Schroders takes over Woodford trust and extends loan facility

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Schroders takes over Woodford trust and extends loan facility

Schroders has taken its first step to reducing the gearing in the Schroder UK Public Private Trust (SUPP), having been installed as new manager of the trust formerly known as Woodford Patient Capital (WPCT).

WPCT's name officially changed on Friday, with Schroders taking over the mandate, as confirmed in October.

On the same day, the trust confirmed it had agreed to amend its existing credit facility. This will see the term of the loan extended for 12 months, until 15 January 2021, and the commitment reduced to £112.9m, or 22.5% of net assets.

The investment strategy we will utilise for the mandate, with its focus on investment in both public markets and private assets, reflects one of our key strategic growth areas across our business."

The trust said this was "in-line with the amount currently drawn under the facility and consistent with the company's intention to reduce borrowings". The facility had previously been for up to £50m, with £116m drawn in June 2019.

In addition, it added, the borrowing base, which limits borrowings to an amount based on the value of both the quoted and unquoted holdings, has been removed, providing the Company with greater flexibility while it seeks to reduce gearing.

It added it the board would work with Schroders to reduce the level of borrowings, though cautioned it would take time to achieve this.

On the change of investment manager, chair Susan Searle said there had been "a smooth handover", adding the board was "confident that the portfolio manager's expertise in both public and private assets, alongside its deep sector experience, will enable the portfolio to deliver sustainable value and positive long-term shareholder returns".

Searle continued: "I have been highly impressed with the Schroders team and their approach, having worked closely with them during the transition."

Schroders, which the trust said "employs a collaborative, team-based approach", said it was "delighted to have been given the opportunity to manage this portfolio".

"The investment strategy we will utilise for the mandate, with its focus on investment in both public markets and private assets, reflects one of our key strategic growth areas across our business," it added.

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Broker Numis Securities said it was "good to see that the Schroders appointment has been completed in-line with the expected timeline."

"We would hope that this will lead to more information being available on the new manager's plans for the portfolio, and how it is expected to evolve over time," it added.

"However, given the illiquid, early-stage nature of the portfolio we expect that it may be some time before Schroders can fully put their stamp on the portfolio.

"Increased flexibility and the extension of debt facility is welcomed, although the level of gearing remains high, reflecting the significant declines in the NAV during the year, the difficulty of realising assets and ongoing funding commitments for existing investments.

"The investment policy limited gearing to 20% of net assets, at the time of borrowing, and it is currently 22.5% of net assets. In June 2019, the board set out its aim to reduce gearing to below 10% in six months and generally ungeared within 12 months, meaning it is unlikely to meet these targets."

This article was first published by Investment Week, a sister title to International Investment