GAM has dismissed an alternative funding proposal made by shareholder Rock Investment.
Rock had suggested the asset manager issue a CHF 25m (£22m) convertible bond to fund itself in the event the Liontrust takeover falls through.
The GAM board said today however that such a transaction would not be a viable replacement for the financing Liontrust is planning to put in place, and is ‘insufficient to maintain GAM as a going concern’.
See also: Liontrust extends GAM offer period for third time as NewGAMe reveals 100-day plan
The board noted the first CHF 10m (£8m) tranche of the Liontrust loan has already been drawn in order to fund losses and UK pension obligations.
The CHF 15m (£12m) remaining would not be enough to cover for an underlying loss before tax of CHF 23.5m (£21m) for the six months to 30 June, combined with ongoing pension obligations of CHF10m (£8m) a year.
There will also be significant restructuring costs to be met, with the board estimating a figure of CHF 50m (£44m), based on the due diligence associated with the Liontrust deal.
See also: GAM rejects investor group’s EGM delay request
When outstanding liabilities on GAM’s balance sheet of CHF 40m are taken into account, the board estimated GAM would need to find CHF 100m (£80m) in new financing if the Liontrust deal collapses.
GAM shareholders have until this Wednesday, 23 August to accept the Liontrust offer, in-line with the wishes of the board and senior fund managers.
Rock Investment and their NewGame partners remain steadfastly against the takeover, insisting shareholders would be better served by implementing a turnaround plan as an independent entity.
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