Fair Oaks Income Fund has just published reorganisation proposals. The purpose of the Reorganisation Proposal is to allow those Shareholders who wish to extend the life of their investment in the Company beyond the planned end date of the existing Master Fund, FOIF LP, to be able to do so by having their Ordinary Shares re-designated as 2017 Shares. These will be invested in a new Master Fund II, FOMC II LP, which will have a planned end date in June 2024 and an investment objective and policy substantially similar to that of the existing Master Fund.
Those Shareholders who do not wish to extend the life of their investment will need to make an Election to have their existing Ordinary Shares re-designated as 2014 Shares, which will continue to participate solely in the Master Fund.
2017 Shares
Initially Master Fund II’s portfolio will comprise solely its interest in the Master Fund. However, over time, cash will be reinvested in new investments. Any new cash raised for the 2017 shares will also be deployed into the 2017 portfolio.
The investment objective will be to generate attractive, risk-adjusted returns, principally through income distributions. On the basis of market conditions as at the date of this announcement, they will target a net total return on the Initial Issue Price of between 12 and 14 per cent. per annum over the planned life of Master Fund II (this is a target only and not a profit forecast.
2014 Shares
The 2014 Shares are designed to enable Shareholders to maintain the life of their investment in the Company. As the 2014 Shares will be substantively invested through the Master Fund, the 2014 Shares will have an expected life to the planned end date of the Master Fund, being June 2019 (this may be extended for up to two additional consecutive one-year periods at the discretion of the General Partner).
The composition of the Master Fund’s portfolio will be unchanged by the implementation of the Proposals. However, over time the Master Fund’s portfolio will become less diversified as its investments are realised.
Based on the results of Shareholder consultations received to date, it is expected that the 2014 Share class will represent a relatively small proportion of the company’s share capital and therefore the 2014 Shares are currently expected to benefit from lower levels of secondary market liquidity than the 2017 Shares. The 2014 Shares may also have a greater concentration of ownership than the 2017 Shares.
Secondary Market Placing
To the extent that Shareholders wish to consider realising their investment in the Company, rather than holding either 2014 Shares or 2017 Shares, then the Company has engaged its corporate broker, Numis Securities Limited, to seek to generate secondary market demand from Shareholders or new investors willing to hold 2017 Shares. Numis can only execute bargains with “Qualified Investors”.
Share Issue Proposal
The Company has published a Prospectus relating to the Issue of up to 200 million C Shares at USD 1 per C Share and a Placing Programme of 2017 Shares and/or C Shares up to a further aggregate issue value of USD 250 million (excluding the proceeds from the First Placing and Offer for Subscription). Any net proceeds from the C Shares issued pursuant to the Issue, as well as C Shares and/or 2017 Shares issued pursuant to the Placing Programme, will be used to invest in commitments in Master Fund II.
At the level of the Company, the assets representing the net proceeds of the Issue and any other C Share issue will be accounted for and managed as a separate pool of assets of the Company, distinct from the assets attributable to the 2017 Shares until their date of conversion into 2017 Shares and distinct from the assets attributable to the 2014 Shares. Both the 2017 Share class and C Share class pools will however participate in Master Fund II limited partnership interests and therefore be exposed to the same (single) Master Fund II portfolio.
Name Change Proposal
It is proposed to change the name of the Company to “Fair Oaks Income Limited”.
FAIR : Fair Oaks looks to extend life