Dear
Re: Starwood European Real Estate Finance (SWEF)
We are writing to you because you hold shares in this company within your Transact account. The company has recently announced that they will be holding an Extraordinary General Meeting (EGM) on 27th January 2023.
At this meeting they will be proposing a change to the Investment Policy to cease making any new investments, pursue a realisation strategy in respect of the existing investments and periodically redeem shares in return for cash.
Full details of the announcement can be viewed at the following web address: https://starwoodeuropeanfinance.com/media/1373/circular-dated-28-december-2022.pdf
Shareholders will be asked to vote on the proposals, as your shares are held via Transact we will be able to submit votes on your behalf.
The company has been in discussions with a number of large shareholders in the company who have expressed their desire to realise a significant proportion of their shares in the company. Currently, this would be facilitated by way of a Realisation Offer, which would be triggered based on the existing terms of the company’s discount control mechanisms.
The company has determined that if these realisations were to proceed, they would be of a significant enough scale to mean the company would no longer be of a viable size to provide shareholders with sufficient liquidity and scale.
With this in mind, the company are putting forward alternative proposals which would replace the Realisation Offer with an orderly wind-down of the company in its entirety. Existing assets would be realised over time and periodic payments of cash made to all existing investors in return for a proportion their shares of equivalent value.
Based on the time to maturity for the underlying loans which make up the fund’s existing portfolio, around 40% should be realisable within 1 year, 65% within 2 years, 86% within 3 years and the full portfolio realisable within 4-5 years. These timeframes are subject to change, depending on whether borrowers repay loans early, or request extensions which are subsequently granted by the company.
The company has stated it’s listing on the London Stock Exchange and the ability to trade in the shares will be maintained for as long as is practicable during the realisation process, subject to regulatory considerations.
The costs associated with these proposals are estimated to be around £210,000, which isn’t a significant amount given it represents just 0.05% of the last announced net value of the company’s assets (£411.5m).
The current share price of 89p (as at 9th January 2023) represents a -14% discount to the last announced net asset value per share of 104p. The expectation is that as assets are realised and cash is returned to investors in exchange for shares, the cash received will be based on the net asset
value. This means a potential +14% uplift in value from the current valuation of your holding each time shares are redeemed by the company in exchange for cash.
The company expects to continue paying dividends during the realisation process, but the amount and ability to do so will be reviewed periodically to take account of the reducing level of income as assets are realised.
Having considered the proposals in detail and taking into account the potential repercussions if they were not approved, we are recommending you vote in favour of all proposals being put forward at the upcoming EGM.
We will vote on your behalf in accordance with these recommendations unless you contact us by phone, email, or in writing to confirm otherwise. We are planning to begin submitting votes on Monday 23rd January 2023, so please contact us by 5pm on Friday 20th January 2023 if you wish to abstain from the vote or vote against the proposals.
If you have any questions, or wish to contact us to change your vote as above, please contact John Genovese at our office who has been dealing with this matter. His email address is john.genovese@chestertonhouse.co.uk, alternatively he can be reached by calling the main office telephone number 01509 610472 and asking to be put through to his extension.
Kind regards
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