GAM's board has pushed back against Rock Investments offer to replace the loans put forward by Liontrust Asset Management, stating that the firm needs "in excess" of CHF 100m (£89.1m) to continue functioning.

Last week (17 August), Rock wrote to GAM to propose short-term bridge financing should be made available if the Liontrust offer fails.

Rock's offer was made in response to a loan provided by Liontrust to GAM as part of the former's takeover deal, which GAM has argued was essential for the survival of its business, and Rock had previously suggested was a conflict of interest.

The firm is part of NJJ Holding, which oversees NewGAMe, a GAM shareholder group which has repeatedly objected to the proposed Liontrust takeover offer.

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The plan from Rock would involve a CHF 25m (£22.3m) convertible bond to GAM, which Rock would propose at an extraordinary general meeting to be held in the future, exceeding Liontrust's CHF 20m (£17.8m) loan facility.

However, in a letter today (21 August), GAM's board argued that the level of funding needed to stabilise the firm was "significantly higher", and likely to be in excess of CHF 100m (£89.1m).

GAM explained that the first tranche of this loan was now fully drawn to fund its losses and UK pension payments over the last two months, which totalled CHF 10m (£8.9m).

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The remaining CHF 15m (£13.4m) from Rock's loan once Liontrust had been repaid would be "insufficient", it argued, as the firm lost CHF 23.5m (£20.1m) in the first half of 2023, while CHF 10m must be paid annually to the GAM UK pension scheme.

Furthermore, the firm's balance sheet contained over CHF 40m (£35.7m) in lease liabilities, along with eight more years of pension obligations, representing a total future cash outflow of about CHF 80m (£71.3m).  

GAM also noted that Liontrust had identified CHF 64m (£57m) of savings throughout the firm, but the restructuring would require CHF 50m (£44.6m) to achieve the targeted cost savings.

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"Against this background, the proposed convertible bond is insufficient to maintain GAM as a going concern, in the short term let alone over the next 12 months as required by law and regulators," it said.

Additionally, the board warned that the deal would either "significantly dilute existing GAM shareholders" if done through an external capital raise or "significantly leverage the firm" if pursued through external debt.

"GAM requests that Rock acknowledge and accept the realities relating to GAM's financial position, if the Liontrust Offer is declared unsuccessful," the board concluded.

The offer period from Liontrust is due to end later this week (23 August).