UK Mortgages Ltd Notice of EGM

 
TIDMUKML 
 
THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, 
RELEASE OR DISTRIBUTION (IN WHOLE OR IN PART) DIRECTLY OR INDIRECTLY IN OR INTO 
OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE 
RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A 
TAKEOVER OFFER OR AN OFFER OF SECURITIES. 
 
16 November 2020 
 
                             UK MORTGAGES LIMITED 
 
 (a closed-ended investment company incorporated in Guernsey with registration 
                    number 60440) LEI 549300388LT7VTHCIT59 
 
 Circular to Shareholders and Notice of Extraordinary General Meeting relating 
                to proposals for the Company's future strategy 
 
Following the further consultation with Shareholders which was announced on 27 
October 2020, the Board of UK Mortgages Limited ("UKML" or the "Company") is 
recommending that the Company should continue operating as a publicly traded 
investment company under a revised mandate offering increased focus on 
enhancing liquidity and returns whilst continuing to seek to narrow the 
discount to net asset value at which the Company's Ordinary Shares trade. 
 
The Board is therefore convening an Extraordinary General Meeting of the 
Company to be held at 11 a.m. on Friday, 4 December 2020  at the offices of 
Northern Trust International Fund Administration Services (Guernsey) Limited 
Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands GY1 3QL 
in order to approve the proposal. 
 
Christopher Waldron, Chairman of UKML, said: "Following the launch of the 
review of strategy, the Board has consulted with the Company's Shareholders 
over the appropriate future direction for the business. I am pleased to say 
they have strongly supported our proposals to take the Company forward with a 
revised mandate for increased dividend cover and enhanced liquidity and 
returns." 
 
Details of the Proposal 
 
Subject to approval by Shareholders at the Extraordinary General Meeting, the 
Board intends that: 
 
1.    Additional shareholder protections 
 
·    If the Ordinary Shares trade at a discount of 5% or wider to the 
prevailing NAV in the period of 20 Business Days preceding any Board 
consideration of a refinancing of a Mortgage Securitisation, then the Board 
will not approve such refinancing and instead will pursue a realisation with 
the proceeds (net of expenses) intended to be returned to Shareholders 
·    If the Ordinary Shares are not trading at an average price per Ordinary 
Share which is equal to or above the most recent published NAV in the period of 
20 Business Days preceding the second anniversary of the Extraordinary General 
Meeting, the Board intends to place the Company into a managed wind down. 
 
2.    Realisation of Cornhill No. 6 & Malt Hill No. 2 
 
It is intended that Cornhill No. 6 and Malt Hill No. 2 will be disposed of on a 
timely basis with a view to optimising Shareholder value. Whilst these are high 
quality assets, the yield is below the current Shareholder requirements. The 
proceeds (net of expenses) are intended to be distributed to Shareholders 
through a tender offer by the Company to repurchase Ordinary Shares. It should 
be noted that in general the loan portfolios were purchased at a premium and a 
sale at below that level may have a negative effect on the NAV in the short 
term. The combined portfolios are expected to have a nominal value of 
approximately GBP500 million at the time of sale and therefore a 1 per cent 
variation in price would amount to approximately GBP5 million. TwentyFour's 
estimates for the resulting available capital released from this sale, in 
relation to returns to shareholders in or around May 2021, range between GBP35 
million and GBP40 million. These returns would be distributed through a tender 
offer at a price expected to be materially above 70 pence per Ordinary Share. 
The making of any tender offer and the price at which it is made are at the 
Board's discretion, would require approval by Shareholders (which is expected 
to be by way of ordinary resolution) and are subject to the requirements of 
Guernsey law. 
 
3.    Securitise current Keystone pool 
 
Notwithstanding what is said in paragraph 1 (Additional shareholder 
protections) above it is intended to securitise the current Keystone pool 
(Cornhill No. 4) at an appropriate time to optimise funding costs and lock-in 
attractive potential returns which the Portfolio Manager estimates under 
current market conditions to be in the low-to-mid teens per annum over 
approximately 3 years.[1] The target size of this securitisation is estimated 
to be approximately GBP350 million. 
 
