Alternative Liquidity Solutions Ltd Update on Run-Off Shares and Estimating Timing (3342L)

TIDMALSL

RNS Number : 3342L

Alternative Liquidity Solutions Ltd

03 September 2012

ALTERNATIVE LIQUIDITY SOLUTIONS LIMITED

(The "Company")

(Registered in Guernsey - Number 46912)

Registered Office:

2(ND) FLOOR, REGENCY COURT, GLATEGNY ESPLANADE,

ST PETER PORT, GUERNSEY GY1 3NQ

TELEPHONE: [phone]

FACSIMILE: [phone]

E-MAIL: [e-mail]

 
 For immediate Release   3 September 2012 
----------------------  ----------------- 
 

Alternative Liquidity Solutions Limited

Update on Run-Off Shares and Estimated Timing of Distributions

Further to the announcement by Alternative Liquidity Solutions Limited (the "Company") of its interim results on 29 August 2012, the Board is hereby providing certain additional information to shareholders. This information relates to the liquidity profile of the Company's portfolio and to the anticipated mechanism for returning capital to those shareholders who elect to receive Run-Off Shares pursuant to the proposed reconstruction of the Company and comprises:

1. the expected timing and quantum of redemption proceeds from Redeemable Funds and distributions to shareholders arising from these and the Company's free cash;

2. further detail in relation to the valuation of the Long Lock Funds and Liquidation Share Classes, including the assumptions made by the Company's independent valuation advisers as to the timing of realisations of these investments; and

3. clarification of the mechanics for the creation of the Run-Off Shares and how this interrelates with the Company's proposed fund raising.

The Company's investment portfolio comprises three categories of funds:

-- funds which have stated redemption dates (of varying length and frequency) which are currently being honoured at the managers' stated net asset values ("Redeemable Funds");

-- funds which were established as closed ended entities with capital returned when the underlying investments of those funds are realised ("Long Lock Funds"); and

-- funds which were originally open-ended but have become illiquid and suspended redemptions and have created liquidating share classes, with capital returned when the underlying investments are realised and capital distributed ("Liquidation Share Classes").

The Board engaged independent specialist valuation experts, Time 2 Recover Limited ("T2R"), to assist with the valuation of the investment portfolio as at 30 June 2012. The table below provides an analysis of the valuation of the investment portfolio, based on the Revised Valuation Methodology described in the interim results. This methodology utilises a present value approach, discounting expected future recoveries at an appropriate rate, reflecting the uncertainty over quantum and timeframe of such recoveries:

 
                   Investments             Expected future     Weighted     Discount   Present 
                    at managers'            recovery            average      rate       value 
                    valuations                                  estimated               (unaudited) 
                                                                recovery 
                                                                period 
                            GBP                   GBP            Years                     GBP 
 
 Redeemable Funds          7,881,392         7,868,387               0.4        20%       7,234,799 
 Long Lock Funds           6,051,153         6,043,129               3.5        20%       3,122,355 
 Liquidation Share 
  Classes                  1,494,727         1,440,955               1.8        30%         900,818 
 Total                    15,427,272        15,352,471                                   11,257,972 
                      ==============  ================                               ============== 
 
 

The expected future recoveries and weighted average recovery periods set out in the table above are based on a detailed assessment by T2R of each of the Company's underlying portfolio holdings. This assessment involved qualitative analytic reports on each underlying investment as well as a quantitative valuation to capture the time horizon and recovery value of all underlying investments. The methodology used involves the following principles:

-- where available, recent transactions by third parties in the same securities or fund interests;

-- qualitative analytic reports on each underlying fund that seek to identify materially negative effects and reasons for impairment;

-- the present value of expected future cash recoveries from investments, discounted at a rate which the Board believes sufficiently compensates investors for the illiquidity and risk associated with the uncertainty of timing and quantum; and

   --        the nominal value where fair market value is deemed consistent with the stated NAV. 

