Publication of circular and notice of GM

 

Life Settlement Assets PLC

LEI: 2138003OL2VBXWG1BZ27

(the "Company" or "LSA")

Publication of circular

 

 

Further to the announcement on 18 December 2019 relating to the Company's share capital structure, the Company has today posted a Circular (the "Circular") in respect of the recommended proposals for the Merger of the A, D and E Ordinary Share Classes and notice of a General Meeting and A, D and E Ordinary Share Class Meetings.

Introduction and background

The Company announced on 18 December 2019 that it was considering merging the Company's four Share Classes in order to enhance liquidity and eliminate certain of the administrative costs and inefficiencies of operating multiple portfolios comprised of similar assets. 

Reflecting the development of the Company through the acquisition of different portfolios of whole and fractional interests in life settlement policies at different times, where each was placed into a separate asset trust and reflected by a separate Share Class, the Company now has a resulting structure which investors find difficult to navigate and is both more complex and modestly more costly to administer. The Ordinary Shares in issue as at the date of this Circular, and their attributable NAVs as at 29 February 2020, are as follows:

Share Class	NAV (US$m)	Ordinary Shares in issue
A Ordinary Share Class	89.2	39,891,391
B Ordinary Share Class	14.1	14,596,098
D Ordinary Share Class	7.7	8,792,561
E Ordinary Share Class	3.6	1,566,603

 

The Board has considered whether to include the B Ordinary Share Class in the proposed Merger of Share Classes, but after careful analysis the Board believes there would be no material benefit to the B Ordinary Shareholders in including the B Ordinary Share Class in the proposed Merger at this stage because of the shorter maturity profile of this portfolio.  However, this will be kept under review and may be reconsidered at a later date depending on how the projected maturities develop.

Overall, the Directors believe that the simplified share class structure should provide both improved liquidity for the holders of the merged Share Classes and a clearer investment case for new investors in the future as well as the potential for nearer term cashflow enhancements to the existing A Ordinary Shareholders. Accordingly, after careful consideration of these factors, based on the terms set out below, the Board has determined that it is in the best interests of the Shareholders as a whole to merge the A, D and E Ordinary Share Classes (the "A/D/E Merger").

Benefits of the A/D/E Merger

Merging the relatively small D and E Ordinary Share Classes would provide a helpful simplification of the Company's structure.   Also, the A Ordinary Shareholders will benefit from expected improved cash flows over the next few years and a reduced focus on HIV-related maturities arising from the inclusion of the D and E Ordinary Share Class portfolios.  Shareholders of the merged Share Classes will also achieve an additional benefit of consolidating the underlying fractional Policies into the larger asset portfolio resulting from the Merger, reducing the reliance on the performance of third parties (which are exposed to the same Policies as the Company) for the creation of value.  

In addition to achieving some modest cost savings from merging the A, D and E classes, the Board has already undertaken the merger of the underlying trusts which hold the Company's investments into one trust which is expected to yield more significant cost savings in the region of US$250,000 per annum.  

Terms of the A/D/E Merger

In considering the terms of the A/D/E Merger, the Board has discussed the proposals with its Investment Manager, Acheron Capital Limited, and has been mindful that Jean-Michel Paul, the principal of the Investment Manager, indirectly holds approximately 2.79% of the A Ordinary Shares, 2.43% of the B Ordinary Shares, 80.9% of the D Ordinary Shares, and 95.8% of the E Ordinary Shares, noting that he has a controlling position in both the D and E Ordinary Share Classes.  He also holds a 30% non-controlling interest in a company which holds approximately 28.8% of the B Ordinary Shares. All the members of the Board are independent of the Investment Manager and none are interested in either the D or E Ordinary Shares. 

The proposed terms of the A/D/E Merger are that the D and E Ordinary Share Classes be merged into the A Ordinary Share Class by re-designating a proportion of the D and E Ordinary Shares as A Ordinary Shares on a share-for-share basis at the NAVs attributable to the A, D and E Ordinary Shares as at 30 April 2020. The attributable NAVs will be calculated using the audited NAVs as at 31 December 2019 and adjusting for subsequent maturities and other trading events that have arisen between 31 December 2019 and 29 February 2020, and will be subject to such further adjustments as the Board considers to be necessary in order to reflect significant changes in the financial position of the relevant Share Class between 1 March 2020 and the Calculation Date. Any remaining D and E Ordinary Shares will be re-designated as Deferred Shares with nominal value.

As part of the arrangements negotiated with the Investment Manager for the proposed A/D/E Merger, the Board has considered the accrued but unpaid investment management performance fees attributable to the D and E Ordinary Share Classes and also the existing prepayment of annual premiums in respect of the policy interests of those Share Classes.  The Board has agreed that these accrued performance fees should be paid as a result of the implementation of the A/D/E Merger and note that it would in any event be impracticable to continue to monitor performance fees on the pre-Merger basis. In addition, the D and E Share Classes will be entitled to a proportion (based on cash availability) of the approximately $1.53 million of premiums prepaid in respect of the current financial year for the Policies in which they have beneficial interests, such amount to be paid by way of a special dividend.  Repayment of prepaid premiums is considered normal in settling contracts for the transfer of policies, and, in any case, the amount of this special dividend will be reflected in calculating NAV for the purposes of the Merger.  The accrued performance fees will be partly paid out of available cash held by the D and E Ordinary Share Classes after payment of the special dividend with the remainder payable no later than 31 December 2020 and funded from cash receipts post-Merger. 

