NZX Regulation Decision
Senior Trust Retirement Village Listed Fund (NS) (“SRF”)
Application for a waiver from NZX Main Board Listing Rule 9.1.1 and Ruling on NZX Main Board Listing Rule 9.2.1
21 December 2017
Background
1. The information on which these decisions are based is set out in Appendix One to these decisions. These decisions will not apply if that information is not or ceases to be full and accurate in all material respects.
2. The Rules to which these decisions relates are set out in Appendix Two.
3. Capitalised terms which have not been defined in these decisions have the meanings given to them in the Rules.
Waiver from Rule 9.1.1
Decision
4. Subject to the conditions set out in paragraph 5 below, and on the basis that the information provided by SRF is complete and accurate in all material respects, NZXR grants SRF a waiver from Rule 9.1.1, to the extent that SRF would be required to obtain unitholder approval to enter into the New Loan.
5. The waiver in paragraph 4 above is provided on the conditions that:
(a) that the Manager certifies to NZXR that:
i. the New Loan has been entered into and negotiated on an arm's length commercial basis; and
ii. in its opinion, entry into the New Loan is fair and reasonable to, and in the best interests of, SRF and its unitholders who are not related to, or Associated Persons of, Portfolio E and the Manager;
(b) the waiver, its conditions, and its implications are disclosed in SRF’s half year and annual reports during the term of the New Loan; and
(c) the waiver, its conditions, and implications are disclosed in any Offer Document from no later than 31 January 2018 and then for the duration of the term of the New Loan.
6. The information on which this decision is based is set out in Appendix One to this decision. This waiver will not apply if that information is not or ceases to be full and accurate in all material respects.
7. The Rules to which this decision relates are set out in Appendix Two to this decision.
8. Capitalised terms which have not been defined in this decision have the meanings given to them in the Rules.
Reasons
9. In coming to the decision to provide the waiver set out in paragraph 1 above, NZXR has considered that:
(a) the policy behind Rule 9.1.1 is to regulate transactions which may change the essential nature of the Issuer’s business or require the immediate expenditure of large amounts of unitholders' funds. NZXR is comfortable that the granting of this waiver does not offend the policy of this Rule;
(b) the New Loan is entirely within the ordinary course of SRF’s business, rather than being a transaction that changes the essential nature of the business. The New Loan amends an existing framework, continuing the commercial relationship between SRF as a co-lender, and Whitby; and
(c) the New Loan, as a co-lending arrangement, is a Related Party transaction. The Manager is prohibited from entering into transactions with a Related Party, unless the transaction is on a normal commercial arm’s length basis. Accordingly, the Manager must be satisfied that the New Loan satisfies this criterion.
Ruling on Rule 9.2.1
Decision
10. For the purpose of Rule 9.2.1, NZXR rules that the New Loan is a transaction under the co-lending arrangements captured by the waiver from Rule 9.2,1 granted to SRF on 27 November 2015, at paragraph 56.
Confidentiality
11. SRF has requested that this application and any decision be kept confidential until an announcement of the New Loan is released to the market.
12. In accordance with Footnote 1 to Rule 1.11.2, NZXR grants SRF’s request.
Appendix One
1. Senior Trust Retirement Village Listed Fund (NS) (SRF) is a Listed Issuer with units Quoted on the NZX Main Board.
2. SRF invests by making secured loans to retirement villages and aged care operators. SRF’s manager, Senior Trust Management Limited (Manager), must make investment decisions on behalf of SRF in accordance with SRF’s statement of investment policies and objectives, as set out in SRF’s Master Trust Deed and Establishment Deed (SRF’s Deeds).
3. SRF currently has co-lending arrangements in place with Portfolio E of the Senior Trust Retirement Village Fund (Portfolio E) (which is also managed by SRF’s Manager). SRF was granted waivers from Rule 9.2 by NZX Regulation (NZXR) in November 2015 to allow for entry into or any transaction under to certain related party transactions including the co-lending arrangements with Portfolio E.
4. One of these co-lending arrangements relates to loans made available to Whitby Village (2009) Limited (Whitby).
5. SRF has entered into negotiations with Whitby to refinance the existing co-lending facility, and intends (subject to Board approval) to provide a new loan facility to Whitby for a limit of up to $15 million (New Loan). The expiry date of the New Loan facility is 28 February 2021.
6. SRF has submitted that the New Loan is an authorised investment under SRF’s Deeds and that the Manager has determined that entry into the New Loan would be on normal commercial arm’s length terms. The Manager has sought and received SRF’s statutory supervisor’s consent for the New Loan.
7. SRF has further submitted that the New Loan facility will replace the existing loan, and provides that Whitby must request drawings by notice to the Manager, however SRF is not obliged to provide a drawing under the New Loan.
8. At this time SRF does not know whether or not the full amount of the facility will be drawn down over the term of the facility. Further as the New Loan will be governed by a security sharing deed between SRF and Portfolio E, it is at the Manager’s discretion where to apportion any draw down request between the co-lenders.
9. SRF has applied for a waiver from NZX Main Board Listing Rule (Rule) 9.1.1 to enter into the New Loan which may amount to a series of related transactions with a value greater than 50% of its Average Market Capitalisation (AMC). As at the date of this waiver, SRF’s AMC is approximately $22.79 million.
Appendix Two
9.1
Rule 9.1.1 Disposal or Acquisition of Assets
Rule 9.1.1 An Issuer shall not (subject to Rule 9.1.3) enter into any transaction or series of linked or related transactions to acquire, sell, lease, exchange, or otherwise dispose of (otherwise than by way of charge) assets of the Issuer or assets to be held by the Issuer:
(a) which would change the essential nature of the business of the Issuer; or
(b) in respect of which the gross value is in excess of 50% of the Average Market Capitalisation of the Issuer;
except with the prior approval of an Ordinary Resolution of the Issuer or a special resolution if that Issuer must obtain approval of the transaction or transactions by a special resolution under section 129 of the Companies Act 1993.
9.2 Transactions with Related Parties
9.2.1 An Issuer shall not enter into a Material Transaction if a Related Party is, or is likely to become:
(a) a direct or indirect party to the Material Transaction, or to at least one of a related series of transactions of which the Material Transaction forms part; or
(b) in the case of a guarantee or other transaction of the nature referred to in paragraph (d) of the definition of Material Transaction, a direct or indirect beneficiary of such guarantee or other transaction,
unless that Material Transaction is approved by an Ordinary Resolution of the Issuer.