Lamington Road DAC (“Lamington” or the “Company”) is a designated activity company with limited liability organized under the laws of Ireland, and operates the life settlement business formerly of Emergent Capital, Inc. (“Emergent’). Lamington’s business consists of a 27.5% ownership stake in White Eagle Asset Portfolio, L.P., which owns a portfolio of life insurance policies known as life settlements.
Effective April 7, 2021, our Board of Directors is composed of five members.
Mr. Brennan is the founder and portfolio manager, since 2015, of Brennan Asset Management, LLC (BAM), a Registered Investment Advisory firm based in Napa, CA, which utilizes a concentrated value investing strategy. Prior to founding Brennan Asset Management, Patrick managed portfolios and led research efforts at two value investing firms in California: Hutchinson Capital Management, from 2013 to 2014, and RBO & Co., from 2009 to 2012. Previously, Patrick worked at Mark Boyar & Company, where he led the firm’s research team and helped manage assets across individual portfolios, institutional accounts and a mutual fund. Patrick also worked for six years in investment banking and equity research with Deutsche Bank, CIBC World Markets and William Blair & Company covering financial services, media and telecom and business services. Patrick graduated summa cum laude from the University of Notre Dame with a degree in economics and was inducted into Phi Beta Kappa.
Mr. Brennan has senior board, executive and client-facing international experience across financial, fund and technology arenas. He has investment / portfolio management experience as an investment manager and a member of the Investment Committee for Alternative Investment Fund for an Irish-based management company. Mr. Brennan has over 20 years’ experience in international structured corporate finance, regulated funds, venture investment, technology and capital markets roles, working with large international investment banks, corporate clients and fund management operations. He held a Global Executive Role with full P&L, operations, HR, balance sheet, strategic and risk management responsibility at Rabobank for the European structured corporate finance business with assets of over €3 billion located in companies in the Cayman Islands, Ireland, Jersey, the UK, the Netherlands, Luxembourg and Belgium, including Irish Section 110 companies. Mr. Brennan holds a diploma in Corporate Direction from the Institute of Directors as part of the Chartered Director Program and is a Graduate of Law (LL. B. (Hons)) from Trinity College, Dublin, and Technology (BSc (Hons) in Digital Technology, Design and Innovation from the Technological University of Dublin). He is admitted as a Barrister in England and Wales and is admitted as an attorney to the bar of the State of New York.
Mr. Knapp is the Managing Director of Ironsides Partners LLC, which is a registered investment advisor that specializes in discounted assets and distressed credit investments. Mr. Knapp is also a director of several other publicly traded companies, often as a result of his investment activities with Ironsides. These include MVC Capital listed on the NYSE, Castle Private Equity AG listed on the SIX Swiss Exchange, the Africa Opportunity Fund listed on the London Stock Exchange, and MPC Container Ships listed on the Oslo Børs’ Merkur Market.
Since 2011, Mr. Patterson has served as the President of River City Management. In this role, Mr. Patterson has responsibility for investment decisions and asset allocation in public and private assets. Prior to joining the River City Management, Mr. Patterson served as an Analyst from 2009 to 2011 for a lower middle market private equity firm as a member of the deal team evaluating a wide spectrum of industries and business models, executing transactions, and overseeing portfolio companies. From 2007 to 2009, Mr. Patterson served as an Associate and Vice President for a boutique investment bank where he was a member of a deal team and actively participated in all aspects of sourcing and executing transactions. Mr. Patterson graduated from the University of Denver with a Master of Science in Finance. He completed his undergraduate studies at the University of Nebraska-Lincoln, where he earned his Bachelor in Science in Business Administration with Highest Distinction and double majored in Finance and Accounting.
The manager of Lamington is Intertrust Management Ireland Limited, whose duties are solely administrative duties.
We have the following classes of notes outstanding: Series A Notes, Series B Notes, and Profit Participating Notes (PPNs). All of our outstanding PPNs are held by the Lamington Road Grantor Trust, a Cayman grantor trust (the “Trust”). The Trust has issued and outstanding trust certificates (the “Trust Certificates”), which represent interests in the PPNs.
