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London Shipping Limited An asset-backed Enterprise Investment Scheme A company established to own and operate a mid size dry cargo bulk carrier vessel and take advantage of the recovery in the shipping market. The Business Case Enterprise and the Directors believe the shipping market is currently showing signs of recovery. All the major indices – new build prices, second hand prices and charter rates – are all beginning to move back up towards long-term trend. The start of this anticipated long-term revival in values has led to increased investment from traditional shipowners as well as attracting strong interest from several private equity groups. The Financial Times recently reported: “Private Equity’s move into Shipping has been widely welcomed as a signal that the sector is emerging from the crisis”. Handymax Newbuild Prices ($m) 0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2013 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 Trend line Source: Platou The Company London Shipping intends to acquire a Handymax vessel around 10 to 20 years old. These vessels typically have a life of 25 years, leaving an expected remaining useful life of 5 to 15 years. The Company will fund the acquisition through a combination of equity and debt. The level of the debt will depend on the age of the vessel acquired but will not exceed 65% of the vessel’s value. Recent sales suggest a 15 year old vessel, for example, will cost of the order of £8 million, and in this case the level of debt would be around 60%. Owning and operating commercial vessels is one of the few “asset-backed” trades allowable under the EIS. Asset Manager and Track Record London Shipping will subcontract the day-to-day running of the business to British Marine plc, a UK owned and managed ship-owner and operator with a 14 year track record of successfully operating mid-size bulk carriers under the UK flag and Tonnage Tax regime. British Marine was originally set up in 1999 by CEO Alan Bekhor as one of a series of three EIS companies, which between them purchased 7 vessels from 1999 to 2002. At the time of the merger of the three companies in 2007, the accumulated cash and fair value of the vessels showed an IRR of 37% over a 7 year period. The interests of British Marine will be aligned with Investors, as a significant part of its overall remuneration could be derived from a management incentive scheme linked to value returned to investors. Promoted by Enterprise Investment Partners LLP Enterprise Investment Partners LLP are an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (FRN 574048)
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Page 1: An asset-backed Enterprise Investment Scheme - EISA€¦ · An asset-backed Enterprise Investment Scheme ... Chairman, has 26 years’ experience in asset-based financing and investments,

Job No: 16931 Proof Event: 11 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA

Customer: Enterprise Project Title: Shipping Teaser T: 0207 055 6500 F: 020 7055 6600

London Shipping LimitedAn asset-backed Enterprise Investment Scheme

A company established to own and operate a mid size dry cargo bulk carrier vessel and take advantage of the recovery in the shipping market.

The Business Case Enterprise and the Directors believe the shipping market is currently showing signs of recovery. All the major indices – new build prices, second hand prices and charter rates – are all beginning to move back up towards long-term trend. The start of this anticipated long-term revival in values has led to increased investment from traditional shipowners as well as attracting strong interest from several private equity groups.

The Financial Times recently reported: “Private Equity’s move into Shipping has been widely welcomed as a signal that the sector is emerging from the crisis”.

Handymax Newbuild Prices ($m)

0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

2013

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

Trend line

Source: Platou

The CompanyLondon Shipping intends to acquire a Handymax vessel around 10 to 20 years old. These vessels typically have a life of 25 years, leaving an expected remaining useful life of 5 to 15 years. The Company will fund the acquisition through a combination of equity and debt. The level of the debt will depend on the age of the vessel acquired but will not exceed 65% of the vessel’s value. Recent sales suggest a 15 year old vessel, for example, will cost of the order of £8 million, and in this case the level of debt would be around 60%.

Owning and operating commercial vessels is one of the few “asset-backed” trades allowable under the EIS.

Asset Manager and Track RecordLondon Shipping will subcontract the day-to-day running of the business to British Marine plc, a UK owned and managed ship-owner and operator with a 14 year track record of successfully operating mid-size bulk carriers under the UK flag and Tonnage Tax regime. British Marine was originally set up in 1999 by CEO Alan Bekhor as one of a series of three EIS companies, which between them purchased 7 vessels from 1999 to 2002. At the time of the merger of the three companies in 2007, the accumulated cash and fair value of the vessels showed an IRR of 37% over a 7 year period.

The interests of British Marine will be aligned with Investors, as a significant part of its overall remuneration could be derived from a management incentive scheme linked to value returned to investors.

Promoted byEnterprise Investment Partners LLP

Enterprise Investment Partners LLP are an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority

(FRN 574048)

Page 2: An asset-backed Enterprise Investment Scheme - EISA€¦ · An asset-backed Enterprise Investment Scheme ... Chairman, has 26 years’ experience in asset-based financing and investments,

Job No: 16931 Proof Event: 11 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA

Customer: Enterprise Project Title: Shipping Teaser T: 0207 055 6500 F: 020 7055 6600

Target Returns Enterprise and the Directors are targeting the following returns to Investors, free of Income Tax and CGT:

Base Case £1.32 for each net 70p invested, being an expected IRR of 17% p.a.

