ANALYSTS have suggested the Honeycomb and Pollen Street Secured Lending investment trusts should resurrect merger talks.
The two alternative finance-focused trusts, both managed by Pollen Street Capital, were rumoured to have been considering a merger over the summer.
It comes as Honeycomb called for a vote on continuing its operations to be brought forward from the 2021 annual shareholder meeting so it can secure optimal terms on a debt facility that matures in the next 12 months.
The London-listed fund will instead hold the vote at a general meeting on 16 December.
“The company’s primary leverage facility is due to mature within the next 12 months and the directors believe that, to secure optimal terms on a replacement facility, it is important that the continuation vote is passed by shareholders to give greater certainty as to the company’s longer term investment period,” Honeycomb said.
“If secured, the company will be in a stronger position to negotiate more favourable terms with lenders which the directors believe will provide enhanced returns to shareholders.
“In addition, increased certainty as to the life of the company will further enable it to continue to build effective long-term partnerships with key new and existing counterparties and borrowers.
“It will also allow the company the opportunity to continue to grow and diversify its portfolio whilst continuing to deliver its investment objective of providing shareholders with an attractive level of dividend income and capital growth.”
“Both funds are managed by Pollen Street Capital and we believe that it would make sense for them to come together, however, mergers are typically hard to achieve in the investment companies sectors,” an analyst note from brokerage Numis said.
“In our view, achieving any merger would require stabilising the shareholder base of both funds and therefore require offering an exit to shareholders to clear any overhang and allow shareholders to manage their overall exposure to the strategy.
“The funds have combined assets of £1.1bn, which gives the scope to return capital whilst remaining a viable size. Pollen Street Secured Lending is currently trading at a 13 per cent discount and has the same two largest shareholders, with Invesco holding 24 per cent of share capital and Quilter Investors 16 per cent.”
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