Chenavari Capital Solutions Limited Return of Capital (6245R)

TIDMCCSL

RNS Number : 6245R

Chenavari Capital Solutions Limited

13 December 2016

Chenavari Capital Solutions Limited (the Company)

13 December 2016

This announcement contains inside information

Return of capital

The Company today announces its intention to cease making any further investments with immediate effect and from 1 January 2017 will commence a realisation period which will include the return of unencumbered cash balances to Shareholders.

Further announcements will be made prior to each individual return of cash to Shareholders.

Background

Prior to its initial public offering in 2013, the Company stated that, following 31 December 2015, it would return to Shareholders any unencumbered cash and such cash balances as arise from time to time as a result, predominantly, of investments maturing in accordance with their terms or otherwise.

In December 2015, the Company held an extraordinary general meeting at which the approval of Shareholders was obtained for a proposal to extend the investment period for up to 12 months to 31 December 2016.

Realisation Period

This extended investment period now being nearly at a close, the Company has determined that no further extension to the investment period will be sought and that it intends to commence a realisation period (the "Realisation Period") with effect from 1 January 2017, during which it will return to Shareholders any unencumbered cash and such cash balances as arise from time to time as a result, predominantly, of investments maturing in accordance with their terms or otherwise.

Apart from cessation of new investments, no change to the Company's investment policy is proposed.

The precise mechanism for any return of cash to Shareholders will depend upon the relevant factors prevailing at the time and will be at the discretion of the Board, but may include a combination of capital distributions, share repurchases and redemptions. The amount and frequency of such distributions will be at the Company's absolute discretion. It is anticipated that the first return of cash to Shareholders will take place no later than 30 April 2017, but there can be no assurances to this effect.

It is the Company's current intention to maintain the admission to trading of the Shares on the Specialist Fund Segment of the London Stock Exchange (the "Admission") until further notice. Any proposal to cancel the Admission would only be completed with the approval of Shareholders at an extraordinary general meeting.

The Company will continue to publish monthly net asset values and factsheets.

During the Realisation Period, it is inevitable that the Company's portfolio will become less diversified as assets are realised and the proceeds returned to Shareholders. Shareholders and prospective investors should note that this may increase the risk of an investment in the Company.

Update on the existing portfolio

The Investment Adviser maintains a Base Case, an Upside Case and a Stress Case for each investment in the portfolio, depending on its characteristics and underlying collateral. The cases are derived from a combination of: initial cases derived at the time of investment from analysis of the transaction's structure and the underlying portfolio data, regular tracking of the performance of the transaction's underlying collateral pool and market implied factors such as credit spreads or the performance of other similar deals.

As of 30 October 2016, the Investment Adviser's indicative estimates of the internal rates of portfolio return, calculated on the invested capital of the Company, are:

   --     12.15% if all investments perform in line with the "Base Case"; 
   --     16.91% if all investments perform in line with the "Upside Case"; and 
   --     3.51% if all investments perform in line with the "Stress Case". 

Shareholders should note that, due to the diversification of the portfolio's holdings, it is unlikely that all investments would perform in line with either the Upside or Stress case.

Under the Base Case, it is estimated that investment cash flows during 2017 will be as detailed below, but there can be no assurances to this effect.

   --     Q1 2017 - GBP6.9m 
   --     Q2 2017 - GBP7.3m 
   --     Q3 2017 - GBP5.3m 
   --     Q4 2017 - GBP8.3m 

Based on the cash flows used to calculate the Base Case internal rate of return above, it is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before the end of 2020.

The Company may hold back the payment of cash proceeds during the Realisation Period until a material amount is available for distribution to Shareholders to avoid the cost and administrative burden of distributing small amounts.

Indicative internal rates of portfolio return are dependent on the underlying Base Case, Upside Case and Stress Case asset assumptions that are made by the Investment Adviser. These include, but are not limited to, predictions of default, prepayment, recovery, amortisation, interest rates, asset spread, portfolio replenishment and issuer optional redemptions. The figures are calculated on invested capital of the Company and do not reflect indications of NAV total return. The figures are based on long-term performance projections of the investment strategy and market conditions at the time of modelling and are therefore subject to change. There is no guarantee that any indicative rates of returns can be achieved. Investors should not place any reliance on such target return in deciding whether to invest in the Company. Stress Tests present a set of hypothetical scenarios that assume changes for one or more market variable in order to assess the effect on the portfolio. The results shown represent estimated gross performance of the portfolio under the market conditions stated and do not reflect any management or performance fees or other expenses. The Investment Adviser has made assumptions that it deems reasonable and used the best information available to calculate the rate of return case estimates. If a different set of assumptions were used in these calculations, there could be a material difference in the calculated estimates. Please refer to the prospectus dated 23 September 2013 for risk factors. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular investment programme.

Further information in relation to the Company is available at:

http://www.chenavaricapitalsolutions.com/

Enquiries:

Kirstie McLaren

Chenavari Investment Managers

Email: [e-mail]

Telephone: [phone]

This information is provided by RNS

The company news service from the London Stock Exchange

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December 13, 2016 02:00 ET (07:00 GMT)