Shareholders should note that, notwithstanding that the estimated present values incorporated within the Company's accounts are considerably more conservative than the valuations provided by the underlying managers, such figures are only estimates as to the quantum and timing of recovery on each of the Company's assets. There can be no assurance that the eventual recovery values will equal these estimated values, nor any assurance that recoveries will occur within the estimated timeframes. Actual results, performance or events may differ materially from those expressed or implied in these estimates.

1. Estimated distribution timetable of free cash and redemption proceeds from Redeemable Funds

The table below sets out the Company's cash as at 30 June 2012 net of outstanding capital commitments ("Free Cash"), the Board's current estimation of the timing of receipts from the Redeemable Funds and the distributions the Board would anticipate being able to make to redeeming shareholders from these sources. The table also shows other estimated future recoveries from the Long Lock Funds, Liquidating Share Classes and outstanding capital commitments, the timing of which is not currently known. The assumptions upon which these estimates are provided are set out below the table.

 
                                     Free cash   Redemptions   Distributions   Per share 
                                       (GBPm)       (GBPm)         (GBPm)         (p) 
----------------------------------  ----------  ------------  --------------  ---------- 
 
   Cash & Funds where redemptions 
   have been placed 
----------------------------------  ----------  ------------  --------------  ---------- 
 September 2012                        3.67         1.98 
----------------------------------  ----------  ------------  --------------  ---------- 
 October 2012                                       1.58 
----------------------------------  ----------  ------------  --------------  ---------- 
 November 2012                                      1.45          (7.28)         20.3 
----------------------------------  ----------  ------------  --------------  ---------- 
 December 2012                                        - 
----------------------------------  ----------  ------------  --------------  ---------- 
 January 2013                                       0.41 
----------------------------------  ----------  ------------  --------------  ---------- 
 February 2013                                      0.40          (1.89)          5.3 
----------------------------------  ----------  ------------  --------------  ---------- 
 March 2013                                         0.07 
----------------------------------  ----------  ------------  --------------  ---------- 
 April 2013                                         0.29 
----------------------------------  ----------  ------------  --------------  ---------- 
 May 2013                                           0.40          (0.89)          2.5 
----------------------------------  ----------  ------------  --------------  ---------- 
 June 2013                                            - 
----------------------------------  ----------  ------------  --------------  ---------- 
 July 2013                                          0.86 
----------------------------------  ----------  ------------  --------------  ---------- 
 August 2013                                        0.40          (1.47)          4.1 
----------------------------------  ----------  ------------  --------------  ---------- 
 September 2013                                       - 
----------------------------------  ----------  ------------  --------------  ---------- 
 Total - Cash & Redeeming 
  Funds                                3.67         7.86                         32.2 
----------------------------------  ----------  ------------  --------------  ---------- 
 
 Other expected recoveries 
  - uncertain timing 
----------------------------------  ----------  ------------  --------------  ---------- 
 Cash reserved for uncalled 
  commitments                          1.19 
----------------------------------  ----------  ------------  --------------  ---------- 
 Long Lock Funds                       6.04 
----------------------------------  ----------  ------------  --------------  ---------- 
 Liquidation Funds                     1.44 
----------------------------------  ----------  ------------  --------------  ---------- 
 Total - Recoveries with 
  Uncertain Timing                     8.68           -              -           24.2 
----------------------------------  ----------  ------------  --------------  ---------- 
 
 

The following assumptions have been made compiling the distribution timetable:

A. The redemption terms of the underlying Redeemable Funds are honoured in full and no additional gating or suspension of redemptions is imposed

B. Amounts are based on the valuation of the underlying fund holdings and prevailing exchange rates as at 30 June 2012 and are therefore subject to fluctuations in valuation based on underlying manager performance and foreign currency movements.

C. The first capital return will be made in November 2012 and thereafter will be made quarterly to the extent that there is sufficient cash to justify a distribution.

D. No distributions are assumed from Long Lock Funds or Liquidating Share Classes, although in practice the Board expects that redemption proceeds will continue to be received and will be distributed.