The Series A Notes, the Series B Notes, and the PPNs are listed on the Vienna MTF (a multilateral trading facility operated by Wiener Börse AG), identified there by the issuer name and ISIN code:
On April 7, 2021, Emergent effected a restructuring that resulted in its various security holders receiving securities Series A Notes, Series B Notes, PPNs and Trust Certificates. In addition, the single outstanding share of stock of Lamington that was formerly owned by an indirectly wholly-owned subsidiary of Emergent was transferred to Intertrust Nominees (Ireland) Limited (the “Trustee”) to be held on trust for charitable purposes, and the Trustee has agreed not to sell, transfer, mortgage, charge or otherwise dispose of, secure or deal with all or any of the shares. As a result, Lamington is no longer an indirect subsidiary of Emergent.
On April 7, 2021, Emergent moved its operations to Lamington.
Upon the Restructuring:
On May 19, 2021, Emergent completed the follow-up closing to the Restructuring, and as a result all of Emergent’s securities were cancelled and no longer outstanding.
This notice addresses the delivery of Lamington Road DAC’s (the “Company”) Annual Financial Statements for the year ended November 30, 2020 (the “2020 Financials”). As a result of the significant demands of the Company’s restructuring transaction completed in April 2021 and due to delays caused by the COVID-19 pandemic, the Company has required additional time to complete its financial closing procedures and reports, and was unable, without unreasonable effort or expense, to deliver such reports within 120 days after fiscal year end as required by Section 4.05 of the Indenture dated as of April 7, 2021 (the “Indenture”). The additional time required to finalize the Company’s 2020 Annual Financials is due, in part, because the Company was unable to engage its auditor until the Indenture was entered into by the relevant parties and the U.S. bankruptcy plan of reorganization in In re Emergent Capital, Inc., Case No. 20-12602 (BLS), filed in the U.S. Bankruptcy Court for the District of Delaware, became effective, with both occurring on April 7, 2021. The Company will post its 2020 Financials as soon as practicable.
For similar reasons and the focus on the 2020 Financials, the Company was unable to deliver and post its interim financial statement for the six month period ended May 31, 2021 within 90 days after such period end as also required by Section 4.05 of the Indenture. The Company intends to deliver and post its interim financial statements as soon as practicable.
Although the Company is unable to post its 2020 Financials and interim financial statements at this time, the Company has not redeemed any Notes through the Payment Priority Waterfall or in any other manner, each as defined in the Indenture.
Lamington’s cash balance as of December 15, 2021 was $13,758,631. At the October 2021 Lamington Board meeting, Lamington’s Board unanimously authorized the full repayment of the Class D Partnership Units (Mezzanine loan) by August 2022 and authorized an ultimate reduction in the minimum cash balance to $4 million (from $5 million) to facilitate the Class D repayment.
U.S. Federal Income Tax Matters
Updated March 11, 2022
Set forth below is a brief discussion of certain U.S. federal income tax consequences of distributions with respect to the securities issued by Lamington Road Designated Activity Company (“Lamington”) to taxable U.S. persons who hold securities in Lamington that should be treated as equity for U.S. federal income tax purposes (each, a “Lamington Securityholder”). This summary does not discuss all U.S. federal income or other tax consequences that may be applicable to a Lamington Securityholder in connection with a distribution from Lamington nor does it discuss the U.S. federal income tax consequences to persons subject to special tax regimes. Each holder of Lamington securities should consult with its own tax advisor regarding the U.S. federal, state, local and non-U.S. tax treatment to it from receiving distributions from Lamington.
Emergent Capital, Inc. (“Emergent”) prior to its liquidation, included its gross taxable income for U.S. federal income tax purposes on a flow-through basis certain income from Lamington, its Irish subsidiary, referred to as “global intangible low-taxed income” (“GILTI”). As a consequence of the inclusion of such GILTI in its gross income, had it not liquidated, Emergent would have been entitled to receive tax-free distributions from Lamington up to the amount of such prior GILTI inclusions. Such distributions, which are permitted to be received free of U.S. federal income tax, generally are referred to as “previously-taxed income” (“PTI”) and the amount of PTI which Emergent would have been entitled to receive as of immediately prior to its liquidation is referred to herein as the “PTI Amount”.
