Talks over a consolidation plan to fold RMI Infrastructure Income (RMII) into GCP Infrastructure Investments (GCP ) have ended with the GCP board claiming it turned out to be a ‘much more complex process’ and the latter instead opting for a managed wind-down of its assets.

GCP, a £1.1bn infrastructure lender, revealed plans for a three-way merger with RMII, a much smaller £81.1m debt fund, and GCP Asset Backed Income (GABI) a £400m stable mate in August.

The deal would have seen RMII’s assets, minus high-risk government back coronavirus loans, transfer to GCP.

However, today GCP and RMII issued statements saying talks have ceased.

GCP said the team had been ‘unable to agree on structure and terms’ that are ‘acceptable for both parties’.

The GCP board is continuing to pursue the combination with GABI and stated terms have been agreed and a circular with details will be published shortly.

RMII shares eased 0.1p to 68.9p in early trading on a discount of about 26% below net asset value (NAV), while GCP dipped half a penny to 74p on a 31% discount.

Analysts at Jeffries said the deal with RMII had ‘made little sense as a straight NAV-to-NAV merger transaction’ because RMII traded on a narrower discount than GCP.

‘As such discussions may have surrounded some form of cash exit alongside this,” the analysts wrote. ‘Looking forward this news now simplifies the GCP/GABI potential merger, but we feel further disclosure is required on the GABI portfolio’ which has several non-performing loans.

For its part RMII said it had ‘assessed a number of proposals’ but ‘differing views were received by shareholders on the merits of a potential combination’.

The result is a unanimous recommendation from the board for a managed wind-down. This will be a ‘orderly realisation’ of assets with capital returned to shareholders as loans are repaid to the company. 

The company will be able to extend loan maturities and provide further funding to borrowers if the board believe it will maximise returns ‘in the timeframe in which the company will otherwise be dealing with the managed wind-down’.

The dividend’s target yield of 6.5% will be maintained until realisation.

A shareholder circular with more details will be published by the end of October . It may include a roll-over option for investors looking to retain exposure to RM’s ESG lending strategy.

The RMII board also said it remains open to further offers.