City of London Investment opposes Edinburgh Dragon plan

10th Dec 2010 12:58

City of London Investment Group (CLIG) says that it intends to vote against Edinburgh Dragon Trust's plan to raise cash. Edinburgh Dragon plans a placing and open offer of up to £50m of 3.5% convertible unsecured loan stock 2018. Shareholders can apply for 0.2547 nominal units of loan stock at 100p each for each ordinary share they own. The yield is above the ordinary share dividend yield. A £40 million multi-currency loan facility with the Royal Bank of Scotland ended in September and the cash will replace that. CLIG wants Edinburgh Dragon to put in place a policy to reduce the discount to NAV of the Edinburgh Dragon share price and it believes that the issue of new stock could hamper any plans to reduce the discount. The discount to NAV has been more than 10% in each of the past three years. CLIG argues that Edinburgh Dragon needs to take action to change this. Edinburgh Dragon did buy back shares in December 2009 in order to help narrow the discount. CLIG says that it is not against the issue of the loan stock in principle.