Acorn Income Fund has announced proposals that seek to extend the life of its zeros until 28 February 2022. Zero holders have the option their cash back in 2017 as planned. There will also be an opportunity to subscribe for new ordinary shares and new zeros.
Acorn Income has, currently, two classes of shares in issue: ordinary shares and ZDP shares. The ordinary shares have been traded on the main market of the London Stock Exchange since February 1999. At the end of November, the company’s issued share capital was 17,186,664 ordinary shares and 23,069,931 ZDP Shares.
ZDP shareholders are entitled to receive 138 pence per ZDP Share on 31 January 2017. The directors are required, every five years, to propose a Discontinuation Resolution, a proposal that the company should cease to continue as presently constituted. Shareholder voted on the last one at the annual general meeting on 26 September 2016 and said the company should keep going. Now the board needs to think about refinancing the ZDP Shares.
The board considers that it is in the best interests of the company to maintain the gearing afforded by the ZDP Shares after 31 January 2017. They are proposing that the life of the ZDP Shares be extended to 28 February 2022 when they would be entitled to receive a final capital entitlement of 167.2 pence per ZDP share. this works out to a Gross Redemption Yield of 3.85 per cent. Before the company issues any new ZDP shares it will check that the assets available to cover the final entitlement, assuming no change in the company’s NAV, exceed 2.0 times. that’s a higher test than the 1.85x they use at the moment. They reckon, all things being equal, the company’s gross assets would need to fall by 15.9 per cent. per annum, in order for the ZDP Shares not to receive their full 2022 final capital entitlement (although that depends on the performance of the investment portfolios.
AIF : Acorn Income moves to extend life of zeros