4.    Expand and Securitise 2nd Keystone pool 
 
Subsequently, it is intended to take advantage of foreseeable favourable 
origination and funding conditions to continue to fund and securitise a second 
pool of mortgages through Keystone in order to access further attractive 
potential returns. The Portfolio Manager currently estimates that potential 
returns from this pool to be in the mid-to-high teens per annum, within the 
existing appetite for credit and structural risk. 
 
Paragraphs 1 to 4 above are referred to together as the "Proposal". 
 
Dividend and NAV performance 
 
The Board intends to continue to pay dividends of 4.5p per annum per Ordinary 
Share and expects based on current market conditions and reasonable assumptions 
that this level will be covered by 
 
income in the current financial year and will increase progressively 
thereafter.[2]  The NAV is estimated to increase gradually following completion 
of the intended sale of Cornhill No. 6 & Malt Hill No. 2. 
 
Benefits of the Proposal 
 
The Board considers the Proposal to offer a compelling proposition and has the 
potential to deliver better value to Shareholders than the alternative of 
winding down the Company. The UK mortgage market is going through a period 
where margins have materially improved, enabling generation of significant 
returns. UKML offers exposure to a hard-to-compile, high performing portfolio 
which is difficult to replicate. Continuing to fund Keystone, including funding 
a second pool as described above,  is expected to generate significant income 
and become central to UKML's marketing proposition. The Proposal will generate 
income that means the 4.5p per annum dividend is covered and dividend cover is 
expected to increase progressively thereafter. The Portfolio Manager expects an 
IRR in the region of 11.5-13.5% over the next three years as compared to an IRR 
for managed winding down of the Company of 6-10%.[3] To the extent that the 
share price does not respond and trade at or above NAV by the second 
anniversary of the Extraordinary General Meeting, the Proposal includes 
provisions for further liquidity to be generated provided through the sale of 
assets or a managed wind down. 
 
Alternatives to the Proposal 
 
The Board considers that the Proposal should deliver substantially higher value 
to Shareholders than the alternative of winding down the Company. Winding down 
accelerates the writing off of premiums paid on mortgages, initial set-up costs 
for each SPV and would incur significant legal and advisory costs for each 
portfolio sale. It should be noted that an orderly winding down would be 
expected to take at least 3 years to coincide with the maturity dates of the 
securitisations in which the Company invests. 
 
Extraordinary General Meeting 
 
The Company will only implement the Proposal if the Resolution is passed at the 
Extraordinary General Meeting.  If the Resolution is not passed at the 
Extraordinary General Meeting, the Directors intend to put the Company into a 
managed winding down. 
 
Therefore, the Board is Recommending that Shareholders vote in favour of the 
Proposal. 
 
 
 
 
Enquiries: 
 
UK Mortgages Limited 
Christopher Waldron (Chairman)               020 7260 1000 
 
Numis Securities Limited, Financial Adviser and Corporate Broker 
Hugh Jonathan                                           020 7260 1000 
Nathan Brown 
 
Garfield Advisory, Public Relations Adviser 
Andrew Garfield                                         079 7498 2337 
Jason Nisse                                               077 6968 8618 
 
Further information 
 
This announcement is not intended to and does not constitute an offer to buy or 
the solicitation of an offer to subscribe for or sell or an invitation to 
purchase or subscribe for any securities or the solicitation of any vote in any 
jurisdiction. The release, publication or distribution of this announcement in 
whole or in part, directly or indirectly, in, into or from certain 
jurisdictions may be restricted by law and therefore persons in such 
jurisdictions should inform themselves about and observe such restrictions. 
 
Numis Securities Limited ("Numis"), which is authorised and regulated in the 
United Kingdom by the Financial Conduct Authority, is acting exclusively for UK 
Mortgages Limited and no one else in connection with the matters set out in 
this announcement and will not regard any other person as its client in 
relation to the matters in this announcement and will not be responsible to 
anyone other than UK Mortgages Limited for providing the protections afforded 
to clients of Numis, nor for providing advice in relation to any matter 
referred to herein. 
 
