abrdn Diversified Income and Growth has been talking to its shareholders. In the light of the feedback received during these conversations and the trust’s entrenched discount to NAV, the board has concluded that it is in the best interests of shareholders as a whole to put forward proposals for a managed wind-down of the company.
[Thus concludes the sorry tale of British Assets Trust. Or so you might think, but the wind down is planned to take quite a long time and anything might happen. The thing that struck me, in the list of longer-dated assets – see below – is how good some of the returns that ADIG has been achieving are. Could some of these come back as individual funds?]
The company proposes to conduct an orderly realisation of its assets in a manner that seeks to optimise their value whilst progressively returning cash to shareholders. In particular:
- the board expects that approximately £115m would be returned to shareholders in the first half of 2024 at, or close to, NAV;
- approximately £107.3m of the private markets portfolio is expected to mature between 2024 and 2027. It is intended that the proceeds of this will be returned to shareholders in a timely manner as the investments mature;
- the remaining £81.5m of the private markets portfolio is expected to mature between 2029 and 2033. As market conditions improve, opportunistic secondary sales of these assets would be considered;
- the company will cease making new investments (save as to fund existing commitments and support the process);
- the board will seek to reduce the company’s ongoing costs; and
- it is intended that the company’s debt arrangements, comprising secured bonds with a par value of about £16.1m, will be repaid during 2024.
Shareholders will need to approve this, and vote for continuation at the AGM scheduled for 27 February 2024. Full details of the proposals will be published in a circular to shareholders as soon as practicable.
The company will continue to pay its regular quarterly dividend until such time as the change of investment objective and policy is approved. The board will review the level of dividend payable thereafter.
Near term return of capital
This represents £94m of fixed income and credit investments, £51m of listed equities and £9m of cash and cash equivalents, but ADIG will need to hold onto some cash to fund it through to the end and meet £41m of outstanding commitments in respect of its private markets portfolio. The £115m will be handed back at NAV less costs. The board does not intend to proceed with a tender offer on the terms outlined in the announcement of 26 October 2023.
Future realisations
The longer dated funds are:
- abrdn Andean Social Infrastructure Fund I, producing an IRR of 3.2%, maturing in 2029, £15,024,741 of NAV now and £4,628,934 yet to fund
- Healthcare Royalty Partners IV, IRR 18.50%, maturity 2031, £15,681,989 of NAV, £1,242,929 unfunded
- SL Capital Infrastructure Fund II, IRR 8.90%, maturing 2032, £21,466,958 of NAV, £2,790,193 unfunded
- Bonaccord Capital Partners I-A, IRR 17.40%, maturing 2032, £16,237,660 of NAV, £3,454,256 unfunded
- Aberdeen Standard Secondary Opportunities Fund IV, IRR 35.00%, maturing 2033, £13,161,630 of NAV, £11,127,767 unfunded
The board believes that these longer-term investments are, in the large part, attractive, saleable assets but remains cognisant of the fact that early disposals from its private markets portfolio in current market conditions would necessitate a substantial discount to their long-term realisable values, and thereby limit the value that could be achieved for shareholders.
The board will also remain open-minded to takeover and merger opportunities during the managed wind-down.
Given the current position of the private markets portfolio, it is expected that the managed wind-down would be in place for three to four years or longer. There can be no certainty as to the precise quantum or timing of any realisations or returns of capital from the private markets portfolio.
Ongoing costs
The board intends to reduce the number of directors and Anna Troup has indicated that she does not intend to stand for re-election at the AGM in February 2024. The company is exploring further ways in which it can reduce its costs.
A circular to shareholders setting out the full details of the proposals will be published as soon as practicable.
ADIG : Another one bites the dust – now ADIG proposes winddown