GCP Infrastructure Investments Ltd and GCP Asset Backed Income Fund Ltd on Friday announced that they aim to merge with RM Infrastructure Income PLC.

GCP Infrastructure is a Jersey-based investment fund, which specialises in UK infrastructure. GCP Asset Backed Income, also known as GABI, is a London-based UK asset backed loan investor. RM Infrastructure is an investor in loans to infrastructure assets.

The companies said the proposed merger of the GCP companies would be via a contractual reconstruction scheme resulting in the solvent winding-up of GCP Asset Backed Income and the transfer of its assets to GCP Infra. The number of GCP Infra shares issued to GCP Asset Backed shareholders will be determined on a formula asset value for formula asset value basis.

GCP Asset Backed Chair Alex Ohlsson said: ‘The board is pleased to announce the agreement of the heads of terms with GCP Infra. Recognising the challenges currently facing the UK credit and alternative asset sector, the board considers that GABI shareholders will be well served as part of a larger, FTSE 250 company that offers a considerable liquidity commitment, reduced leverage in the short to medium-term, and a sizeable and diverse portfolio of infrastructure and real asset debt investments.’

GCP Infrastructure expects that the plans ‘will bring benefits to both the existing and any new shareholders in the company.’ It added that following the completion, there will ba an increased return of capital to shareholders with GCP Infrastructure reducing its leverage.

GCP Infrastructure said that under the plan to merge with GCP Asset, it will commit to spend £200 million to the enlarged portfolio. £100 million will be used to reduce GCP Infrastructure’s leverage to a target drawn balance of £50 million. £100 million will be distributed to shareholders via share buybacks, special dividends or other ways.

The planned combination requires approval from regulators and shareholders of the companies.

If the scheme to merge with GCP Asset is approved, GCP Infra intends to draw on GCP Asset’s revolving credit arrangements to fund the repayment in full of the outstanding balance under the revolving credit facility, which currently has £40 million outstanding.

The GCP companies expect to merge before the end of 2023.

Across GCP Infra and GCP Asset, about £140 million of loan repayments are expected to be received in the first half of 2024.

Separately, the companies are in discussion with RM Infrastructure for a potential merger of the enlarged GCP Infra with RM Infrastructure. This would be effected via transferring a material proportion of RMI Infrastructure shares to GCP Infrastructure in exchange for the issue of new GCP Infrastructure shares.

RM Infrastructure said it is also considering one other unnamed proposal it has received last month. It said it is assessing both proposals and will update its shareholders as appropriate.

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