Although there is no direct authority on the matter, set forth on Emergent’s website (https://emergentcapital.com/) is its determination of the amount of PTI that was allocated among the three classes of Lamington securities outstanding: the Class A Notes, the Class B Notes, and the “profit participating notes” held through the owner trust as of April 7, 2021(i.e., the date of Emergent’s liquidation). As a result of Emergent’s liquidation and distribution of Lamington securities, Lamington Securityholders should succeed to a portion of the PTI Amount.
The per security denominations set forth on Emergent’s website are valid only for Lamington securities issued and outstanding as of April 7, 2021. Lamington Securityholders who acquire Lamington securities issued after such date, including pursuant to any payment-in-kind distributions made after April 7, 2021, would not have any PTI allocation with respect to such securities.
The tax-free distributions of PTI by Lamington will reduce a Lamington Securityholder’s tax basis in the securities with respect to which the distribution is received. Accordingly, for U.S. federal income tax purposes, a Lamington Securityholder may recognize additional taxable gain or less taxable loss on the sale of such securities or upon the ultimate liquidation of Lamington.
Lamington will not provide any additional information regarding the amount of PTI allocated to any Lamington Securityholder or the Lamington Securityholder’s remaining share of the PTI Amount. As such, each Lamington Securityholder should keep records of the amount of distributions which it receives from Lamington that are attributable to PTI.
After a Lamington Securityholder has received distributions equal to such Lamington Securityholder’s share of the PTI Amount, any additional distributions to the Lamington Securityholders should be treated first as a dividend to the extent of the greater of Lamington’s current and accumulated earnings and profits. Assuming that applicable holding period requirements are satisfied, such dividend income generally should be treated as “qualified dividend income” for U.S. federal income tax purposes, which is eligible for the favorable rates applicable to long-term capital gain when received by a non-corporate taxpayer.
This summary was prepared as of the date set forth above. Lamington undertakes no responsibility to update this summary, including to reflect any change in law or fact. As noted above, each holder of Lamington securities should consult with its own tax advisor regarding the U.S. federal, state, local and non-U.S. tax treatment to it from receiving distributions from Lamington, whether in cash or in kind.
A U.S. person holding a beneficial ownership interest in a foreign trust is generally required to disclose such ownership to the Internal Revenue Service by filing Form 3520. Please consult your tax advisor.
This notice addresses the delivery of the Issuer’s annual financial report for its fiscal year 2021, within 120 days after such period end as required by Section 4.05 of the Indenture. As a result of the significant demands of the Company’s restructuring transaction completed in April 2021, and due to delay caused by the COVID-19 pandemic, the Issuer has required additional time to complete its financial closing procedures and reports, and has been unable, without unreasonable effort or expense, to deliver such reports within 120 days after the end of its fiscal year, as required by Section 4.05. The Company will deliver its annual financial report for its fiscal year 2021 as soon as practicable.
Repayment of Certain Obligation pursuant to Limited Partnership Agreement.
As of June 15, 2022, Lamington’s cash balance was $18,291,032. Pursuant to a resolution unanimously adopted on April 5, 2022, the Lamington Board increased the Minimum Cash Balance from $4,000,000 to $4,000,000 plus the amount necessary to repay certain amounts arising pursuant to the Amended and Restated Agreement of Limited Partnership (the “LPA”) of White Eagle Asset Portfolio, LP (the “Partnership”) in full. On July 14, 2022, the LPA of the Partnership was amended to permit repayment of those obligations (the “Second Amended and Restated LPA”).
As permitted by the Second Amended and Restated LPA, on July 15, 2022, Lamington repaid in full certain debts owed by Lamington to the Partnership in the amount of $10,927,797.03. These debts were classified as the Class D Interest arising in connection with the White Eagle Asset Portfolio, LP bankruptcy proceeding in 2019.
