K1 Ventures

[yawnyawn]

The transaction is expected to increase the Group’s earnings per share and net tangible assets per share by approximately 5 cents for the financial year ending 30 June 2017, after taking into consideration adjustments for factors such as net assets, income taxes, and the Greenstreet carried interest.

Book value S$6m
Gross proceeds US29m or S$40m
Gross gain $34m

Less tax and management incentives of about $12.3m
Gain of 5ct or about $21.7m

Not sure what the taxes and incentives for Guggenheim disposal look like? Fair to assume 35%?

For this, you have to refer to the paragraph 3 of the "Proposed Amendment to the Management Agreement" circular entered between K1 and Greenstreet in 2014.

http://www.k1ventures.com.sg/admin/files...202014.pdf

This is how i inferred the management agreement. To keep it simple, upon disposal of any investments, Greenstreet gets a cut on the realized net profits(total distributions + divestment amount - initial capital - threshold level).

1) If the investment managed to compound at 10-15% over the years, Greenstreet will be entitled to a carried interest of up to 10% of the realised net profits

2) If the investment managed to compound >15% over the years, Greenstreet will be entitled to a carried interest of 15% of the realised net profit.

I tried to do some rough calculation for the case of KUH, the initial capital was US$57M and additional threshold was US$41M. Total threshold US$98M.

Based on AR2016, "Total cash and property distributions received from inception are approximately US$223 million at 30 June 2016." Divestment of KUH gives US$29M.

Therefore, capital in KUH managed to compound at ~12% over 13 years. The capital would grow to US$197M if investment in KUH compounded at
10% over 13 years. Greenstreet should be entitled to 10% of US$55M (US$252M less US$197M), therefore ~US$5.5M.

Thank you!

How about Guggenheim? Assuming k1 disposed this at US$220m, how much would the incentive be?

I finally looked at the circular for the 2010 Management Agreement. 
http://www.k1ventures.com.sg/admin/files...rcular.pdf

Based on 2016 AR, it was stated that "The Group has received approximately US$35.1 million of scheduled dividends since June 2011. In addition, the Group has received supplemental special distributions of approximately US$3.8 million related to the Preferred Units."

Assume K1 disposed Guggenheim at US$220M, total sum would be US$259M. This gives a return of 17.2% compounded over 6 years.

10% compounded over 6 years would give US$177M. Greenstreet should be entitled to at least 15% of the realized net profit in this case. Actual amount may vary though since they are many confusing subclauses under the management agreement.

[D123]

Power struggle at Guggenheim Partners rattles a Wall Street star

"A power struggle has broken out between Guggenheim Partners’ two most prominent executives, sapping morale, alarming clients and contributing to the departure of several top managers, according to current and former employees of the $240bn asset manager and investment bank. 

Guggenheim saw its total return to its owners drop by four per cent last year, while its investment management division reported a five per cent year-on-year drop in revenue to $765m, according to a June 30 memo sent to investors — an aberration at a group whose assets under management have grown from just $35bn 10 years ago."

More at the FT page: https://www.ft.com/content/5ebb59e0-6c51-11e7-b9c7-15af748b60d0

[cif5000]

Disposal of Guggenheim at US$221m.

http://infopub.sgx.com/FileOpen/k1%20-%2...eID=464424

[yeokiwi]

