elections should
replace the 2023 Tender Proposal. Further, we recommend that this
realisation opportunity should be offered at least every fifth year
thereafter. This would enable shareholders to remain invested
knowing that they have access to liquidity at net asset value in
the future. Mechanisms like this have become increasingly common in
the investment trust sector and have proved highly effective in
managing discounts. Indeed, when used well, they have even
facilitated the subsequent growth of investment companies.
Our view is that a permanent, long-term resolution of the
Company's discount problem requires a thoughtful, structural
solution along the lines of our proposal. Specifically, compared to
the current status quo of ad hoc tender offers and Company
buybacks, our proposal has the following key advantages:
- It would allow shareholders to ultimately realise returns that
are similar to the underlying net asset value performance and
eliminates discount risk for longer-term investors;
- By diverting income and capital payments into a realisation and
continuation pool, exiting shareholders cause no harm to those
shareholders who remain invested. In contrast, generating the cash
required to meet the 2023 Tender Opportunity could leave the
remaining portfolio less liquid and with greater concentration to
non-income paying equity investments; and
- By assuring shareholders that there will always be periodic
opportunities to realise their investment at net asset value, the
issue of the Manager's creeping control over the Company becomes
less of a concern.
The Board's response and our recommendation for an informal
meeting of shareholders
To its credit, the Board actively engaged with our concerns and
proposal and has consulted with a number of shareholders to seek
their perspectives. Our understanding is that the Company will in
due course bring forward its own thoughts on the 2023 Tender
Proposal. Given that there are different ideas under consideration,
we believe that it would be best to hold an informal meeting of
institutional and professional shareholders to discuss the issues
facing the Company and the merits of different potential solutions.
This will avoid unnecessarily incurring the cost of drafting formal
documentation without having widespread support amongst
shareholders.
We are happy to discuss our proposal with any interested
institutional or professional investors and would encourage you to
contact us on the details below.
Yours faithfully,
Tom Sharp
|
Miles Staude
|
Director
|
Director
|
Metage Capital
|
Staude
Capital
|
Email:
tom.sharp@metage.com
|
Email:
miles.staude@staudecapital.com
|
[1] Metage Capital Limited is a company registered in
England and Wales with registration number 03525123. Its
registered office address is 20 Farringdon Street, 8th Floor,
London, EC4A 4AB.
[2] Staude Capital Limited is an Appointed Representative of
Mirabella Advisers LLP. Investment personnel at Staude Capital
Limited are seconded to Mirabella Financial Services LLP which acts
as Investment Manager to funds that are shareholders of the
Company. Staude Capital Limited is a company incorporated in
England with registration number
10236669. Its registered office address is Old Anglo House,
Mitton Street, Stourport-On-Severn,
Worcestershire, England, DY13
9AQ.