Unaudited Interim Financials
On August 29, 2022, Lamington Road DAC (the “Lamington”) provided U.S. Bank National Association, as Trustee (the “Trustee”) under the Lamington Indenture with respect to the Lamington’s outstanding Series A Notes, Series B Notes and the PPNs, with the Company’s interim financial report for the first six months of FY2022 (the “FY2022 Interim Financials”). The FY2022 Interim Financials are posted here.
Lamington notes that the Interim Financials do not reflect events occurring after May 31, 2022, including Lamington’s repayment in full of certain debts owed by Lamington to White Eagle in the amount of $10,927,797.03. This transaction was disclosed on this website under the heading “Repayment of Certain Obligation pursuant to Limited Partnership Agreement.”. As a result of the repayment of the Class D Interests, Lamington expects to receive from White Eagle a minimum payment of $4 million annually from August 2022 until August 2027 with additional payments by White Eagle to Lamington dependent on the performance of the White Eagle portfolio.
Attached is a sample of an IRS Form 3520-A with respect to ownership of trust certificates (“Trust Certificates”) that is based on what was issued by the Lamington Road Grantor Trust, a Cayman Islands grantor trust (the “Grantor Trust”) to another certificate holder. Such IRS Form 3520-A was prepared by the accounting firm retained by the Trustee of the Grantor Trust. This sample is intended to provide the basis to derive the necessary information to complete a Substitute IRS Form 3520-A with respect to an interest in such Trust Certificates in the event that (i) you have determined that you are required to file an IRS Form 3520 with respect to your interest in the Trust Certificates and (ii) you have not received an IRS Form 3520-A directly from the trustee of the Grantor Trust. For purposes of completing a Substitute Form 3520-A, please note that there are 171,541,491 Trust Certificates outstanding (which correspond to 171,541,491 PPNs issued by Lamington Road DAC).
This is not intended to provide any guidance as to the U.S. federal income tax consequences of owning Trust Certificates, including whether holders of such Trust Certificates are required to file an IRS Form 3520. Each holder of Trust Certificates should consult with its own tax advisor regarding the U.S. federal, state, local and non-U.S. tax treatment to it from owning Trust Certificates.
As a result of the Company’s FY2022 Interim Financials, and in accordance with its obligations under Regulation (EU) 596/2014 (the Market Abuse Regulation), the Company has published a Supplemental Notice to Noteholders dated as of September 2, 2022 through the appropriate regulatory information provider under European securities law. The Supplemental Notice to Noteholders is available at RIS Notification – 11:08:57 02 Sep 2022 – News article | London Stock Exchange.
Open Market Repurchase of Series B Notes.
On any date up to and including December 31, 2022, Section 3.3 of the Indenture permits the Company to repurchase Series A and/or Series B Notes in the open market so long as the Company maintains its Minimum Cash Balance. Pursuant to that resolution, the Company repurchased a $5,500,000 in face amount of the Series B Notes. These Series B Notes will be delivered to U.S. Bank, as Trustee under the Indenture, for cancellation.
December 2022 Interest Payments
On December 9, 2022, the Company notified U.S. Bank National Association, as Trustee under the Indenture, that it will cash pay 100 percent of the Series A Note interest payable for the 6-month period ending December 31, 2022.
With respect to the Series B Note interest, the Company notified the Trustee that it will pay PIK Interest (in lieu of cash payment) on 100 percent of the Series B Notes outstanding for the 6-month period ending December 31, 2022. The Company anticipates the PIK interest portion of the Series B Note payment will equal $2,502,901.
After the December 31, 2022 interest payment date, the outstanding principal amount of the Series A Notes is anticipated to be $54,828,153. Following the cancellation of the Series B Notes repurchased by the Company, the outstanding principal amount of the Series B Notes is anticipated to be $68,321,863, the latter of which accounts for both the payment of PIK Interest on December 31, 2022, and the retirement of the Series B Notes repurchased on December 9, 2022.
Minimum Cash Balance
As of December 15, 2022, the cash balance of the Company was $6,539,600. As approved by the Board, the Company’s Minimum Cash Balance was $3,500,000, plus the difference between the amount authorized by the Lamington Board to make open market purchases of the Series B Notes and the final purchase price of all open market purchases of Series B Notes.
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