Cheyne Capital Hedge Fund Overhauls Queen's Walk Debt Fund
Cheyne Capital is overhauling its Queen's Walk Investment fund
, hit hard by the U.S. subprime crisis, by cutting its payouts and raising cash to spend on less risky assets to widen its appeal.
Cheyne Capitals Hedge fund, which will change its name to Real Estate Credit Investments, plans to raise nearly 25 million euros ($32 million) through a share placing and open offer, it said on Tuesday.
It will use the cash to buy less risky parts of residential and commercial property-backed debt, taking its focus away from junk or unrated debt.
"We're derisking the company and moving up the capital structure," fund manager Shamez Alibhai told Reuters.
At 1414 GMT Queen's Walk shares were down 5.6 percent at 2.28 euros.
Queen's Walk was among a clutch of stock exchange listed funds whose share prices fell dramatically in 2007 as the valuations of its investments in the riskiest parts of subprime mortgage-related debt fell.
"We want to move Queen's Walk away from something that's more complicated and difficult to explain to investors, to more liquid and more transparent securities. We hope by changing the investment policy we'll see some decompression in the discount to NAV (net asset value)."
The fund, which has been trading on a discount to NAV of 35-40 percent recently, plans to cut the dividend on its ordinary shares, though it will issue investors with preference shares paying an 8 percent coupon.
This will mean the total payout to shareholders will be cut by around 40 percent to 7-8 percent, Alibhai said.
He added that real-estate debt looked cheap and said the fund would increasingly aim for capital growth.
"We're trying to balance income distribution and capital growth," he said.
The fund's exposure to less risky real-estate debt is set to rise to around 50 percent from 25 percent of the portfolio after the fund invests the capital it raises, he added.
* Issues 13.3 mln shares at 2 euros, to raise 25 mln euros
* Bonus issue of preference shares paying 8 percent
* Will cut total payout to investors to 7-8 percent
* Aims to cut discount by investing in less risky debt
* Shares down 5.6 percent
by: Laurence Fletcher
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