Jade Road Investments Limited (JADE) (formerly Adamas Finance Asia Limited) has published its final results for the year ended 31 December 2022. The company’s main focus for the year was to pivot from its legacy portfolio of Asian assets to investing in geographically diverse assets in more stable regions. The headline numbers were poor with NAV falling 77.8% while the discount sits at 97%.
Commenting on the results, chairman John Croft noted:
“Solid progress was made to transition the company away from its legacy asset portfolio of Asian SMEs towards a more globally diverse portfolio. As part of the company’s new amended investment strategy to continue to deploy capital into multiple asset-backed and/or income-generating investments but shift the geographical focus, the company completed a significant (post balance sheet) investment in a highly diversified and low-correlated fund, managed by Delaware-based Heirloom Investment Management. To enable this, the company successfully restructured its US Dollar-denominated secured debt, extending its maturity to 31 December 2023.
“In terms of its current Asian asset portfolio, the investment manager is conducting an accelerated disposal program. In August, the company received the third and final equal tranche payment of US$400,000 from China-based Meize Energy Industries, thereby completing the partial disposal transaction.
“These developments, consisting of the new amended investment strategy, significant new investment and accelerated disposal programme, have placed the company on a much firmer footing and I believe is now heading in the right direction to achieve its long-term aim of becoming a dividend-paying vehicle.
Regarding the new investment strategy, he continued:
“Last year, I wrote about the economic and geopolitical challenges facing China and Southeast Asia and how the company had been hard at work pivoting away from its legacy assets in the region. The new investment strategy, approved by an overwhelming number of shareholders at the company’s recent general meeting, allows the company to expand beyond its previous focus on Asian investments to a global approach.
“The intention is to create a geographically diverse portfolio as well as benefit from an environment where inflation levels are higher than interest rates. The long-term aim is to create strong risk-adjusted returns with the capability to generate regular income in addition to capital gains, and become a dividend paying vehicle.
“In order to facilitate this transformation, productive talks were held with the holders of the company’s US Dollar-denominated bonds totaling $3.6m. The board was able to extend the maturity of the loan notes to 31 December 2023 on 1st December 2022; albeit with a modest increase in the interest rate payable on the principal amount of the loan notes outstanding to [a not so modest] 15% per year, and an increase in the interest rate payable on the principal amount of the outstanding loan notes to 16% per year where $1.8m or more of the principal amount of the loan notes remain outstanding by 30 June 2023.
“In addition, a ‘priority return’ provision was agreed requiring the company to prioritise proceeds received by it pursuant to an equity placing of more than £10,000,000, or of any sale (including any contractual rights) within the company’s existing portfolio in making repayments on the notes. Any such repayment would be limited to 10% of the net proceeds received by the company pursuant to a Qualifying Placing, or 65% of the net proceeds received by the company following an asset sale.
“Finally, it was agreed that the loan note holders would be issued with 3-year warrants equivalent to 5% of the next share issuance undertaken by the company with a strike price at a 50% premium to the price of such share issuance on 22nd March 2023.”
[Raising money at a discount, as would inevitably be the case here, is dilutive for existing investors, and at the kind of discount that Jade Road trades on, very highly dilutive. In an environment where many much better placed funds are opting to liquidate, we are not sure why the board is persisting with this one.]
JADE: Long way back for Jade Road Investments