Medium Case £1.54 for each net 70p invested, being an expected IRR of 22% p.a.

High Case £1.80 for each net 70p invested, being an expected IRR of 26% p.a.

Exit RouteIt is the intention of the Directors to seek an Exit for investors after three and a half years’ trading through a sale, dependent on conditions in the shipping market. The market for mid-size vessels of this sort is currently very liquid, with sales of this type of vessel averaging 12 per month between January and October 2013.

Charter RatesThe daily earnings rate of Handymax vessels for one year time charters has a typical cycle of 7 years, and as the graph below suggests, Enterprise and the Directors believe current rates are below long-term trend and a recovery is now under way back towards the long-term average.

Trends in the Shipping MarketHandymax Charter Rates ($)

0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

July-

13

July-

12

July-

11

July-

10

July-

09

July-

08

July-

07

July-

06

July-

05

Average

Source: Baltic Exchange

The market for second hand vesselsThe market for second hand Handymax vessels is currently active and in the opinion of Enterprise and the Directors is tracking the pick up in charter rates and moving back towards the long-term average.

15 Year Old Handymax Purchase Prices ($m)

0

$10

$20

$30

$40

$50

$60

Average

Jan-

13

Jan-

12

Jan-

11

Jan-

10

Jan-

09

Jan-

08

Jan-

07

Jan-

06

Jan-

05

Source: British Marine plc

DirectorsBraden Harris, Chairman, has 26 years’ experience in asset-based financing and investments, the latter half of which has been focused on the maritime sector. Currently MD of Allocean Maritime Investments, a specialist shipping investment company founded in 2012.

Sunil Malhotra is a qualified Master Mariner with 38 years’ experience in the shipping industry, who has served as Master on board various types of vessels, including dry bulk carriers, container ships and Ro-Ro vessels. COO of British Marine since 2000, with specific responsibility for the technical management of British Marine’s fleet.

Martin Sherwood, non-executive has many years’ experience of small company fund-raising and the tax-efficient investment market. Formerly head of Tax Efficient Solutions at Smith & Williamson, he set up Enterprise in 2010 and has been closely involved with the EIS since its inception, sits on the board of a number of EIS companies and is co-founder and director of the EIS Association.

Initial and Ongoing ChargesInitial Charge of 6% of funds raised, out of which authorised intermediaries may choose to take an initial commission of 3%, or 2% plus annual trail of 0.35% until the earlier of Exit or the expiry of four years.

Investments in single company EIS offers fall outside the jurisdiction of the RDR (Retail Distribution Review).

Ongoing management charge of 1.5% per annum.

Management Incentive30% of the proceeds above the level of £1.25 returned to investors, subject to a “Precipice” after the expiry of four years from the date of the last issue of shares, thus incentivising management to provide a timely Exit for investors by no later than four years.

Minimum and Maximum Subscriptions£3.5m and £5m respectively.

Minimum Individual Investment£10,000.

Closing DateThe earlier of Maximum Subscription of £5 million or 31 March 2014, unless extended.

Assistance

Enquiries and requests for copies of the Offer Document should be referred to Enterprise Investment Partners LLP on 020 7487 8282 or email: [email protected]

Regulatory InformationThis summary has been issued by Enterprise Investment Partners LLP, an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority. This summary is directed at authorised financial advisers and investment professionals only, as defined in paragraph 19 of the Financial Services and Markets Act (Financial Promotion) Order 2005, and should not be distributed to anyone else. It is not an offer to subscribe to London Shipping Limited (“the Company”). Investment in the Company can only be made on the basis of the full Information Memorandum and the risk factors contained therein.

The value of shares may go down as well as up and Investors may not get back the full amount invested. Investors should not consider investing unless they can afford a total loss of their investment. Investments in unquoted shares carry higher risks than investments in quoted shares and involve a degree of risk as well as the opportunity of reward.

Investors should be aware that tax reliefs can change. Their applicability and value will depend upon the individual circumstances of a given Investor, and Investors should seek their own independent professional advice on their particular tax situation and the application of such tax reliefs prior to making any investment. There is no guarantee that EIS status or other tax efficient status can be maintained throughout the life of the investment. Both the company and Investors need to comply with the requirements of the EIS legislation in order to maintain EIS and other tax reliefs and non-compliance may result in the loss or partial claw-back of these tax reliefs and potential interest penalties.

Future projections are based on Enterprise and the Directors’ internal estimates, which are subject to change at any time.


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