Shareholders should note in relation to the estimates provided in the distribution timetable above the reservations as to the quantum and timing of expected future recoveries previously expressed. Shareholders should also note that the Board reserves the right in its absolute discretion to change the indicated distribution timetable and to alter the quantum of future distributions. Consequently no assurance can be given that distributions will be made, either as to quantum or timing, in accordance with this timetable,

   2.         Recovery assumptions for the Long Lock Funds and Liquidation Share Classes 

The timing of recoveries from the Long Lock Funds and Liquidation Share Classes is uncertain. However, for the purposes of arriving at the estimated present fair value of these funds as set out in the interim accounts for the period ended 30 June 2012, the following assumptions have been made on the quantum and timing of recoveries for each of the underlying holdings:

 
                             Investments      Expected            Weighted     Discount   Present 
                              at managers'     future recovery     average      rate       value (unaudited) 
                              valuation                            estimated 
                                                                   recovery 
                                                                   period 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Long- Lock Funds 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Apollo European 
  Principal Finance          GBP2,759,546     GBP2,759,546        3.26         20%        GBP1,521,979 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Ffenics                     GBP1,207,654     GBP1,207,654        2.42         20%         GBP776,856 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 OCM European 
  Principal Opportunities 
  Fund                       GBP2,045,200     GBP2,037,655        5.14         20%           GBP797,780 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 SISU Capital                   GBP38,753      GBP38,273          2.18         20%             GBP25,740 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Sub-Total                   GBP6,051,153     GBP6,043,129        3.50         20%        GBP3,122,355 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 
 Liquidation Shares 
  Classes 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 ADM Gladius                  GBP132,910       GBP126,264         1.69         30%            GBP80,956 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Cognis                         GBP50,487      GBP19,418          1.13         30%         GBP14,439 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Fortelus Special 
  Stiatuions (SPV)            GBP452,619       GBP452,619         3.39         30%          GBP186,069 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Ironshield Special 
  Situations Side 
  Pocket                      GBP300,068        GBP300,008        1.13         30%          GBP223,116 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Kind Street Europe 
  Side Pocket                 GBP163,159         GBP155,001       1.13         30%          GBP115,252 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 OCM European 
  Credit Opportunities 
  Fund                        GBP29,534        GBP29,475          2.80         30%         GBP14,123 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Tisbury Europe               GBP9,295         GBP5,949           0.56         30%           GBP5,130 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Trafalgar Discovery          GBP5,262               GBP828       1.02         30%          GBP634 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Trafalgar Kahala 
  Jet                         GBP351,394       GBP 351,394        1.13         30%           GBP261,101 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 Sub-Total                   GBP1,494,727     GBP1,440,955        1.80         30%          GBP900,818 
--------------------------  ---------------  ------------------  -----------  ---------  ------------------- 
 
 
   3.         Mechanics for returning capital to shareholders 

As part of the Company's proposed reconstruction, Shareholders who do not wish to maintain their investment in full in the ongoing vehicle may elect to have some or all of their Ordinary Shares redesignated as Run-Off Shares. This election is expected to take place at or around the same time as the publication of the prospectus in connection with the proposed Equity Fundraising, and will in any event take place before the end of October.

Upon redesignation of the Company's share capital, the assets of the Company will be allocated pro rata between Ordinary Shareholders and Run-Off Shareholders. Accordingly, any cash proceeds received from the redemption or liquidation of the Company's underlying investments will be available on the same pro rata basis either for distribution to Run-Off Shareholders or for reinvestment on behalf of continuing Ordinary Shareholders.

If either the Equity Fundraising is not completed in accordance with its terms on or before 31 December 2012 or the Directors announce publicly that there is no realistic prospect of the Equity Fundraising being completed by 31 December 2012, all of the Ordinary Shares will be automatically redesignated as Run-Off Shares.

The Run-Off Shares will not be listed in order to keep expenses to a minimum.

The information contained herein is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.

For further information, please contact:

Jon Macintosh

Saltus Partners LLP

+ 44 20 7499 0200

Harry Stein

FTI Consulting

[phone]

This information is provided by RNS

The company news service from the London Stock Exchange

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