Guernsey service providers Carey Olsen and Heritage International Fund Managers Limited (HIFM) have acted for Better Capital Limited on its innovative conversion into a Protected Cell Company (PCC).
Better Capital is an existing Guernsey closed-ended fund listed on the London Stock Exchange (LSE). The conversion to a PCC sees the interests of the existing listed fund forming the 2009 cell and the launch of its second cell, the 2012 cell.
The 2012 cell has raised £169.9m of new money to invest in Better Capital's second fund, Better Capital Fund II (Fund II). The new money was raised under a placing and an open offer to existing shareholders. Like the 2009 cell, the 2012 cell will invest principally in UK and Irish turnaround opportunities.
This is the first example of a closed-ended PCC with more than one cell having a full LSE listing. This is the first example of a closed-ended PCC with more than one cell having a full LSE listing. The innovative use of a PCC structure provides operational efficiencies and is also designed to separate the new portfolio of assets to be acquired by Fund II from the existing portfolio, thus providing enhanced shareholder benefits. This is achieved by two cells, the 2009 cell comprising the interests in the existing portfolio and the 2012 cell which will invest the funds raised for Fund II.
The use of a PCC in this way is also pioneering for private equity structuring as it provides the company with the scope to continue to raise further funds in distinct cells, as well as providing the legal segregation of assets and their allocation to each shareholder vintage through a clear separation of listed share classes.
From an operational stance, the unique aspects of the PCC structure reduce running expenses and enable strong corporate governance, as a single board of directors has oversight over the distinct fund vintages.
The Directors of the newly converted PCC believe that significant opportunities will arise for turnaround investment funds due to current economic conditions, as companies continue to suffer from a lack of capital, support from banks and operational expertise.
Carey Olsen advised Better Capital on matters of Guernsey law and HIFM acts as the fund administrator for the structure. The firms worked closely with DLA Piper UK LLP (the English legal advisers) and Numis Securities.
The team from Carey Olsen included corporate partner Tom Carey, senior associate Tony Lane and associate Alex Mauger.
Advocate Carey said: "The use of the PCC structure to create separate listed portfolios enables new money to be raised without diluting the existing portfolio and without complicating shareholder distribution rights at the end of the life of the original portfolio. Successive portfolios can be created, each being at a different stage in their lifespan and each benefitting from the experience of a single Board.
It is always exciting for our team to advise clients on new types of fund structures that achieve the best product for their organisation and investors. We wish Better Capital every success with the new fund."
The HIFM team is led by Mark Huntley, Managing Director, and supported by a specialist team of qualified accountants, company secretaries and administrators whose combined expertise helped deliver the operational framework for the structure.
The directors of HIFM have worked with Better Capital since the establishment of Fund I and with its chairman, Jon Moulton, for many years prior to this relationship.
Mr Huntley commented: "Better Capital and all their advisors have delivered an excellent result with the restructure, raising a considerable amount in the context of global market conditions and in comparison to funds raised through public offerings on the LSE main market in 2011. The team rose to the challenges faced by the new structure and HIFM was delighted to be involved in a structure where value could be added from our many years of experience administering PCC and ICC structures. We now look forward to working with Better Capital on the exciting opportunities which are in the pipeline for Fund II. It is encouraging for Guernsey that, as a jurisdiction, we continue to be at the forefront of industry innovation."
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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