Publication on website and availability of hard copies 
 
Copies can be downloaded from the Company's website: 
 
https://twentyfouram.com/en/funds/uk-mortgages-fund/ 
 
Forward looking statements 
 
This announcement, oral statements made regarding the Proposal, and other 
information published by UK Mortgages Limited may contain statements which are, 
or may be deemed to be, "forward-looking statements". Forward-looking 
statements are prospective in nature and are not based on historical facts, but 
rather on current expectations and projections of the management of UK 
Mortgages Limited about future events, and are therefore subject to risks and 
uncertainties which could cause actual results to differ materially from the 

future results expressed or implied by the forward-looking statements. Often, 
but not always, forward-looking statements can be identified by the use of 
forward-looking words such as "plans", "expects" or "does not expect", "is 
expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", 
"intends", "anticipates" or "does not anticipate", or "believes", or variations 
of such words and phrases or statements that certain actions, events or results 
"may", "could", "should", "would", "might" or "will" be taken, occur or be 
achieved. Although UK Mortgages Limited believe that the expectations reflected 
in such forward-looking statements are reasonable, UK Mortgages Limited can 
give no assurance that such expectations will prove to be correct. By their 
nature, forward-looking statements involve risk and uncertainty because they 
relate to events and depend on circumstances that will occur in the future. 
There are a number of factors that could cause actual results and developments 
to differ materially from those expressed or implied by such forward-looking 
statements. Such forward-looking statements should therefore be construed in 
the light of such factors. Neither UK Mortgages Limited, nor any of its 
associates or directors, officers or advisers, provides any representation, 
assurance or guarantee that the occurrence of the events expressed or implied 
in any forward-looking statements in this announcement will actually occur. You 
are cautioned not to place undue reliance on these forward-looking statements. 
Other than in accordance with its legal or regulatory obligations (including 
under the Disclosure Guidance and Transparency Rules of the FCA), UK Mortgages 
Limited is under no obligation, and expressly disclaims any intention or 
obligation, to update or revise any forward-looking statements, whether as a 
result of new information, future events or otherwise. 
 
MAR 
 
The information contained within this announcement is deemed by UKML to 
constitute inside information as stipulated under the Market Abuse Regulation. 
Upon the publication of this announcement via a Regulatory Information Service, 
this inside information is now considered to be in the public domain. 
 
[1] This is an estimate only and is based on current market conditions and 
information and estimates available to the Company as at the date of this 
document and is not a profit forecast. There can be no assurance that this 
estimate will be met.. This estimate should not be taken as an indication of 
the Company's expected or actual current or future results. The Company's 
actual results, profits and dividends paid will depend upon a number of 
factors, including but not limited to the Company's net income and the 
Company's ongoing costs, expenses and charges. 
 
[2] This is an estimate only and is based on current market conditions and 
information and estimates available to the Company as at the date of this 
document and is not a profit forecast. There can be no assurance that this 
estimate will be met or that the Company will make pay dividends at the level 
estimated or at all. This estimated should not be taken as an indication of the 
Company's expected or actual current or future results. The Company's actual 
results, profits and dividends paid will depend upon a number of factors, 
including but not limited to the Company's net income and the Company's ongoing 
costs, expenses and charges. 
 
[3] This is an estimate only and is based on current market conditions and 
information and estimates available to the Company as at the date of this 
document and is not a profit forecast. There can be no assurance that this 
estimate will be met. This estimate should not be taken as an indication of the 
Company's expected or actual current or future results. The Company's actual 
IRR will depend upon a number of factors, including but not limited to the 
Company's net income and the Company's ongoing costs, expenses and charges. 
 
 
 
END 
 

(END) Dow Jones Newswires

November 16, 2020 02:00 ET (07:00 GMT)