Pollen Street Secured Lending, a £600m investment trust, has sacked the private equity manager overseeing its money and is now the subject of a takeover bid backed by Invesco’s co-head of UK equities, Mark Barnett.
In a statement on 25 February, the Pollen Street trust’s board accused the manager, Pollen Street Capital (PSC), of “serious, repeated and ongoing breaches” of its contract. It said PSC had refused to give full details of where its money is invested and had published information about the dividends to be paid to trust shareholders without the board’s knowledge or approval.
Simon King, chair of the trust board, said in the statement: “While portfolio performance has been satisfactory, it is not acceptable to withhold company information from the board, publish very material information about the company without board approval and fail to confirm compliance with clear and important instructions from the company, its client.”
PSC, which manages £2.6bn in a range of private equity and credit strategies, published an immediate response, saying it was “deeply disappointed” at the sacking and that it “does not reflect the substantial improvement in the performance of the company since we took over as manager”.
The PSSL trust made 5.2% on its money during 2019, according to its most recently published figures, around the same level as the year before. The trust made 3% during 2017, the year MW Eaglewood, its former manager, merged with Pollen Street Capital and the board decided to continue with the combined firm. It returned 4.1% the year before.
The trust’s share price, however, has been more volatile. Last year it gained 3.5%, but retreated by 1.6% during 2018. The trust’s shares rose 2% in 2017, but slumped by 20.1% the year before.
PSC said it had not handed over information on holdings to the PSSL board because the request for it had come in light of the takeover bid for the trust from Waterfall Asset Management, a rival, and was “highly unusual” in its extent.
PSC said: “We therefore expressed our concern to the board about whether sharing such extensive information is in the best interests of shareholders” and warned that it might amount to a breach of confidentiality. It added: “Should the offer ultimately be unsuccessful, the offeror would be in possession of highly confidential information…[and] have significant potential to undermine shareholder value.”
PSSL was once known as P2P Global Investments and invested in online lending platforms. It later broadened its scope to include debt from small businesses, consumers and property companies under PSC, which took over in 2017.
Also on 25 February, the trust announced the details of the potential offer from Waterfall, another US manager that specialises in structured credit. Waterfall has offered 900p per share for the trust, valuing it at £652m.
The trust’s board said the “possible offer is at a value the board of PSSL would be minded to recommend”. The offer represents an 8.7% premium to the trust’s current market capitalisation — the market’s estimate of what its assets are worth — but a 4.8% discount to the trust’s own latest valuation of its assets, at £684.7m.
The trust also said the possible Waterfall bid has the backing of Barnett, manager of Invesco’s Income funds, who is the largest shareholder in the Pollen Street trust, with 24.6% of its shares.
Barnett, who has been forced to defend the management of his portfolios after the collapse of Neil Woodford’s investment empire — his former mentor — had come under pressure over his holdings in Pollen Street Secured Lending because they might prove harder to sell than larger, more frequently traded shares. Similar liquidity issues were one of the factors that sank Woodford.
Barnett reduced his holding in Pollen Street Secured Lending in November.
Invesco was contacted for comment.
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