Press release


Press release 11/37

CSSF statement on ARM Asset Backed Securities S.A. (“ARM”) and ARM’s letter of 25 october 2011 sent to investors (the “Investor Letter”) on the proposed transaction between ARM and Insetco PLC (the “Insetco Deal”)

The present statement follows on from the ARM FAQ document published by CSSF press release 11/31 of 23 September 2011 and is to be read in conjunction with question 10.2 of that document which stated that the CSSF was liaising daily with ARM to ensure that ARM’s intended consultation of investors regarding the Insetco deal was based on complete, not misleading and factually correct information.

Since numerous bondholders have made requests to obtain more detailed information on the Insetco deal and in view of the fact that it now appears unrealistic that ARM and the CSSF will find a common ground on the precise contents of the Investor Letter, the CSSF informed ARM on 21 October 2011 that it does not object to ARM sending out, under its own responsibility, the Investor Letter in the format ARM deems appropriate.

The CSSF however wants to stress that it has not given its approval to the contents of the Investor Letter. The Investor Letter aims not only at informing the investors about the current situation in respect of the Insetco deal, but its main purpose is to ask existing ARM bondholders and pending investors, together “the Investors”, to give their view on whether they would like the Insetco deal to go ahead or not. This is why the CSSF has taken the view vis-à-vis ARM that the contents of the Investor Letter should be as comprehensive and balanced as reasonably possible.

However, in light of the final version of the Investor Letter prepared by ARM, the CSSF considers that Investors currently are not in a position to make an informed decision on the proposed Insetco deal on the basis of available information.

The CSSF holds the view that Investors would only be in a position to make an informed choice on the merits of the Insetco deal once several important issues will have been clarified, among which the two following essential points:

  • Clarification as to the ownership and treatment of the pending investors’ monies. According to information received by the CSSF, it is possible that these monies beneficially belong to certain or all of the pending investors. If that were so, ARM would, if it were to transfer these monies to Insetco, dispose over monies which do not beneficially belong to it. The Investor Letter as released by ARM suggests that these monies would only be transferred in proportion to the accepting pending investors. However, the CSSF cannot read this into the copy of the Insetco sale and purchase agreement which has been made available to it. This agreement (unless it would have been varied in the meantime) seems to clearly provide that all the monies are to be transferred to Insetco, notwithstanding the decision (positive or negative) of individual pending investors. The uncertainty surrounding the treatment of these monies might have an impact on the validity or effectiveness of the Insetco deal. It cannot be excluded in this context that the question of the ownership of the pending investors’ monies will have to be determined by the competent courts in the UK and/or Luxembourg;
  • Clarification of the economic model/mathematical formulae explaining the link between the market value of assets transferred to Insetco (supposed to be 80 mio US$) and the nominal value of bonds to be issued by Insetco (equivalent to 226 mio US$) as well as the apparent proportionality between the amount of cash transferred and such amount of bonds to be issued by Insetco.

While the Investor letter invites Investors to express an opinion on the Insetco deal based on currently available information, the CSSF encourages Investors to request and collect all relevant information in order to be able to form an independent view on the merits of the Insetco deal and to seek independent professional advice in case they intend to respond to the poll.

The CSSF further holds the view that, in order to allow Investors and their professional advisers to form an independent view on the merits of the Insetco deal, it would be appropriate for ARM to disclose the full content of the Insetco sale and purchase agreement.

On a final note, the CSSF wants to stress that it never ordered an information blackout or a prohibition of communication on the Insetco deal. To the contrary, the CSSF encouraged ARM on several occasions to communicate with Investors on the Insetco deal for information purposes. It is however true that the CSSF did request ARM to refrain from polling Investors on their opinion about that deal, while ARM and the CSSF were trying to reach an agreement on a balanced content of the Investor Letter.

Please find below links to former CSSF press-releases relating to ARM: