Starwood European proposes changes to DCM and management agreement – The board of directors has announced proposals that relate to the discount-triggered realisation mechanism and realisation vote currently provided for in the Articles ), amendments to the investment management agreement with Starwood European Finance Partners Limited and the replacement of the existing carried interest entitlement with a performance fee, together with a proposal to seek authorisation to allot new shares and dis-apply pre-emption rights. The proposals will not be implemented without approval from shareholders at an extraordinary general meeting.
The Proposals have been formulated in light of the following:
- the approaching fifth anniversary of the life of the Company on 17 December 2017 and the potential application of the current discount-triggered realisation mechanism and the realisation vote (which would currently be held before 28 February 2018);
- a review of the terms of the Investment Management Agreement after the initial five year period;
- facilitating a future restructuring of the underlying financing structure of the Group through the removal of the existing partnership which is situated between the Company and its Luxembourg holding company; and
- the objective of raising fresh capital, including through a placing programme and through opportunistic tap issues.
Shareholders will be asked to vote on the amendments to the Investment Management Agreement and the related proposed dissolution of the existing partnership because the proposed changes constitute a related party transaction for the purposes of the Listing Rules. A further announcement will be made on the publication of the Circular.
Summary of the Proposals
The Proposals comprise:
- an amendment to the Articles which would defer the current provisions relating to a realisation offer and realisation vote mechanisms. The current provisions provide that the Directors have discretion to implement a Realisation Offer, if certain discount-related conditions are met, or to propose a Realisation Vote by no later than 28 February 2018 in the event that such conditions are not met. It is proposed that the provisions relating to the Realisation Offer will first apply by reference to the last six months of the nancial year ending 31 December 2022 and that the Realisation Vote mechanism would apply (where the discount-triggered realisation mechanism has not been activated) by no later than 28 February 2023, and in each case on successive ve year anniversaries of such dates;
- an amendment to the Investment Management Agreement to enable the Company to terminate the agreement in the event of a change of control of the Investment Manager, following a consultation process with the Investment Manager;
- amendments to the circumstances where the Company can summarily terminate the Investment Management Agreement, to provide additional clarity around the meaning of “material breach” by the Investment Manager;
- an amendment to the base management fee provided in the Investment Management Agreement such that in calculating such fee, there shall be excluded the un-invested portion of the cash proceeds of any new issue of Shares until at least 90 per cent. of such proceeds are invested in accordance with the Company’s investment policy (or deployed to repay borrowings under any revolving credit facility of the Company or other liabilities of the Company) for the first time;
- the proposed removal of the existing partnership (Partnership) from the Company’s group (Group) structure and the replacement of the entitlement of Starfin Carry L.P. (Special Limited Partner) to receive carried interest (Existing Carried Interest Entitlement) with a performance fee at the Investment Management Agreement level (Performance Fee), calculated substantially on the same basis as the Existing Carried Interest Entitlement but subject to a change in the measurement period for the calculation thereof from a five year period to two years; and
- authorisation to allot new Shares and to dis-apply pre-emption rights in respect of up to 20 per cent. of the issued share capital on the date of the Extraordinary General Meeting. These authorities are in substitution for the 10 per cent. authorities taken at the 2017 Annual General Meeting of the Company and are supplemental to the authorities taken in respect of the placing programme of the Company.
Update on Current Performance
The Company expects to release its interim results for the 6 month period to 30 June 2017 on or about 11 September 2017. The Company continues to perform in line with the Board’s expectations and the unaudited NAV as at 31 August 2017 is not expected to vary significantly from the unaudited NAV as at 31 July 2017.
SWEF : Starwood European proposes changes to DCM and management agreement