M&G Credit Income bucks trend with £30m fundraise target

MGCI has responded to investor demand for private credit, with plans to issue shares at a premium to net asset value.

M&G Credit Income (MGCI) is undertaking a placing and retail offer for up to 31m shares, potentially raising more than £29m. 

The board made the decision in response to high and sustained demand, with the trust having issued or sold from treasury 12.7m shares in the last 12 months.

The directors gained approval for the fresh issuance at a general meeting last month, with the fundraising plans confirmed this week. 

The new shares will be issued at a 1% premium to net asset value (NAV), matching the average premium the ordinary shares have traded at since the 2024 annual general meeting last May. Issued shares will not be subject to stamp duty. 

If the maximum amount of shares were issued, when the end of January NAV if factored in, the placing could raise more than £29m, according to Citywire calculations. The latest end of February NAV is yet to be published. 

It comes at a time when only a handful of trusts have been able to issue new equity. New activist trust Achilles (AIC) also bucked the trend, managing to raise £54m last month.

The £146m M&G trust, which aims to generate a regular and attractive level of income with low volatility by investing in a diversified portfolio of largely investment grade debt instruments, has benefitted from a recent surge in investor demand for private credit. 

When plans for the raise were first announced last month, Killik investment companies specialist Mick Gilligan said: ‘Demand from credit investors is strong. Sterling investment grade credit markets are rich, with the additional income investors receive for lending to sterling investment grade corporates over gilts (the credit spread) is less than 1%. 

‘This compares to a 25-year low of 0.62% (Feb 2005) and an average of 1.6%. Despite tight spreads, yields of 5% plus...are helping to maintain the strong demand.’

He added that MGCI’s ability to invest in private credit is helping it to improve on this yield, whilst maintaining good credit quality. The latest yield to maturity on the MGCI portfolio is 8.1%.

The retail offer will be made available via the Winterflood Retail Access Platform (WRAP). Fundraising opened yesterday and will close on 20 March.