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GCP Infrastructure and GCP Asset Backed Income combination off of the cards

Separately, GCP Infrastructure (GCP) and GCP Asset Backed Income (GABI) have issued statements saying that a proposed combination of the two companies has been terminated. A significant shareholder consultation exercise was undertaken and both statements make reference to a divergence of views existing amongst shareholders of GABI as being the hurdle. GABI’s board has said that it has no desire, were the scheme to be successful, to create an enlarged entity with a significant minority of investors in such entity opposed to it. [QD comment: It is good to see appropriate consultation with shareholders being undertaken and those views being respected. However, this is a bit of a surprise result as the combination seemed to make sense for both parties – it would have created a larger more liquid and efficient fund – the aim of the merger was to create a more sizeable infrastructure and real asset debt vehicle, with greater secondary market liquidity and the ability to return capital to shareholders while offering the potential for a re-rating over time].

As part of its statement, GCP Infrastructure says that it remains committed to delivering a strategy that accelerates its capital reallocation. The priorities for the uses of its available cash reserves remain, in the first instance, a combination of reducing its outstanding debt balance from the current £104m to as low as possible; and buying back shares whilst its share price trades at a material discount to its net asset value per ordinary share. Given these alternatives, the threshold for new investment activity remains a high hurdle. GCP’s board says that it will continue to work with the manager to accelerate the return of capital to the company in addition to scheduled amortisation through refinances, disposals and other means that may be available to the company from time to time.

GABI’s statement says that there has been a consistent view expressed by shareholders during the consultation that it would benefit from the introduction of a continuation vote. Reflecting this, its board has said that it will propose an ordinary resolution at the company’s AGM to be held in May 2024 that the company continue in its present form. In the event that such a resolution passes, a similar resolution will be proposed every four years thereafter. Alternatively, if such a resolution does not pass, the board expects to put forward proposals to shareholders to amend the investment objective and policy of the company to pursue a strategy for the orderly realisation of the company’s portfolio and the return of capital to shareholders thereafter.

GABI’s board says that, in the period up until the continuation vote at the 2024 AGM, it intends to use any cash resources available to it, after drawdowns of any existing commitments, firstly to repay the GABI’s revolving credit facility and, thereafter, to buyback GABI shares whilst these trade a material discount net asset value.

As part of the heads of terms, Gravis has underwritten the costs incurred by both CCP and GABI in progressing the merger proposals up to a capped amount, and therefore there will be little or no cost to GCP, GABI and their respective shareholders for the development of the proposals to date.

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