Business Wire

EJF Sends Letter to Eurocastle Investment Requesting Change in Strategy and New Board Members

Share

EJF Debt Opportunities Master Fund, L.P., the beneficial owner of 26.2% of shares of Eurocastle Investment Limited (AMS:ECT) (“Eurocastle” or the “Company”), has today sent a letter to Eurocastle’s Board of Directors. This letter calls for a change in the Company’s strategic direction, raising concerns around the following five issues:

  • The Company’s position in doBank represents almost half its overall NAV
  • The Company continues to trade at a discount to NAV
  • The Board’s decision to hold approximately 27% of NAV in uninvested cash is excessive
  • The Company’s management fees related to its position in doBank, which is independently managed, are also excessive
  • The need for additional independent Board members

The full text of the letter is below:

24 May 2018

Eurocastle Investment Limited
Regency Court
Glategny Esplanade
St Peter Port
Guernsey, GY1 1WW
Channel Islands

Eurocastle Investment Limited Board of Directors:
Mr. Randal A. Nardsone
Mr. Jason Sherwill
Mr. Peter M. Smith
Dr. Simon J. Thornton
Ms. Claire Whittet

CC: Francesco Colasanti
Randal A. Nardone
Investor Relations

Dear Members of the Board of Directors of Eurocastle Investment Limited:

EJF Debt Opportunities Master Fund, L.P. (“EJF”) is the beneficial owner of 13,798,647 shares of Eurocastle Investment Limited (the “Company”), which represents approximately 26.2% of the voting share capital of the Company, excluding shares held in treasury. EJF has been a consistent shareholder in the Company during the past three years.

In our capacity as the largest shareholder of the Company, we write to express our concerns with the Company’s strategic direction regarding its position in the doBank Group (“doBank”) and its share price consistently trading at a discount to net asset value (“NAV”); the decision by the board of directors (the “Board”) to retain approximately 27% of NAV in cash; the charging of management fees on the Company’s position in doBank, which is independently managed; and the need for additional representation on the Board.

First, we believe the Company should seek to monetise its investment in doBank in the near term with a clear path to execution. The Company has pursued its core investment strategy and utilised proceeds, as outlined in its prospectus, in part, by acquiring doBank prior to its subsequent public market exit in 2017. Given that doBank is publicly listed and represents 49% of the Company’s total NAV, less accrued incentive fee of €34.5 million, each as of 31 March 2018, the Company should not hold half of its NAV in a single, exchange-traded position. If the Company’s shareholders want to own doBank, they may purchase the shares in the open market instead of paying FIG LLC (the “Manager”) a fee to make the same investment.

Due to the current embedded gain in the investment and the unpredictability of the equity markets, Italian political standings and banking regulation, we believe that monetisation is appropriate and may be achieved through the potential sale of doBank to a strategic buyer, which may potentially benefit doBank by adding non-performing loans to its portfolio over time. We note that affiliates of Fortress Investment Group LLC (“Fortress”) are also investors in doBank, and we do not think the Company should be managed as though it is a Fortress private fund and wedded to its investment strategies.

Second, the Company continues to trade at a discount to NAV, which we believe will continue unless the Company and the Board take a different strategic position. Our view is that the discount to NAV may be remedied through implementation of an open market buyback program that the Company’s shareholders authorised at the annual general meetings in 2016 and 2017. To date, the Company has not attempted to repurchase its stock in the open market. This authority may be utilised pro-actively to take advantage of the discount to NAV at which the Company trades while being accretive to NAV. We believe monetising doBank by selling to a strategic buyer will enable the Company to narrow this gap and also allow shareholders to realise the embedded gains in the Company’s position in doBank.

Third, we estimate that, as of 31 May 2018, the Company will be holding approximately €135 million, or approximately 27% of NAV, in uninvested cash, which we believe is excessive and should be distributed to shareholders while reserving for appropriate levels of working capital. While we recognise that the Company may from time to time want to hold cash for working capital purposes and to execute its investment strategy, we believe that the Company’s obligation to fund working capital alongside a regular dividend should be paid through the cash generation of the existing portfolio. Reserving cash commitments for working capital and future dividends is an inefficient use of cash and creates a drag on the Company’s performance. We highlight the Manager’s previous comments about its FINO investment that the deferred purchase price commitment over the next few years is to be funded via portfolio cash flows.

