IMF Bentham substantially de-risks balance sheet and upsizes fund in progressive capital play

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SYDNEY, 5 February 2018Sale of the majority of its US investment portfolio to its US Fund enables company to retain substantial upside exposure to the cases while substantially de-risking its balance sheet.

IMF announces today that it has just completed another progressive move in its funding and investment management strategy by selling the majority of its US investment portfolio to its US Fund.

This innovative capital markets strategy reduces the risk in its US portfolio and converts intangible assets to cash, enabling the cash to be deployed elsewhere.

For our investors this means we have substantially de-risked our balance sheet, monetised an asset (releasing approximately US$47.8million in net cash), mitigated costs for future investments, all while retaining substantial up-side exposure to the cases sold through our participation in our US Fund. Simultaneously, IMF and Fortress1 have agreed to upsize the US Fund from US$133million to US$166.3 million.” said, Andrew Saker, IMF’s Managing Director and Chief Executive Officer.

Sale of US Investment Portfolio

IMF’s wholly owned subsidiary, Bentham Capital LLC (Bentham), has transferred its rights in the majority of its investments in its US investment portfolio to Bentham IMF Fund 1 LLC (Fund 12) for book value plus associated investment expenses less proceeds received. IMF will receive US$57.4 million, of which IMF will have contributed US$9.6 million as its contribution to Fund 1. In addition, IMF will be entitled to 85% of the profits on these investments realised by Fund 1 after paying preferred dividends and other expenses of the fund.

Bentham will retain ownership of five investments in the US portfolio, some of which are due to complete in the near-term. The retained investments total US$6.3 million in aggregated capital. No further deployments of capital are expected for these investments.

Upsizing of Fund 1

Fund 1 was structured in February 2017 with an initial US$133 million and the option to increase aggregate capital commitments up to US$200 million.

Following completion of this new Transaction, the aggregated committed and deployed capital by Fund 1 will be US$117million and US$95 million, respectively.  As part of the Transaction, Fund 1 will be upsized to US$166.3 million (with the ability to upsize further in future). The upsized Fund 1 provides additional capital for US investments without creating significant adverse deployment pressure. The additional capital of US$33.3 million will be funded 25% by IMF and 75% by Fortress.

Rationale for Transaction
This Transaction means IMF:

  • releases substantial capital while retaining upside returns associated with the Sale
  • recovers the full book value of its investments from Fund 1 (There is limited adverse cost exposure risk in the US so IMF’s primary risk was the loss of its investment. This Transaction mitigates that risk)
  • substantially de-risks its existing US portfolio
  • retains material exposure to profits realised on the Sale Investments
  • may receive earlier repayment of capital and payment of its profit share (as Fund 1’s investment realisation profile is likely to be brought forward as a result of the Transaction enabling Fund 1 to repay capital to Fortress sooner, with a flow-on effect to IMF)
  • reduces its exposure to funding the remaining costs of the Sale Investments (as the costs are shared with Fortress in Fund 1)


 

  1. Fortress Credit Advisors LLC - see IMF ASX Announcement 13.2.2017
  2. See IMF ASX Announcement 13.2.2017