http://infopub.sgx.com/FileOpen/k1%20-%2...eID=464424

SINGAPORE, 28 July 2017 - The Board of Directors of k1 Ventures Limited (the
“Company”) wishes to announce that its indirect wholly-owned subsidiaries, DFS Holdings I
Corp and DFS Holdings II Limited have entered into a definitive agreement with Guggenheim
Capital, LLC (“Guggenheim”) for the redemption by Guggenheim of the Company’s entire
ownership interests in Guggenheim (the “Guggenheim Interest”), comprising 100,000 Series A
preferred units, 250,000 common units, 11,111,111 detachable warrants, and an additional 1.85
million common units for a gross cash consideration of approximately US$221 million, which is
prior to any deductions for U.S. income taxes and the Greenstreet carried interest (the
“Guggenheim Disposal”).
The Guggenheim Disposal is in accordance with the original investment documents. The gross
cash consideration for the Guggenheim Disposal was arrived at on a willing buyer and willing
seller fair market value basis, after taking into account, among other things, Guggenheim’s
financial statements and annual business plans. The Guggenheim Disposal is expected to be
completed during the fourth quarter of 2017.
Based on the unaudited consolidated financial statements of the Company and its subsidiaries
(“Group”) for the third quarter ended 31 March 2017, the book value and the net tangible asset
value of the Group’s interests in Guggenheim is approximately S$143 million.
The Guggenheim Disposal is part of the Company’s on-going process of monetising its
investments and distributing surplus cash to Shareholders. At the Company’s Extraordinary
General Meeting held on 29 March 2017, approval was granted by the shareholders of the
Company for the divestment of interests in the capital of Guggenheim. Following the
Guggenheim Disposal, the Group will cease to have any interests in Guggenheim.
The transaction is expected to increase the Group’s net tangible assets per share by
approximately 29 Singapore cents for the financial year ending 30 June 2017, after taking into
consideration estimated adjustments for factors such as net assets, income taxes, and the
Greenstreet carried interest. The transaction is expected to increase the Group’s earnings per
share by approximately 31 Singapore cents for the financial year ending 30 June 2017, after
also taking into consideration a currency gain.

current NTA = 43cts.
KUE = 5cts
Guggenheim = 29cts
total = 43+5+31 = 77cts??

[desmondxyz]

http://infopub.sgx.com/FileOpen/k1%20-%2...eID=464424

SINGAPORE, 28 July 2017 - The Board of Directors of k1 Ventures Limited (the
“Company”) wishes to announce that its indirect wholly-owned subsidiaries, DFS Holdings I
Corp and DFS Holdings II Limited have entered into a definitive agreement with Guggenheim
Capital, LLC (“Guggenheim”) for the redemption by Guggenheim of the Company’s entire
ownership interests in Guggenheim (the “Guggenheim Interest”), comprising 100,000 Series A
preferred units, 250,000 common units, 11,111,111 detachable warrants, and an additional 1.85
million common units for a gross cash consideration of approximately US$221 million, which is
prior to any deductions for U.S. income taxes and the Greenstreet carried interest (the
“Guggenheim Disposal”).
The Guggenheim Disposal is in accordance with the original investment documents. The gross
cash consideration for the Guggenheim Disposal was arrived at on a willing buyer and willing
seller fair market value basis, after taking into account, among other things, Guggenheim’s
financial statements and annual business plans. The Guggenheim Disposal is expected to be
completed during the fourth quarter of 2017.
Based on the unaudited consolidated financial statements of the Company and its subsidiaries
(“Group”) for the third quarter ended 31 March 2017, the book value and the net tangible asset
value of the Group’s interests in Guggenheim is approximately S$143 million.
The Guggenheim Disposal is part of the Company’s on-going process of monetising its
investments and distributing surplus cash to Shareholders. At the Company’s Extraordinary
General Meeting held on 29 March 2017, approval was granted by the shareholders of the
Company for the divestment of interests in the capital of Guggenheim. Following the
Guggenheim Disposal, the Group will cease to have any interests in Guggenheim.
The transaction is expected to increase the Group’s net tangible assets per share by
approximately 29 Singapore cents for the financial year ending 30 June 2017, after taking into
consideration estimated adjustments for factors such as net assets, income taxes, and the
Greenstreet carried interest. The transaction is expected to increase the Group’s earnings per
share by approximately 31 Singapore cents for the financial year ending 30 June 2017, after
also taking into consideration a currency gain.

current NTA = 43cts.
KUE = 5cts
Guggenheim = 29cts
total = 43+5+31 = 77cts??

current NTA = 43cts.
KUE = 5cts
Guggenheim = 31cts
total = 43+5+31 = 79cts

So what's the strategy now? sell at a discount now or hold until it close shop? Will it be a lengthy process?

[brattzz]

still got meat, hold until it close shop, unless u got better use of the cash.

