KKV Secured Loan Fund Limited Notice of EGM and Publication of Circular (1962F)

TIDMKKVL

RNS Number : 1962F

KKV Secured Loan Fund Limited

13 November 2020

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

LEI: 2138007S3YRY3IUU4W39

13 November 2020

KKV SECURED LOAN FUND LIMITED

Publication of Circular and Notice of Extraordinary General Meeting and Class Meetings

The Board of KKV Secured Loan Fund Limited (the "Company") is pleased to announce the details of the recommended proposals for a managed wind-down of the Company and associated adoption of the New Investment Objectives and Investment Policies, and proposed adoption of the New Articles (the "Proposals").

A circular in connection with the Proposals (the "Circular") is expected to be posted to Shareholders later today containing, amongst other things, a letter from the Chairman of the Company, an expected timetable of principal events, notices of the EGM, Ordinary Share Class Meeting and C Share Class Meeting (together, the "Meetings") and details of the actions to be taken by Shareholders, together with the Forms of Proxy for the Meetings.

The Circular will shortly be available on the Company's website at https://www.kkvim.com/kkv-secured-loan-fund/. The contents of such website are not incorporated into, and do not form part of, this announcement (the "Announcement"). A copy of the Circular will also be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Capitalised terms used in this Announcement, unless otherwise defined, have the same meanings as set out in the Circular.

Background to the Proposals

On 24 September 2020, the Board announced the intention to put forward proposals for a managed wind-down of the Company, in relation to both the Ordinary Share Class and the C Share Class. The Board noted that whilst Ordinary Shareholders as a whole supported continuation of the Ordinary Share Class, a substantial proportion of the Ordinary Shareholders voted against continuation. In addition, since the 16 July Shareholder Meetings, the Portfolio Manager has raised concerns over the valuation of certain assets held within the Company's Portfolios, as announced on 6 August 2020 (and further announced on 30 September 2020 and 11 November). These assets are subject to ongoing review by both the Portfolio Manager and KPMG LLP. The Board believes that these two factors are likely to continue to impact the rating of Ordinary Shares for an extended period of time. As a consequence of this and feedback from several major Shareholders, both the Board and the Portfolio Manager have determined to place the Ordinary Share Class into managed wind-down along with the C Share Class.

In order to do this, the Company is seeking Shareholder approval to replace the Current Investment Objective and Investment Policy with the New Investment Objectives and Investment Policies set out in the Circular. If approved, the Board will endeavour to realise all of the Company's investments in a manner that achieves a balance between maximising the net value received from those investments and making timely returns to Shareholders.

In addition, the Board is seeking Shareholder approval for the Adoption of the New Articles to:

-- provide the Company with an alternative mechanism for making distributions to Shareholders, namely the B Share Mechanism and the D Share Mechanism, further details of which are set out in the Circular;

   --    remove the continuation vote; 

-- give the Board greater flexibility to capitalise profits at the Board's discretion in order to effect the B and/or D Share Mechanism;

   --    remove the right of conversion of C Shares into Ordinary Shares; and 

-- give the Board more flexibility in relation to the composition of the Board and how proceedings of the Board and its committees are effected, by removing any requirement that there shall not be a majority of the Directors resident in the United Kingdom.

Summary of the Proposals

   1.         Amendments to the Current Investment Objective and Investment Policy 

The Proposals involve amending the Current Investment Objective and Investment Policy to reflect a realisation strategy and to cease making any new investments except in very limited circumstances as detailed in the Circular.

The Company's listing and the capacity to trade in its Ordinary Shares and C Shares will be maintained for as long as the Directors believe it to be practicable and cost-effective during the Managed Wind-Down period, subject to being able to meet the requirements of the Listing Rules. Accordingly, once a significant proportion of the Company's assets have been realised and distributed to Shareholders, the Board will then consider, in light of the then prevailing market conditions and Shareholders' views, whether it would be appropriate to propose a resolution for delisting the Ordinary Shares and/or the C Shares (as applicable), which would require additional Shareholder approval at that time.

The Board will continue to treat the Ordinary Share Class and the C Share Class as separate pools of capital during the Managed Wind-Down and there will not be a combination of the two Share Classes.

Irrespective of whether or not the Board seeks to delist the Ordinary Shares and/or the C Shares (as applicable), once all, or substantially all, of the Company's investments have been realised, the Company will, at an appropriate time, seek Shareholders' approval for it to be placed into members' voluntary liquidation.

   2.         Mechanics for returning cash to Shareholders 

The Board has carefully considered the potential mechanics for returning capital to Shareholders as part of the Managed Wind-Down and the Company's ability to do so. The Board currently believes it is in the best interests of Shareholders as a whole to return cash to Shareholders at the appropriate times at the Board's discretion using a B Share Mechanism and a D Share Mechanism, and it is proposed certain changes to the Articles are made by the Adoption of the New Articles in order to enable to Company to use such mechanisms, as set out in further detail in the Circular.

   3.         Adoption of the New Articles 

The proposed Managed Wind-Down requires certain changes to the Articles which are proposed to be effected by the Adoption of the New Articles, details of which are set out in detail in the Circular.

