GCP to raise new money for boring high yielding fund

Transcription

1 GCP t raise new mney fr bring high yielding fund Dice McCairn May 15, 2016 Debt GCP Prject Finance is hping t duble in size t invest in prviding prject finance lans secured against physical assets r secure cntracts with lengthy duratins, and delivering a dividend t sharehlders f arund 6%. GCP r Gravis Capital Partners, was funded by a Crprate finance team frm prperty cmpany DTZ, wh specialised in arranging lans fr large prperty develpments. Since establishing GCP in 2008, the team have launched tw successful investment trusts prir t GCP Prject Finance (LON:PROJ); thse being GCP Student Living, and the circa 700 millin GCP Infrastructure fund. The latest launch GCP Prject Finance r Prj, launched in Octber last year raising 100 millin frm investrs, mst f which has already been deplyed, faster than expected, and leading t the first year dividend being increased frm 4% t 5%, and the payment date being brught frward frm August t May. The Bard is seeking t raise between millin f new mney in an ffer which is due t clse n May 23 rd. The trust can brrw r gear up t 25% but this is presently zer. GCP utilises gearing in their infrastructure investment trust, but nly fr shrt term cash flw requirements and the Bard has n plans t make use f gearing with Prj. Encuragingly there is n perfrmance fee, just a management fee f 0.90% per annum.

2 Prj prvides the debt element f prjects such as care hmes, where it prvides the finance t build r acquire the hme. The debt is secured against the building s that in the event that the peratr was t g under, Prj wuld inherit the building and seek t appint a new peratr r dispse f the building. This desn t mean it is cmpletely insulated frm financial difficulties, but prviding they ve chses their assets carefully, they shuld get a substantial prtin f their investment back, r might even lse nthing at all. What is prject finance? Prject finance investments are investments in prjects that have cntracted, predictable medium t lng term incme (cash flws and/r physical assets). Investments are typically made in a single purpse, ring fenced cmpany that wns the cntract r the asset. In the diagram belw, the Prject Cmpany at the centre f the diagram wns the physical asset, such as, fr example, a care hme; n the diagram the care hme wuld be the Prject asset. Prj wuld be the lender, with care hme peratr being the Prject spnsr thugh they may als be the service prvider t, r that culd be a third party. The Prject cmpany at the centre f it all des nthing ther than wn the asset. It wuld als wn any cntract the asset benefitted frm, such as a lcal authrity cntract t prvide beds in the care hme. If the care hme peratr went bust, Prj wuld be entitled t appint anther in their place, r sell the hme n t anther entity.

3 It s all abut incme Prj s appeal is undubtedly t incme investrs, seeking a reasnably safe yield, thugh, it has t be recgnised that that is dependent n the Prj management chsing their assets carefully. It is difficult fr rdinary investrs t evaluate the quality f these cntracts. Prj s stated bjective is: t generate attractive risk-adjusted returns primarily thrugh regular, grwing distributins and mdest capital appreciatin ver the lng term. Mst f the returns sharehlders make will cme frm the dividend rather than increases in the NAV (net asset value) and share price. The partners in GCP have invested 5 millin f their wn mney when it IPO d last Octber, which may prvide sme cmfrt. The type f lans Prj prvides are called Senir Secure Debt. The advantage f this type f debt is in the event f anything ging wrng, they are first in line t be paid. In fact, Prj negtiates either the physical asset such as a building r bilers (they prvide finance fr a dmestic biler cmpany), and r lengthy cntracts be ffered as security, increasing the likelihd they will get sme r all f their mney back. Prj is aiming t pay a 6% yield n the mney raised by year tw. As stated already, fr this year, with the existing pl f mney, a 5% yield will be achieved. The new share sale is being dne by way f a C-share issue. This is an additinal pl f mney, managed alngside but separate frm the existing fund. The reasn fr this is until it is invested it will nt be earning mney, and it wuld disadvantage existing sharehlders whist getting up t speed. Once 90% f the new pt f mney is invested, r in six mnths time, whichever is first, bth pls f mney will be merged tgether. Dividends will be paid quarterly. Assets: Prj targets deals valued at 5-20 millin. Expsure is limited t the perfrmance f the prject cmpany Prject finance lending has key structural benefits, cmpared with crprate lending, including; Tight cntrl f prject cash flws and assets Highly transparent Pre-defined risks, with the ability t place the risk with the party best able t manage it Single purpse r limited scpe cmpanies

4 GCP Prject Finance Current Prtfli Hw t invest T participate in this ffer yu need t cntact yur stckbrker r savings platfrm. Platfrms participating include; The Share Centre, Tilney Bestinvest and Hargreaves Lansdwn. Mre infrmatin can be fund n the GCP Prj website here. Applicatins must be in by Mnday 23 rd May.

5 WhichInvestmentTrust.cm view GCP Prject Finance Prtfli Pipeline We expect this issue t be ppular with investrs seeking a high yield which is reasnably secure. One f the biggest risks fr investrs is the difficulty in being able t truly value and understand the lans being made. Anther risk t cnsider is inflatin. Althugh it is very lw right nw, sme f the lans Prj undertakes are lengthy and almst all are fixed rate with n link t inflatin. With an attractive yield we expect Prj t trade n a premium t NAV, and with existing sharehlders having first refusal, it may well be ver subscribed. Dmestic custmer enters int a 10 year cntract with the brrwer under which: Custmer pays mnthly fee by direct debit Brrwer installs a biler integrated int the existing heating and ht water system Brrwer prvides service and maintenance (with warranty frm manufacturer) Debt is secured against receivables under the cntracts and the bilers themselves Default rate less than 1.3% ver the past 3 years and falling Cver rati allws fr an 18% annual default rate befre debt repayments are hit New bilers being installed every mnth increasing lan prtectin