Hadrian’s Wall increases loss provision – Hadrian’s Wall Secured Investments says that as at 31 October 2019 its NAV was 81.54 pence. This includes an additional provision of £2.89m (equivalent to 2.02p per share) to the company’s general loss reserves.
Update on Biomass Optimum Fuels Limited (“BOFL”) and Biomass Premium Fuels Limited (“BPFL”)
Whilst the investment adviser believes there will be some recovery from these assets, including the wood pellet heating systems which have potentially attractive government renewable heat initiative income streams attaching to them, and is now working to achieve this, there are likely to be additional costs as part of this process. However, the provision on BOFL and BPFL is being kept at £18.1 million in aggregate, as announced on 20 November 2019.
Update on the rest of the portfolio
One of the company’s borrowers is in the process of undertaking an equity raise or company sale and it is hoped that this will conclude in the first quarter of 2020, This should ensure full repayment of the loan at its face value of £13 million, plus accrued interest of approximately £1 million, together with an early repayment fee (meaning Hadrian’s Wall would get back more than it lent). If the sale/equity raise doesn’t happen, it is possible that the borrower might request the company to provide additional capital for working capital purposes. Given the inherent uncertainty connected with any company sale or fund raise, the IFRS 9 general loss reserve has been increased by £0.7m to £2m (the increase being equivalent to 0.49p per share)..
Hadrian’s Wall is allowing the borrower of a loan with a face value of £4.1 million to defer some interest payments, due to cash flow issues arising from unexpected mechanical failure at its plant which caused lower productivity and income for the borrower in recent months. It is expected that the plant will be fully operational again in January 2020. However, the loss reserve for this asset has been increased by £470,000 to £600,000 (0.33p).
The remaining loans in the portfolio are performing as expected.
The board is continuing its strategic review of the options available to it as announced on 9 December 2019, and anticipates being in a position to provide a further update in the New Year. This exercise will include a review of the ongoing role of Hadrian’s Wall Capital Limited, with the overall objective of maximising shareholder value.
HWSL : Hadrian’s Wall increases loss provision