Investment Manager Update

27 June 2008

ACP Mezzanine Limited (AIM:ACPM) (“ACP Mezzanine” or “the Company”) announces that ACP Capital Limited ("ACP Capital"), the parent of the Company’s investment manager, received notice on 17 June 2008 from Vidacos Nominees Limited (“Vidacos”) acting as nominee and on the instructions of Deutsche Bank in its capacity as prime broker for QVT Fund LP ("QVT") and Quintessence Fund LP requisitioning an extraordinary general meeting (an “EGM”) to propose the removal of six of the eight directors of ACP Capital and to appoint Mr John Chapman, Mr Patrick McCann and Mr James Lowenstein to the board, thereby effectively giving QVT control of the board of ACP Capital.

Vidacos is acting as nominee for and on the instructions of Deutsche Bank AG through its London Branch, in its capacity as prime broker for QVT Fund LP and Quintessence Fund LP as beneficial owners of 55,772,475 ordinary shares held by Vidacos representing 28.7 per cent. of the issued share capital of ACP Capital. The board of the Company understands that QVT Financial Fund LLP is or may be interested in a further 2,870,525 ordinary shares also held by Vidacos. Taken together, the Company therefore understands that QVT is currently interested, in aggregate, in 58,643,000 ordinary shares, representing 29.91 per cent. of the issued share capital of ACP Capital.

ACP Capital is posting a circular to its shareholders advising them to vote against all the resolutions to be proposed at the EGM. A copy of the circular can be obtained from www.acpcapital.com.

Whilst the Company has not received any similar notices, should a change of board control of ACP Capital be successful, certain of the Company's commercial and operational arrangements may be impacted, which, in the opinion of the board of the Company, could be to the detriment of shareholders. Two material consequences resulting from a change of board control of ACP Capital relate to certain of the Company's banking arrangements and the potential departure of key personnel as summarised below.

Deutsche Bank AG ("DB") facility (the "Facility")

The Facility which the Company has with DB was entered into pre-July 2007 on attractive terms: 75bps spread and 65 per cent. advance rate. The Company has approximately €75 million worth of assets in this Facility. Under the terms of the Facility, upon Derek Vago and Eric Youngblood ceasing to act the Company, DB has the right to terminate the Facility, which would allow DB to liquidate the Company's assets. Should DB exercise this right, there is a risk that these assets may not be realised at a favourable valuation in current market conditions. ACP Mezzanine is contractually liable to cover DB for any potential shortfall arising from the Company’s assets being sold at a price which is below the value of the Facility.

Intended Departure of Key Management Personnel

ACP Capital’s senior management including Derek Vago, Eric Youngblood and Nikolaj Larsen have indicated that they would resign from their executive management positions within the ACP Capital group of companies should QVT be successful in effecting a change of control of the ACP Capital board. Should a change of control of the board of ACP Capital be successful, this could result in Derek Vago and Eric Youngblood resigning from the board of the Company, subject to the Jersey Financial Services Commission consent. The board of the Company believe that these departures could be detrimental to the Company's existing business, in particular the Company's ability to deliver on the identified pipeline of assets outlined as part of ACP Mezzanine's June 2008 capital raise which may not be completed. This may prevent achievement of the targeted annualised dividend yield for the Company of 17.5 per cent. by the end of 2008.

The Board will continue to monitor the situation and will make further notifications where required.

Enquiries:

  • Rob Bailhache & Nick Henderson, Financial Dynamics +44 (0) 20 7269 7200 (Media Relations)
  • Sacha Macintosh, ACP Capital UK LLP +44 (0) 844 800 4530
  • Philip Secrett/ Fraser Campbell, Grant Thornton Corporate Finance (NOMAD) +44 (0) 20 7383 5100
  • Simon Atkinson/ Simon Stilwell, Liberum Capital Limited (Financial Adviser and broker) +44 (0) 20 3100 2000

About ACP Mezzanine

ACP Mezzanine Limited is a Jersey-incorporated, closed ended investment company quoted on AIM. It is a provider of sub-investment grade finance to European small and mid-sized enterprises – with a primary focus on the UK, France, Germany and Italy – originating, structuring and underwriting the majority of its investments through ACP Capital Limited and ACP Capital’s European network. ACP Mezzanine aims to optimise risk-adjusted returns by actively managing its portfolio and to distribute at least 85% of profits as dividends.