[corporatefatcat]

http://infopub.sgx.com/FileOpen/k1%20-%2...eID=464424

SINGAPORE, 28 July 2017 - The Board of Directors of k1 Ventures Limited (the
“Company”) wishes to announce that its indirect wholly-owned subsidiaries, DFS Holdings I
Corp and DFS Holdings II Limited have entered into a definitive agreement with Guggenheim
Capital, LLC (“Guggenheim”) for the redemption by Guggenheim of the Company’s entire
ownership interests in Guggenheim (the “Guggenheim Interest”), comprising 100,000 Series A
preferred units, 250,000 common units, 11,111,111 detachable warrants, and an additional 1.85
million common units for a gross cash consideration of approximately US$221 million, which is
prior to any deductions for U.S. income taxes and the Greenstreet carried interest (the
“Guggenheim Disposal”).
The Guggenheim Disposal is in accordance with the original investment documents. The gross
cash consideration for the Guggenheim Disposal was arrived at on a willing buyer and willing
seller fair market value basis, after taking into account, among other things, Guggenheim’s
financial statements and annual business plans. The Guggenheim Disposal is expected to be
completed during the fourth quarter of 2017.
Based on the unaudited consolidated financial statements of the Company and its subsidiaries
(“Group”) for the third quarter ended 31 March 2017, the book value and the net tangible asset
value of the Group’s interests in Guggenheim is approximately S$143 million.
The Guggenheim Disposal is part of the Company’s on-going process of monetising its
investments and distributing surplus cash to Shareholders. At the Company’s Extraordinary
General Meeting held on 29 March 2017, approval was granted by the shareholders of the
Company for the divestment of interests in the capital of Guggenheim. Following the
Guggenheim Disposal, the Group will cease to have any interests in Guggenheim.
The transaction is expected to increase the Group’s net tangible assets per share by
approximately 29 Singapore cents for the financial year ending 30 June 2017, after taking into
consideration estimated adjustments for factors such as net assets, income taxes, and the
Greenstreet carried interest. The transaction is expected to increase the Group’s earnings per
share by approximately 31 Singapore cents for the financial year ending 30 June 2017, after
also taking into consideration a currency gain.

current NTA = 43cts.
KUE = 5cts
Guggenheim = 29cts
total = 43+5+31 = 77cts??

current NTA = 43cts.
KUE = 5cts
Guggenheim = 31cts
total = 43+5+31 = 79cts

So what's the strategy now? sell at a discount now or hold until it close shop? Will it be a lengthy process?

Why 31 cents, it is 29 cents.
So total is 43+5+29=77 u take a small haircut for them to use to close shop thrn I guess 75 is a conservative estimate. Still got meat, but not much

[desmondxyz]

http://infopub.sgx.com/FileOpen/k1%20-%2...eID=464424

SINGAPORE, 28 July 2017 - The Board of Directors of k1 Ventures Limited (the
“Company”) wishes to announce that its indirect wholly-owned subsidiaries, DFS Holdings I
Corp and DFS Holdings II Limited have entered into a definitive agreement with Guggenheim
Capital, LLC (“Guggenheim”) for the redemption by Guggenheim of the Company’s entire
ownership interests in Guggenheim (the “Guggenheim Interest”), comprising 100,000 Series A
preferred units, 250,000 common units, 11,111,111 detachable warrants, and an additional 1.85
million common units for a gross cash consideration of approximately US$221 million, which is
prior to any deductions for U.S. income taxes and the Greenstreet carried interest (the
“Guggenheim Disposal”).
The Guggenheim Disposal is in accordance with the original investment documents. The gross
cash consideration for the Guggenheim Disposal was arrived at on a willing buyer and willing
seller fair market value basis, after taking into account, among other things, Guggenheim’s
financial statements and annual business plans. The Guggenheim Disposal is expected to be
completed during the fourth quarter of 2017.
Based on the unaudited consolidated financial statements of the Company and its subsidiaries
(“Group”) for the third quarter ended 31 March 2017, the book value and the net tangible asset
value of the Group’s interests in Guggenheim is approximately S$143 million.
The Guggenheim Disposal is part of the Company’s on-going process of monetising its
investments and distributing surplus cash to Shareholders. At the Company’s Extraordinary
General Meeting held on 29 March 2017, approval was granted by the shareholders of the
Company for the divestment of interests in the capital of Guggenheim. Following the
Guggenheim Disposal, the Group will cease to have any interests in Guggenheim.
The transaction is expected to increase the Group’s net tangible assets per share by
approximately 29 Singapore cents for the financial year ending 30 June 2017, after taking into
consideration estimated adjustments for factors such as net assets, income taxes, and the
Greenstreet carried interest. The transaction is expected to increase the Group’s earnings per
share by approximately 31 Singapore cents for the financial year ending 30 June 2017, after
also taking into consideration a currency gain.

