Digital 9 Infrastructure (DGI9 ) is considering bringing in external investors and borrowing cash to fill the funding gap for its pipeline of investments, with a share issue ruled out by its current wide discount caused by the shock departure of its fund managers in November.   

The investment trust run by Triple Point Asset Management has a £264m pipeline of opportunities that goes beyond the amount of cash it can borrow and has in reserves.

In a trading update yesterday, the managers stressed all was well at the £771m portfolio, with revenue across its eight investments for the 12 months to 30 September totalling £418m and pre-tax profits of £221m 10% ahead of expectations.

As at 31 December, the company’s total borrowing was 42.4% of gross assets, including its revolving credit facility (RCF) and £163m vendor loan note used to acquire UK telecommunications group Arqiva in July.

The trust has two covenants, or limits, on its RCF borrowing: one at the ‘Holdco’ with a limit of 35%, of which 26.9% was drawn for the acquisition of an equity stake in Arqiva; the other a ‘global LTV’ covenant of 65%, of which 50% was drawn for the stake in Arqiva.

Management recently reduced the interest rate on its debt by 0.25% to 3.5%. This is expected to reduce further to 3.25% should the LTV fall below 20%. It is currently 26.9%.

The acquisitions of Arqiva and then Verne Global Finland in October increased the cashflow dividend cover from 0.53 times in September to 1.9 times the target 6p per share dividend at present.

‘The business performance and our latest forecasts demonstrate the strength of our portfolio’s revenues and profitability,’ said Phil Jordan, DGI9’s chair.

Winterflood’s investment research head Emma Bird said the update was a ‘step in the right direction in building investor confidence’, but emphasised that ‘there is a bit of journey to reassure investors’ before the trust can raise further equity.

The shares derated in November following the surprise exit of Thor Johnsen, the head of digital infrastructure at Triple Point, and investment director Andre Karihaloo, which rattled investors. The search for replacements is going well, the company said.

In the meantime, Ben Beaton heads the digital infrastructure team and Arnaud Jaguin remains as investment director.

The shares currently trade at a 14.5% discount to June’s net asset value and offer a 6.7% yield, although the dividends have been uncovered by earnings so far.

Numis analyst Priyesh Parmar noted the importance of the progress on cash dividend cover for income investors and the complexities of the trust’s capital structure.

Stifel analyst Sachin Saggar maintained a neutral rating with a target price of 89p, just above the current level of 88p: ‘While the assets have performed well, we would like to see an announcement on the PM and a path to manage debt levels.’