In a stock exchange notice on Thursday (28 September), chair Phil Jordan said the high interest rate environment and the "critical importance" of prioritising liquidity and sustainable balance sheet management had compelled the board to make this decision.
DGI9 has been grappling with funding problems in recent months, with growing concern among shareholders over the trust's overstretched balance sheet in light of a pipeline of considerable capital expenditure in coming years and the rising cost of debt.
The board said the higher interest rate environment had continued to impact the trust's liquidity and sustainable balance sheet management, despite the "strong" operating performance of its underlying businesses.
"The investment manager believes a more conservative approach to capital allocation is required in order to enhance the company's medium-term liquidity and further accelerate the deleveraging of its balance sheet in the current high interest rate environment," it said.
At the end of June, DGI9 had £47m of unrestricted cash available and £18.8m remaining undrawn from its £375m revolving credit facility (RCF), excluding the accordion tranche of up to £125m. At 27 September, it had £30m of unrestricted cash available, with £11.3m remaining on the RCF.
The board and Triple Point, the investment manager, expected operating cash flow dividend cover to be "substantially achieved" by 31 December 2024. However, the trust's dividend policy may not be supported in the medium-term, the board noted.
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Actual cash available for shareholder distribution will be reduced due to rising interest costs on its RCF and the reinvestment into its capex pipeline, alongside its share of the Arqiva Group accretion payment on its inflation-linked swaps, due in 2027.
In light of the above, the board will begin a formal consultation with its shareholders, starting on 2 October, which will engage on the dividend policy and the future direction of the company.
In a stock exchange notice in early June, the trust announced it had initiated a "competitive" process to syndicate a minority stake in the Verne Global group of companies, which it acquired in September 2021, to strategic capital partners.
Analysts and shareholders have said syndicating equity stakes in portfolio companies at a fair price would be good news for shareholders, as it would provide certainty about the NAV and provide enough liquidity to rectify its funding problems.
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In Thursday's statement, DGI9 said it had "significantly progressed" the syndication, while noting the forecast capex for Verne Global would increase from £493m to £610m.
The board said it had received several non-binding offers "at or around" the USD net asset value of Verne Global as at 31 December 2022, with cash proceeds from the syndication set to be used to pay down a significant portion of the group's RCF and cancel part of it.
DGI9 is currently trading at a 50% discount, according to data from the Association of Investment Companies, as its company specific woes coincide with investors switching capital into bonds and even cash deposits at the expense of alternative assets in a high inflation and interest rates environment.