Neil Woodford’s former investment trust, which is now the Schroder UK Public Private Trust, has revealed a last minute extension on £107.3m worth of debt that was due to expire tomorrow.
Debt has been a sticky subject for the trust since Northern Trust introduced tighter lending requirements in the aftermath of the Woodford Equity Income fund suspension in June 2019, including that Woodford (pictured) had to seek permission before making any investment.
But in an update to markets issued on Thursday, Schroder UK Public Private announced it had extended the credit facility for a 24 month term to 30 January 2023. If the extension had not been granted, a fire sale of portfolio assets would have been triggered.
Once debt reaches £60m it will convert to a revolving facility. That goal appears to be within imminent reach thanks to the announcement this week that portfolio holding Kymab is being acquired by French pharmaceutical business Sanofi. The deal would deliver an initial cash flow of £65m for the investment trust.
Interest on the updated credit facility will be the Bank of England rate +2%.
Stifel analyst Iain Scouller expected scope for some re-rating on the investment trust, which is now trading at a discount of 27.4% compared to a 12-month average of 45.4%, according to Hargreaves Lansdown data. “We think concerns over leverage and debt facility renewal has been one of the factors behind the relatively wide discount the shares have traded on,” Scouller said in an analyst note.
Shares in Schroder UK Public Private were up 3% on Thursday morning at 34p and are now 20% up from where they closed last week at 28p.
Scouller said a successful outcome on the credit facility had been “crucial” for the trust’s future and that he was pleased Northern Trust had granted a two-year facility rather than one year as it had done in the past. “This gives the manager some breathing space to realise investments and deleverage the trust.”
He thought the investment trust’s discount could reduce to around 20% in line with other private equity funds.
Gearing on the trust is currently 26%, according to Association of Investment Companies data. The two other investment trusts in the AIC Growth Capital sector, Jupiter’s Chrysalis and Baillie Gifford’s Schiehallion, have no gearing and trade at respectable premiums of 17.1% and 9.5% respectively.
See also: Ex-Woodford trust rallies 9% after holding quadruples but trapped fund investors miss out
