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Oil and gas fund launches emergency fund raising to avoid asset fire sale
by Robert St George on Sep 12, 2013 at 09:56
International Oil and Gas Technology , a London-listed fund that invests in the energy services sector, has announced a cut-price equity issue it hopes will save it from having to dump holdings onto the market to finance a court case against its former manager.
The fund first revealed the extent of its problems at the end of August, when it confirmed its cash reserves had fallen by 41% to less than £2 million through the first half of the year.
This ‘deteriorating cash position’ was attributed by the fund to a combination of ‘disappointing sales revenues’ from its portfolio and mounting costs in litigation brought by Quorum, a former co-investment manager suing for almost £10 million after alleging its contract was wrongfully terminated.
International Oil and Gas Technology’s board has dismissed the claims as ‘entirely without merit’, but has spent almost £1 million on the case and has budgeted another £1 million in advance of the trial, set for March 2014.
Together, this has compelled the fund to tap the markets. Christopher Hill, its chairman, has warned that the extra money is required to ‘avoid hurried exits’, which would ‘very significantly reduce’ the value of its assets.
The fund therefore hopes to raise more than £1.5 million in a share issue opened today and expected to close tomorrow. The new shares are being offered at a 56% discount to the fund’s net asset value, and 10% below yesterday’s closing price.
The board reported that it had already secured ‘indicative support’ for the placing from over half of its shareholder base.
Regardless of the outcome of the issue, the fund intends to liquidate its portfolio over a 12 to 24-month timeframe and return the proceeds to shareholders.
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on Dec 06, 2013 at 14:28