360 Capital Group is pursuing control of the Australian Enhanced Income Fund which is managed by Elstree Investment Management.
Elstree noted this morning that 360 Capital had requested a copy of the unit registry which is permissible under the Corporations Law. Elstree noted that 360 Capital provided 2 unsolicited proposals on 1 July 2020 and 7 July 2020. The proposals sought to change the responsible entity and were described as “Strictly Private and Confidential”, but neither contained any provisions for unitholders to exit their holding should the management rights be transferred.
In their ASX release of 16 July, 360 Capital stated that the offers “….provided a liquidity facility to those unitholders who wish to exit AYF”. As mentioned above, a liquidity exit was not contemplated in the proposals. The Board of the Responsible Entity has rejected these offers.
The Elstree Board advised that over the next 6 months, the Board would investigate various options including closing the Fund, Selling the the Fund to another manager which would likely yield $0.15 per unit in excess of the NAV or the sale of an empty trust.
Elstree outlined an offer to investors to redeem their units in the fund at NAV less transaction costs of 0.2% (the “Sell Spread”). The Responsible Entity (RE) has the absolute right to accept or reject the request. The RE will accept all redemption requests for units held by unit holders for 3, or more than 3, consecutive years.
360 Capital has jumped on this decision as an example of Elstree favouring some unitholders over others and noted that they were seeking legal advice to the validity of the responsible entity’s decision.
360 Capital is the largest unitholder in the Fund aligning itself with unitholders owning approximately 18.7% of the Fund. 360 Capital previous offer to buy the responsible entity’s management rights to the Fund was rejected by the responsible entity so now 360 Capital will now offer $0.12 per unit to All Unitholders (other than those who take Up Elstree redemption offer) as a special payment upon 360 Capital FM Limited being appointed as responsible entity (subject to certain conditions which will be set out in the notice of meeting).
360 Capital will send a notice of meeting to all unitholders shortly setting out a resolution for the change of responsible entity from Elstree Investment Management Limited to 360 Capital FM Limited. 360 Capital will also outline how 360 Capital proposes to execute and enhance the Fund’s investment strategy.
Related Articles
