Aberdeen Asset Management is to inject £6m into the Enhanced Zero Trust. In exchange for the finan...
Aberdeen Asset Management is to inject £6m into the Enhanced Zero Trust.
In exchange for the finance the group will receive mezzanine securities, ranking behind any bank loans but ahead of ordinary shareholders.
The board of the trust is proposing to repay £7.25m of its £40m of bank debt immediately. The Bank of Scotland will then convert a further £22.5m of debt into £2.25m in uncovenanted loan stock and £20.25m in preference shares.
It further proposes that the directors and investment manager waive all their fees. The proposals, subject to shareholder approval at a yet to be determined EGM, are designed to enable the debt in the trust to be run down over a gradual period.
Some 48.6% of shareholders in the trust by number are Pep or Isa holders or have invested via Aberdeen's share-plan.
The trust originally launched in early 1999 with assets of £100m including £60m of debt, with a portfolio of 70% in zeros and 30% in income shares.
By 30 April 2002 the portfolio's net assets stood at just £34.5m, resulting in net liabilities of £5.5m. Piers Currie, head of investment trusts at Aberdeen, said that at the moment the market is highly illiquid and so the group has recommended this course of action to help improve the situation and encourage investors, bankers and market makers to take a longer term view of the market.
Charles Cade, analyst at HSBC, said this injection of cash by the managers and the conversion of debt to equity by the bank is unprecedented, although the alternative would have been to liquidate the trust leading to a fire sale of assets.
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