1 for 3 Entitlement Offer and Shortfall Offer
One Managed Investment Funds Limited as the Responsible Entity (RE) has announced the launch of Gryphon Capital Income Trust (GCI) (Trust) 1 for 3 Entitlement Offer and Shortfall Offer(1) to raise up to approximately $103.6 million(2). GCI listed on the ASX in May 2018 and provides investors with an opportunity to receive monthly income by investing in a portfolio of Australian secured debt including residential mortgage backed securities (RMBS) and asset backed securities (ABS).
Since listing on the ASX, the Trust has met or exceeded all targets and has delivered regular cash income above the Target Return and a stable Net Tangible Asset (NTA) backing. The Trust provides investors with a means of diversifying their income investments to a defensive fixed income asset class which has displayed little correlation to global equity market volatility and other debt securities.
The Trust pay monthly income and targets a net cash return of RBA Cash Rate plus 3.50% per annum.
Gryphon's Investment Team has over 50 years of collective experience in successfully investing in RMBS and ABS. Gryphon has developed a robust investment process, which prior to the establishment of the Trust, had only been accessible to institutional clients.
- Entitlement Offer – A pro-rata non-renounceable 1 for 3 Entitlement Offer to raise up to approximately $103.6 million – Record Date 7th November 2019
- Oversubscription Facility – The Entitlement Offer includes an Oversubscription Facility which will allow eligible unitholders to subscribe for units in excess of their entitlement
- Shortfall Offer – New investors will have the opportunity to apply for units (minimum $1,000 worth of new units) in the Trust which have not been taken up under the Entitlement Offer.
The New Units to be issued under the Offer will rank equally with existing Units on issue at the time of allotment including full entitlement to any distributions declared on or after the allotment date (being 2 December 2019 for the Entitlement Offer and 9 December 2019 for the Shortfall Offer).
- Offer Price per New Unit under the Offer is $2.01 for both the Entitlement Offer and Shortfall Offer
- The Offer Price is based on the NTA per Unit
Who can participate
- Unitholders who are eligible to participate in the Entitlement Offer ("Eligible Unitholders") can subscribe for 1 new unit for every 3 existing units held on the Record Date being 7 November 2019
- Eligible Unitholders can also apply for units in excess of their entitlement under the Oversubscription Facility (details of which are set out in Section 2 of the PDS)
- Investors who are not eligible to participate in the Entitlement Offer and meet conditions outlined in the PDS can apply for New Units under the Shortfall Offer.
- You should note that there is no guarantee that New Units will be allocated under this Offer.
Use of Funds
The Trust is seeking to raise new capital to undertake additional investments consistent with the Investment Strategy. The Offer is not expected to impact the Target Return nor the Trust’s ability to pay monthly distributions to Unitholders during the period it takes to fully invest the additional capital raised.
Advantages of the Raising
- Additional scale to expand the Trust's participation in the RMBS/ABS market, thereby diversifying the Portfolio
- Expand the Trust's investor base, providing greater liquidity to Unitholders.
- Reduce the opportunity costs of the Trust on a cost per Unit basis.
Key features of the Offer
- Issue price of $2.01 per unit (NTA)
- Monthly target cash distributions of RBA cash rate + 3.50% i.e. approximately 4.25% p.a.(3) (net of fees and expenses)
- Capital preservation along with monthly cash income
- Income supported by a professionally managed diversified portfolio of RMBS and ABS
- Deep experience and expertise that until GCI listed on ASX has only been available to institutional investors
- Portfolio diversification, offering stable yields, secured debt exposure and complementary to other fixed interest investments
- The protections within the RMBS process mean that there have been no losses on any rated bonds(4)
- Expected low capital volatility(5)
- ASX listed liquidity
Issuer: Gryphon Capital (Gryphon)
Transaction: Entitlement Offer and Shortfall Offer
Morgans Role: Joint Arranger and Joint Lead Manager
Offer Size: $103.6 million
Offer Opens: 12 November 2019
Morgans Offer Closes: 21 November 2019
1. Morgans will receive fees for its role.
2. The Offer size may be more or less than approximately $103.6 million.
3. The target distribution rate is set at the RBA cash rate (currently 0.75%) + 3.50% and will move in line with interest rate levels.
4. Source: Standard & Poors: An Overview of Australia's Housing Market and Residential Mortgage-Backed Securities, 21 November 2018. Historical loss performance is not indicitave of future loss performance.
5. The NTA will reflect the value of the bond portfolio assets and move accordingly.
Investors should review the PDS to understand the features and risks of the Gryphon Capital Income Trust. Application for Gryphon Capital Income Trust can only be made by completing the application form attached to the PDS. If you have any questions about the offer, please contact your Morgans adviser, call 134 226 or find your nearest office here.
Gryphon Capital Income Trust units are being offered only in Australia and New Zealand and the PDS will only constitute an offer to a person receiving it in Australia and New Zealand. Not for distribution, directly or indirectly, in the United States or to, or for the account or benefit of, US Persons, except in accordance with an available exemption from the registration requirements of the US Securities Act. The distribution of the PDS (including an electronic copy) in jurisdictions outside Australia may be restricted by law.
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