SQN Asset Finance Income Fund has entered an agreement to buy up one its lessees, Snoozebox, in order to re-sell it to avoid an £8.2m (€9.2m) potential loss to the fund.
Under the agreement, Snoozebox, which provides hospitality accommodation through repurposed shipping containers, will be bought by SQN and then sold to an unnamed new owner, which SQN described as experienced in modular accommodation as well as the oil and gas industries.
Snoozebox will then enter a new operating lease with SQN. The terms will reflect those of a 10-year operating lease, resulting in full amortisation of capital and repayment of interest.
The sale is conditional on Snoozebox emerging from its current administration status, as well as creditors voting in favour of the transferral. Completion is expected by March 2018.
Snoozebox appointed administrators from Moore Stephens in November, after talks for the repayment of a £15.6m facility provided by SQN in 2014 failed. A restructuring was originally the favoured solution, but SQN said satisfactory terms could not be reached in discussions with Snoozebox’s previous management.
Neil Roberts, investment manager for SQN, said: “There continues to be a strong market for the modular accommodation assets financed by the company, which is confirmed by this transaction.
“This solution is a good example of how SQN can protect its investment, whilst retaining the integrity of the core business. We are confident this deal will ensure the longevity of the lessee’s business and result in full amortisation of capital and interest to the company”.
The original asset finance facility, secured against Snoozebox’s modular containers, was expected to be fully drawn down by early 2016.
However, after a change of management in April 2016, Snoozebox’s finances grew increasingly worse. SQN then allowed it for a period to pay only interest on the facility, and used the security deposit to reduce debt outstanding to current levels. Eventually, SQN deemed a repayment unlikely as things stood, and appointed administrators.
As of the latest factsheet for the income fund, Snoozebox accounted for 1.4% of the fund’s portfolio.