GCP Asset Backed Income (GABI ) today formally asked shareholders for their views on its future, but published such a high level of disclosure on the portfolio, analysts believe the board chaired by Alex Ohlsson has effectively hoisted the ‘for sale’ sign over the debt fund struggling with problem loans.

The £370m investment company, which has seven borrowers in arrears or in breach of loan covenants accounting for 11.4% of assets, launched a strategic review at the end of last year after two potential deals fell through.

Today, with the shares continuing to trade at a wide 26% discount to net asset value, depressing its market value to £294m, the company’s board asked for shareholder feedback by 23 February on three options:

• a sale of the company at an acceptable price;
• an orderly wind-down and full return of capital to shareholders;
• continuing as is with fund manager Gravis but with a partial return of capital.

Peel Hunt analyst Markuz Jaffe said while the review was ongoing, the line-by-line detail provided on its 42 asset-backed loans suggested the board was focused on the first option.

That might reflect concern that with 88% of the assets linked to real estate, such as social housing and student accommodation, and 18% under construction, selling the portfolio could be a slow process.

Interested parties visiting the company’s website can find information on the nature of the borrowers and the loans, including principal and interest balances, seniority, maturity, repayment terms, interest rates, inflation protection and discount
valuation rates.

In addition, said Deutsche Numis, ‘it includes a summary of LTVs (albeit cautioning that not all valuations are recent) and equity buffers’.

‘[The] announcement, alongside the relatively granular portfolio information provided on the company’s website, has the dual effect of providing shareholders with additional information to base their feedback and decisions upon, and puts a “for sale” sign up – making it clear to any potentially interested parties the options being considered by GABI’s board,’ said Jaffe.

Ohlsson also announced a £7m share buyback programme in ‘coming weeks’ to hasten the return of capital while the consultation took place, although he said this could be disrupted if the company received an offer approach.

Jaffe said although the share buyback is small it ‘may provide further support for the share price’ which has been ‘gradually improving since mid-January’. The shares have spiked from 64p to over 69p in the past two weeks but have actually risen from a 52.6p low in late October.

The current price is close to the 72p per share approach the company received from a potential US bidder last month, although it was quickly withdrawn. The company also attempted to merge with stable mate GCP Infrastructure (GCP ) but this was blocked by some of its shareholders.

Last week the company said its NAV per share at 31 December was 93.21p, a small decrease over the quarter. 

Longer term, shares in the 9%-yielder have performed poorly. Even with quarterly dividends included, the total return to shareholders over five years has been just 6.4%, although the underlying investment return has been 27%.

According to Refinitiv data, Gravis Capital Management is the joint largest shareholder with Valu-Trac Investment Management at 8.8% each of the company.

‘The board will be seeking to ascertain a future direction for the company which can be supported by a majority of shareholders. The board remains committed to maximising value for shareholders,’ Ohlsson said.