Fourth, we believe charging full management fees on doBank, an independently managed public company, is excessive because doBank’s “majority shareholder, Avio S.a.r.l. (a company jointly owned by Fortress and the Company), does not exercise management and coordination activities in respect of doBank,” according to doBank’s 2017 financial reports. The Manager currently charges a fee of 1.5% on NAV, excluding net corporate cash (the “Adjusted NAV”). The Company’s Adjusted NAV equaled €352 million, as of 31 March 2018, of which doBank was €230 million. doBank is a standalone business and, based on doBank’s own financial reports, the Company’s ownership of doBank shares does not require active management from the Manager.

Fifth, the Manager has affiliates on the Board and is also a shareholder of the Company. In light of the Manager’s multiple roles, including managing Fortress’ private funds which co-invest alongside the Company, there should be additional representation on the Board to serve the best interests of the Company and its shareholders, and to minimise potential conflicts, including with respect to the Company’s ownership of doBank. We invite the Manager to nominate two directors to the Board with input from EJF and other shareholders.

We believe that a discussion with the Board, the Manager, and the Company’s shareholders on these issues about maximising value for the Company’s shareholders would benefit all of the Company’s stakeholders.

Sincerely,

EJF Debt Opportunities Master Fund, L.P.

By: ____________________________________
Name: Emanuel J. Friedman
Title: Chief Executive Officer of EJF Capital LLC

About EJF Debt Opportunities Master Fund, L.P.

EJF Debt Opportunities Master Fund, L.P. is managed by EJF Capital LLC (“EJF Capital”), which is an SEC-registered1, employee-owned alternative asset management firm headquartered outside of Washington, D.C. EJF Capital manages approximately $6.4 billion2 of hedge, separately managed accounts, and private equity assets, as well as $2.6 billion2 of CDO assets through its affiliates. EJF Capital was founded in 2005 by Manny Friedman and Neal Wilson along with a small team of professionals from Friedman, Billings, Ramsey Group, Inc. EJF Capital currently employs approximately 80 professionals across three offices globally (Arlington, Virginia, London, England and Shanghai, China).

____________________________

1  

Registering with the US Securities and Exchange Commission does not imply any level of skill or training.

2 As of 30 April 2018. Firm assets under management includes $579.8 million of uncalled capital.

Contact information

EJF
Hammad Khan, +44 203 752 6771
hkhan@ejfcap.com
or
Hanbury Strategy
Kit Preston Bell, +44 7805 497 922
kit.prestonbell@hanburystrategy.com

About Business Wire

Business Wire
Business Wire
24 Martin Lane
EC4R 0DR London

+44 20 7626 1982http://www.businesswire.co.uk

(c) 2018 Business Wire, Inc., All rights reserved.

Business Wire, a Berkshire Hathaway company, is the global leader in multiplatform press release distribution.

Subscribe to releases from Business Wire

Subscribe to all the latest releases from Business Wire by registering your e-mail address below. You can unsubscribe at any time.

Latest releases from Business Wire

FDA Approves OTEZLA® (apremilast) for the Treatment of Oral Ulcers Associated with Behçet’s Disease19.7.2019 17:59:00 CESTPress release

Celgene Corporation (NASDAQ:CELG) today announced that the U.S. Food and Drug Administration (FDA) has approved OTEZLA® (apremilast) 30 mg twice daily (BID) for the treatment of adult patients with oral ulcers associated with Behçet’s Disease. OTEZLA, an oral, selective inhibitor of phosphodiesterase 4 (PDE4), is the first and only approved treatment option for oral ulcers associated with Behçet’s Disease, a rare, chronic, multisystem inflammatory disease that is difficult to treat. “Oral ulcers are a recurring and debilitating manifestation that affects nearly everyone living with Behçet’s Disease, and have an important negative impact on the quality of life for these patients,” said Yusuf Yazici, M.D., Clinical Associate Professor, Department of Medicine, New York University Langone Health. “In the clinical trial, OTEZLA demonstrated improvements in measures of oral ulcers at week 12. OTEZLA has the potential to be a needed treatment option for U.S. patients and their physicians, who

Abiraterone Acetate Included in World Health Organisation’s Essential Medicines List for the Treatment of Metastatic Castration-Resistant Prostate Cancer19.7.2019 13:05:00 CESTPress release

The Janssen Pharmaceutical Companies of Johnson & Johnson is delighted with the recent announcement from the World Health Organisation (WHO) to include abiraterone acetate (ZYTIGA ® ) for the treatment of metastatic castration-resistant prostate cancer (mCRPC), in the updated Essential Medicines List, published on 9th July 2019.1,2 The WHO’s Essential Medicines List is a core guidance document that helps countries prioritise critical health products that are recommended to be widely available and affordable throughout health systems.1 “The inclusion of abiraterone acetate in the WHO Essential Medicines List highlights the critical role that this treatment can play in improving the lives of patients living with mCRPC and their families,” said Dr. Joaquín Casariego, Janssen Therapeutic Area Lead Oncology for Europe, Middle East & Africa, Janssen-Cilag S.A. “I am proud that we are working hard to impact survival and quality of life by developing and providing innovative medicines which ar