The implementation of the A/D/E Merger is conditional upon the Company having received certain Shareholder approvals.  If the Company receives all requisite Shareholder approvals except for those proposed at the A Ordinary Share Class Meeting, the Company will instead merge the D Ordinary Share Class with the E Ordinary Share Class (the "D/E Merger").  The D/E Merger is similarly expected to reduce administrative inefficiencies in respect of the D and E Ordinary Share Classes.  In this Circular, the capitalised term "Merger" means either the A/D/E Merger or the D/E Merger (as the case may be).

If neither the A/D/E Merger nor the D/E Merger is approved, the Company will continue operating as it has done to date. 

Coronavirus pandemic

The Board is very much aware of the current coronavirus pandemic. Whilst there can be no guarantee that there will be no business interruption, to date there has been no impact on the administration of the Company or its assets and the Board has received details from its key service providers of the steps they are taking to protect their employees and operations.  In addition, the Board draws the attention of Shareholders to the fact that the outbreak of coronavirus could (under certain scenarios) cause a rise in mortality rates which would accelerate the maturity profile of the Company's life settlement interests over the forthcoming months.

Amendments to The Articles

The Articles do not currently contemplate the ability to merge Share Classes and will therefore need to be amended in order to facilitate the Merger.  Accordingly, the New Articles will: 

(a) reflect the changes to the Share Classes resulting from the Merger;

(b) set out the rights attaching to the Deferred Shares; and

(c) allow for future mergers of Share Classes (subject to Shareholder approval). 

At the same time, the Company proposes to make certain minor changes to the Articles to remove definitions and articles which refer to redeemable preference shares and the restructuring and liquidation of Acheron Portfolio Corporation (Luxembourg) S.A., as these definitions and articles are now redundant.

Shareholder Meetings and recommendation

Notices convening the General Meeting and the separate A Ordinary Share Class Meeting, D Ordinary Share Class Meeting and E Ordinary Share Class Meeting, to be held at 14.00 p.m., 14.05 p.m., 14.10 p.m. and 14.15 p.m. respectively on 28 April 2020, each at Isca Administration Services Limited, Suite 8, Bridge House, Courtenay Street, Newton Abbot, TQ12 2QS, are set out in the Circular. 

The Board considers that the A/D/E Merger, or the D/E Merger if the A/D/E Merger is not approved, is in the best interests of the Company and its Shareholders as a whole.  Accordingly, the Board unanimously recommends Shareholders to vote in favour of the Resolutions to be proposed at the Shareholder Meetings. 

Michael Baines, Chairman of LSA, said:

"The Board believes that there are important benefits to shareholders arising from this transaction, including a simplified share class structure, improved liquidity, and a clearer investment case for new investors.  Completion of the transaction should better position the Company for the next phase of its development."

 

Expected timetable

	2020
Latest time and date for receipt of proxy votes for the General Meeting	14.00 p.m. on 24 April
Latest time and date for receipt of proxy votes for the A Ordinary Share Class Meeting	14.05 p.m. on 24 April
Latest time and date for receipt of proxy votes for the D Ordinary Share Class Meeting	14.10 p.m. on 24 April
Latest time and date for receipt of proxy votes for the E Ordinary Share Class Meeting	14.15 p.m. on 24 April
Latest date for dealing in D Ordinary Shares and E Ordinary Shares in respect of the A/D/E Merger, or dealing in D Ordinary Shares in respect of the D/E Merger	28 April
General Meeting	14.00 p.m. on 28 April
A Ordinary Share Class Meeting	14.05 p.m. on 28 April
D Ordinary Share Class Meeting	14.10 p.m. on 28 April
E Ordinary Share Class Meeting	14.15 p.m. on 28 April
Announcement of the results of the General Meeting, A Ordinary Share Class Meeting, D Ordinary Share Class Meeting and E Ordinary Share Class Meeting	28 April
Calculation Date	30 April
Record Date for the entitlement of D Ordinary Shareholders and E Ordinary Shareholders to their new holdings of A Ordinary Shares in respect of the A/D/E Merger, or the entitlement of D Ordinary Shareholders to their new holdings of E Ordinary Shares in respect of the D/E Merger	Close of business on 30 April
CREST accounts credited for revised holdings of new A Ordinary Shares or new E Ordinary Shares (as applicable)	5 May
Expected despatch of share certificates for holdings of new A Ordinary Shares or new E Ordinary Shares (as applicable)	Week commencing 11 May

Notes:

Each of the times and dates in the above timetable is subject to change and may be extended or brought forward without further notice.  The Company will notify investors of any such changes to these times and dates by making an announcement via a Regulatory Information Service. 

 

References to times are to London times unless otherwise stated

 

 

Enquiries:

Life Settlement Assets plc

Michael Baines (Chairman)

020 7258 5990

 

Acheron Capital Limited (Investment Manager)  

Jean-Michel Paul

020 7258 5990  

 

Shore Capital (Financial Adviser and Broker)  

Robert Finlay

020 7601 6115

 

ISCA Administration Services Limited

Company Secretary

01392 487056

 

 

Notes to Editors

LSA is a closed-ended investment company which manages portfolios of whole and fractional interests in life settlement policies issued by life insurance companies operating predominantly in the United States. The life settlement market enables individuals to sell their life insurance policies to investors at a higher cash value than they would otherwise receive from insurance companies (if they were cancelled or surrendered at the date of sale). The Company aims to manage portfolios of life settlement products so that the realised value of the policy maturities exceeds the aggregate cost of acquiring the policies, ongoing premiums, management fees and other operational costs.  LSA was is listed on the Specialist Fund Segment of the Main Market of the London Stock Exchange.