The board of the £289m GCP Asset Backed Income fund has proposed shuttering the trust after the failed merger between it and the GCP Infrastructure trust.
The debt-focused trust’s merger with GCP Infrastructure fell through in September after a “significant minority” of the trust’s shareholders said they did not support it, leading to a strategic review.
Problems that the merger had sought to address, such as liquidity concerns, a high discount and the limited scope for growth of the company, were becoming a significant problem, the trust said at the time.
GCP Asset Backed Income’s share price and net asset value have begun to diverge significantly over the last few years. While its NAV has increased 28.1 per cent since 2019, its share price has fallen more than 10 per cent. As a result, the trust’s discount has widened to -27.7 per cent.
During the review, the trust said it had found that a majority of investors supported either a wind-down or a potential sale.
While a minority supported the trust’s continuation, its board argued that the amount of withdrawals from the trust if it chose to continue “would be substantial,” leaving it too small to provide “sufficient liquidity and scale”.
It added that the wind-down would not result in the trust’s liquidation “immediately” and would seek to implement the capital realisation “in a manner that maximises value to shareholders,” giving it time to sell off its assets.
Shareholders will vote on the decision on 15 May.
With current cash on hand of around £55m, the board said it expected to make an initial capital distribution “of at least this amount as soon as reasonably practicable” after the shareholder vote.
In light of the decision by the board, three of the trust’s non-executive directors also said they would not be seeking reappointment.
Chair of the trust Alex Ohlsson said: “The board thanks shareholders for the constructive feedback provided as part of the shareholder engagement process.
“The extensive feedback has been invaluable in informing the board’s decision-making process and in formulating proposals for an orderly wind-down of the company.”