Gilead Sciences Licenses Respiratory and Herpes Antiviral Research Programs From Novartis19.7.2019 12:30:00 CESTPress release

Gilead Sciences, Inc. (NASDAQ: GILD) announced today that it has licensed three preclinical antiviral programs from Novartis, including investigational agents with the potential to treat human rhinovirus, influenza and herpes viruses. Under the agreement, Gilead will acquire exclusive global rights to develop and commercialize novel small molecules against three undisclosed targets. Novartis will receive an upfront payment and is eligible to receive up to an additional $291 million in potential milestone payments upon achievement of certain development and commercial milestones, as well as royalties on annual net sales. “Today’s announcement builds on Gilead’s heritage in antiviral research and development. We look forward to applying this expertise to advance the development of potential new treatments for viruses with limited therapeutic options,” said John McHutchison AO, MD, Gilead’s Chief Scientific Officer and Head of Research and Development. Gilead’s antiviral portfolio include

Schlumberger Announces Second-Quarter 2019 Results19.7.2019 11:00:00 CESTPress release

Schlumberger Limited (NYSE: SLB) today reported results for the second quarter of 2019. (Stated in millions, except per share amounts) Three Months Ended Change Jun. 30, 2019 Mar. 31, 2019 Jun. 30, 2018 Sequential Year-on-year Revenue $8,269 $7,879 $8,303 5% 0% Pretax segment operating income $968 $908 $1,094 7% -12% Pretax segment operating margin 11.7% 11.5% 13.2% 17 bps -148 bps Net income - GAAP basis $492 $421 $430 17% 14% Net income, excluding charges & credits* $492 $421 $594 17% -17% Diluted EPS - GAAP basis $0.35 $0.30 $0.31 17% 13% Diluted EPS, excluding charges & credits* $0.35 $0.30 $0.43 17% -19% North America revenue $2,801 $2,738 $3,139 2% -11% International revenue $5,463 $5,037 $5,065 8% 8% North America revenue, excluding Cameron $2,243 $2,178 $2,546 3% -12% International revenue, excluding Cameron $4,761 $4,469 $4,387 7% 9% *These are non-GAAP financial measures. See section titled "Charges & Credits" for details. Schlumberger Chairman and CEO Paal Kibsgaard commente

Schlumberger Appoints Olivier Le Peuch as CEO19.7.2019 10:46:00 CESTPress release

Schlumberger Limited (NYSE: SLB) announced today that its Board of Directors has appointed Olivier Le Peuch as its Chief Executive Officer and member of the Schlumberger Board, effective August 1, 2019. Mr. Le Peuch succeeds Paal Kibsgaard, who will retire as Chief Executive Officer effective that same date. Also effective August 1, Mr. Kibsgaard will step down as Chairman of the Board and retire as a member of the Board of Directors. Mr. Kibsgaard will retire after more than 22 years of service to the Company, including eight years as CEO and four years as Chairman. Effective the same date, Mark G. Papa, a current non-independent director, will become non-executive Chairman of the Board. Peter Currie will continue to serve as the Board’s Lead Independent Director. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190719005161/en/ Olivier Le Peuch is appointed Chief Executive Officer and a member of the Schlumberger Board, effe

Fluke Corporation Acquires Industrial Reliability Leader PRÜFTECHNIK19.7.2019 10:00:00 CESTPress release

Fluke Corp., the global leader in test and measurement instruments, has acquired Ismaning, Germany-based PRÜFTECHNIK, a market leader in precision laser shaft alignment, condition monitoring, and non-destructive testing. “Fluke’s acquisition of PRÜFTECHNIK reflects the growing importance our customers place on reliability systems to keep their equipment in optimum operating condition,” said Marc Tremblay, president of Fluke Corporation. “This business will help us usher in the next generation of solutions for our industrial customers.” Fluke Corporation For information on Fluke tools and applications, or to find the location of your nearest distributor, contact Fluke Corporation, P.O. Box 9090, Everett, WA USA 98206, call (800) 44-FLUKE (800-443-5853), fax (425) 446-5116, e-mail fluke-info@fluke.com or visit the Fluke Web site at http://www.fluke.com. About Fluke Founded in 1948, Fluke Corporation is the world leader in compact, professional electronic test tools and software for measu