Benefits of the Proposals

The Directors believe, having taken into account the views of a range of major Shareholders, that the Proposals are in the best interests of the Company and its Shareholders as a whole, and should yield the following principal benefits:

-- implementing a managed wind-down and orderly disposal of investments in relation to both the Ordinary Portfolio and C Portfolio is expected to achieve a balance between maximising the net value received from those investments and making timely returns to Shareholders; and

-- the Proposals will allow cash to be returned to Shareholders in a cost-effective and timely manner through the proposed B Share Mechanism and D Share Mechanism (or by way of such other mechanisms which the Directors consider, in their discretion, are in the best interests of Shareholders from time to time).

Variation to the Investment Management Agreement

The Company, the Portfolio Manager and IFM, as parties to the Investment Management Agreement, have agreed the following variations to the Investment Management Agreement (the "IMA Variation"):

-- a clawback of management fees paid up to the publication of the audited accounts of the Company for the financial year ending 30 June 2020 (the "Initial Management Fees") (the "Annual Report 2020") if the NAV as at 30 June 2020 as reported in the Annual Report 2020 (the "Actual NAV") is less than the NAV as at 30 June 2020 as published in the Company's announcement dated 24 July 2020. The Initial Management Fees will be re-calculated using the Actual NAV (the "Re-calculated Management Fees") and the difference between such Recalculated Management Fees and the Initial Management Fees shall be deducted from future payments of the management fee by the Company until such time as the amount has been deducted in full;

-- subject to the passing of resolution 1 at the Ordinary Share Class Meeting, the parties to the IMA agree to use reasonable endeavours to agree a management fee scale for the Ordinary Shares in January 2021, or such later date as agreed in writing, but in any event following the publication of the Annual Report 2020; and

-- a waiver and release of the Portfolio Manager's obligation to use 5 per cent. of management fees received by it in relation to Ordinary Shares and C Shares to purchase Ordinary Shares and C Shares in the market for the calendar months from and including June 2020 to and including January 2021.

The IMA Variation has been agreed in light of the announcements of 6 August and 30 September 2020 regarding the likelihood of material impairments as well as delay in publication of NAVs prior to the conclusion of the third-party valuation review, and the Board considered it appropriate that any excess management fees calculated at the conclusion of this process be clawed back. The Board will also be seeking to negotiate a revised management fee scale for the Ordinary Shares in January 2021 in order to re-align the Portfolio Manager's interests with the New Investment Objectives and Investment Policies.

Notices of the EGM, Ordinary Share Class Meeting and C Share Class Meeting

The EGM, Ordinary Share Class Meeting and C Share Class Meeting to be held at BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey GY1 1WA on 4 December 2020, will commence respectively at 10.00 a.m. GMT, 10.05 a.m. GMT and 10.10 a.m. GMT (or as soon thereafter as the preceding Meeting concludes or is adjourned).

In light of the Covid-19 pandemic, and travel restrictions currently in place in Guernsey, Shareholders are strongly encouraged to exercise their voting rights by completing and submitting the Forms of Proxy provided alongside the Circular to avoid the need to attend the EGM or Class Meetings in person. It is highly recommended that Shareholders submit their Form of Proxy as early as possible to ensure that their votes are counted at the EGM and the Class Meetings.

Shareholders should carefully read the Circular in its entirety before making a decision with respect to the Proposals.

Timetable

The current expected timetable of principal events for the implementation of the Proposals is set out below and in the Circular. If any of the key dates set out in the expected timetable change, an announcement will be made through a Regulatory Information Service. All times shown in this Announcement are London times, unless otherwise stated.

 
 Event                                               Time and/or date 
       Publication of the Circular                   13 November 2020 
       Latest time and date for receipt of   2 December 2020 at 10.00 
        Forms of Proxy for EGM                               a.m. GMT 
       Latest time and date for receipt of   2 December 2020 at 10.05 
        Forms of Proxy for Ordinary Share                    a.m. GMT 
        Class Meeting 
 Latest time and date for receipt of         2 December 2020 at 10.10 
  Forms of Proxy for C Share Class Meeting                   a.m. GMT 
 EGM                                         4 December 2020 at 10.00 
                                                             a.m. GMT 
 Ordinary Share Class Meeting                4 December 2020 at 10.05 
                                                          a.m.(1) GMT 
 C Share Class Meeting                       4 December 2020 at 10.10 
                                                          a.m.(1) GMT 
 
   (1)    Or as soon thereafter as the preceding meeting concludes or is adjourned. 
 
Enquiries: 
  KKV Secured Loan Fund Limited 
  Peter Niven                                        via the Company Secretary 
  Brett Miller 
 BNP Paribas Securities Services S.C.A., Guernsey 
  Branch 
  Company Secretary                                              01481 750 853 
 Winterflood Securities Limited 
  Neil Langford                                                  020 3100 0000 
 

Cautionary statements

This Announcement may contain and the Company may make verbal statements containing "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company.

As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this announcement by or on behalf of the Company speak only as of the date they are made. The information contained in this Announcement is subject to change without notice and except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statements are based.

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November 13, 2020 02:00 ET (07:00 GMT)