current NTA = 43cts.
KUE = 5cts
Guggenheim = 29cts
total = 43+5+31 = 77cts??

current NTA = 43cts.
KUE = 5cts
Guggenheim = 31cts
total = 43+5+31 = 79cts

So what's the strategy now? sell at a discount now or hold until it close shop? Will it be a lengthy process?

Why 31 cents, it is 29 cents.
So total is 43+5+29=77 u take a small haircut for them to use to close shop thrn I guess 75 is a conservative estimate. Still got meat, but not much

Read the last paragraph of the announcement, 31 CTS after taking currency gain into consideration....

[Jacmar]

Yes it should be the 31cts and i think the difference is due to the regular distribution from GGH.

Personally I am a bit disappointed with the sale price of usd221m. this is essentially the same valuation of p/aum as what they paid for back in 2011. given back then asset price was cheap and now asset prices in US is hot, they could not get a better valuation. Yes management will claim they have a very good return on this investment. sigh, no pop. save the champagne.

[yawnyawn]

Book value S$6m
Gross proceeds US29m or S$40m
Gross gain $34m

Less tax and management incentives of about $12.3m
Gain of 5ct or about $21.7m

Not sure what the taxes and incentives for Guggenheim disposal look like? Fair to assume 35%?

For this, you have to refer to the paragraph 3 of the "Proposed Amendment to the Management Agreement" circular entered between K1 and Greenstreet in 2014.

http://www.k1ventures.com.sg/admin/files...202014.pdf

This is how i inferred the management agreement. To keep it simple, upon disposal of any investments, Greenstreet gets a cut on the realized net profits(total distributions + divestment amount - initial capital - threshold level).

1) If the investment managed to compound at 10-15% over the years, Greenstreet will be entitled to a carried interest of up to 10% of the realised net profits

2) If the investment managed to compound >15% over the years, Greenstreet will be entitled to a carried interest of 15% of the realised net profit.

I tried to do some rough calculation for the case of KUH, the initial capital was US$57M and additional threshold was US$41M. Total threshold US$98M.

Based on AR2016, "Total cash and property distributions received from inception are approximately US$223 million at 30 June 2016." Divestment of KUH gives US$29M.

Therefore, capital in KUH managed to compound at ~12% over 13 years. The capital would grow to US$197M if investment in KUH compounded at
10% over 13 years. Greenstreet should be entitled to 10% of US$55M (US$252M less US$197M), therefore ~US$5.5M.

Thank you!

How about Guggenheim? Assuming k1 disposed this at US$220m, how much would the incentive be?

I finally looked at the circular for the 2010 Management Agreement. 
http://www.k1ventures.com.sg/admin/files...rcular.pdf

Based on 2016 AR, it was stated that "The Group has received approximately US$35.1 million of scheduled dividends since June 2011. In addition, the Group has received supplemental special distributions of approximately US$3.8 million related to the Preferred Units."

Assume K1 disposed Guggenheim at US$220M, total sum would be US$259M. This gives a return of 17.2% compounded over 6 years.

10% compounded over 6 years would give US$177M. Greenstreet should be entitled to at least 15% of the realized net profit in this case. Actual amount may vary though since they are many confusing subclauses under the management agreement.

Wow, cif5000 guessed the disposal price of Guggenheim almost right on the dot, just by 1M! Impressive!

At US221M, assuming 4% stake, the p/aum would be 2.3%. If the assumption is right, I would be disappointed as the valuation is on the lower end of what I expected.

Nevertheless, this "workout" gave me a decent return with a 4 month holding period. I have since sold off my position after the announcement was made.