ICON Leasing Fund Twelve, LLC

 

 

 

 

 

 

 

 

 

 

 

 

	PORTFOLIO OVERVIEW
	THIRD QUARTER 2015

 

 

 

 

 

 

 

 

 

 

 

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Dispositions During the Quarter

 

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Jurong is a newly constructed $2 billion state-of-the art aromatics plant.  We participated in a subordinated equipment loan in April 2011 alongside Standard Chartered Bank and BP Singapore Pte. Ltd., that was part of the $2 billion financing package that included over $500 million in equity from strategic investors that include SK Energy International, Glencore International AG and Vinmar International Ltd.  While the plant was completed on time, a combination of industry headwinds, downturn in commodities and the Chinese economic slowdown has forced the company into receivership, as the company does not have the liquidity to commence operations.  As part of the receivership, we are hoping that there will be a consensual restructuring with the senior lenders, shareholders and trade creditors.  Given the current distressed situation, we have taken a credit reserve that values the asset at 30% of original cost. The Investment Manager believes that a restructuring makes sense and, given the cyclical nature of the industry that Jurong participates in, and the fact that this is the newest and arguably most technologically advanced aromatics plant in the world, if margins follow historical patterns, there is a chance the investment value will recover.

VAS is an aftermarket aircraft parts supplier to the aviation industry.   In 2011, we, ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P. and ICON ECI Fund Fifteen, L.P. made an equipment loan to VAS secured by all of VAS' equipment.  Starting in 2012, management made some missteps, specifically by leveraging to purchase several used aircraft engines that it had anticipated would have significant market value when parted out.  However, the demand never materialized, as many airlines simply invested in new aircraft and engines at this time, leaving VAS with inflated inventory levels and insufficient working capital.  After months of working with the other lenders as well as the sponsor, the Investment Manager decided to sell its exposure back to the company at a loss, rather than risk a much larger loss in a Chapter 11.

On August 27, 2014, ICON advanced TMA a senior secured facility of USD 29,000,000 secured by two offshore supply vessels.  On November 24, 2014, such facility agreement was amended to allow for a senior secured 1st lien and 2nd lien structure and to include an additional two offshore supply vessels as security for the facility. A senior secured 1st lien tranche of USD 66,000,000 was funded by an unrelated third party and ICON's original loan of USD 29,000,000 was converted to the senior secured 2nd lien tranche. As a condition to the amendment and increased facility size, TMA was required to have all four vessels under contract by March 31, 2015.

 

*    Leverage ratio is defined as total liabilities divided by total equity.

** Collections as of December 31, 2015. The uncollected receivables relate to our investment with Técnicas Maritimas Avanzadas, S.A. de C.V. and Jurong Aromatics Corporation Pte. Ltd.

One of our objectives is to provide cash distributions to our members.  In order to assess our ability to meet this objective, unaffiliated broker dealers, third party due diligence providers and other members of the investing community have requested that we report a financial measure that can be reconciled to our financial statements and can be used to assess our ability to support cash distributions from our business operations.  We refer to this financial measure as cash available from our business operations, or CABO.

CABO is not equivalent to our net operating income or loss as determined under GAAP.  Rather, it is a measure that may be a better financial measure for an equipment fund because it measures cash generated by investments, net of management fees and expenses, during a specific period of time. We define CABO as the net change in cash during the period plus distributions to members and investments made during such period, less the debt proceeds used to make such investments,

as well as the net proceeds from equity raised through the sale of interests during such period, if any.

We believe that CABO may be an appropriate supplemental measure of an equipment fund's performance because it is based on a measurement of cash during a specific period that excludes cash from non-business operations, such as distributions, investments and equity raised.

Presentation of this information is intended to assist unaffiliated broker dealers, third party due diligence providers and other members of the investing community in understanding the Fund's ability to support its distributions from its business operations. It should be noted, however, that no other equipment funds calculate CABO, and therefore comparisons with other equipment funds are not meaningful.  CABO should not be considered as an alternative to net income (loss) as an indication of our performance or as an indication of our liquidity.  CABO should be reviewed in conjunction with other measurements as an indication of our performance.

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We entered into certain agreements with our Manager and CĪON Securities, LLC, formerly known as ICON Securities, LLC ("CĪON Securities"), a wholly-owned subsidiary of our Manager and our dealer manager for our offering, whereby we pay or paid certain fees and reimbursements to those parties.  Our Manager was entitled to receive an organizational and offering expense allowance of 3.5% of capital raised up to $50,000,000, 2.5% of capital raised between $50,000,001 and $100,000,000, 1.5% of capital raised between $100,000,001 and $200,000,000, 1.0% of capital raised between $200,000,001 and $250,000,000 and 0.5% of capital raised over $250,000,000.  CĪON Securities was entitled to receive a 2% underwriting fee from the gross proceeds from sales of shares to additional members.

In accordance with the terms of our limited liability company agreement, we pay or paid our Manager (i) management fees ranging from 1% to 7% based on the type of transaction, and (ii) acquisition fees, through the end of the operating period, of 3% of the total purchase price (including indebtedness incurred or assumed and all fees and expenses incurred in connection therewith) of, or the value of the Capital Assets secured by or subject to, our investments.

Our Manager performs certain services relating to the management of our equipment leasing and other financing activities.  Such services include, but are not limited to, the collection of lease payments from the lessees of the equipment or loan payments from borrowers, re-leasing services in connection with equipment which is off-lease, inspections of the equipment, liaising with and general supervision of lessees and borrowers to ensure that the equipment is being properly operated and maintained, monitoring performance by the lessees and borrowers of their obligations under the leases and loans, and the payment of operating expenses. Administrative expense reimbursements are costs incurred by our Manager or its affiliates that are necessary to our operations.

Our Manager also has a 1% interest in our profits, losses, cash distributions and liquidation proceeds. We paid distributions to our Manager of $52,627 and $229,646 for the three and nine months ended September 30, 2015, respectively. We paid distributions to our Manager of $63,786 and $191,338 for the three and nine months ended September 30, 2014, respectively. Additionally, our Manager's interest in the net loss attributable to us was $123,094 and $206,006 for the three and nine months ended September 30, 2015, respectively. Our Manager's interest in the net income attributable to us was $19,715 and $605,773 for the three and nine months ended September 30, 2014, respectively.

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At September 30, 2015 and December 31, 2014, we had a net payable due to our Manager and affiliates of $289,253 and $2,798,414, respectively, primarily related to administrative expense reimbursements. During the three months ended September 30, 2015, we settled our related party receivable of $142,500 due from a joint venture owned 25% by us and 75% by Fund Fourteen by converting it into an additional contribution to the joint venture. Our and Fund Fourteen's proportionate ownership in the joint venture did not change as a result of this conversion. The administrative expense reimbursements incurred during the year ended December 31, 2014 included approximately $2,100,000 of professional fees and other costs in connection with our Manager's proposed sale of our assets during our liquidation period. Our Manager may continue to incur additional professional fees and costs on our behalf as it continues to pursue the sale of our assets in one or more strategic transactions.

Your participation in the Fund is greatly appreciated.

We are committed to protecting the privacy of our investors in compliance with all applicable laws. Please be advised that, unless required by a regulatory authority such as FINRA or ordered by a court of competent jurisdiction, we will not share any of your personally identifiable information with any third party.

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Financial Statements

(A Delaware Limited Liability Company)

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(A Delaware Limited Liability Company)

Consolidated Statements of Comprehensive (Loss) Income (unaudited)

 

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Financial Statements

(A Delaware Limited Liability Company)

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(A Delaware Limited Liability Company)

 

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Financial Statements

(A Delaware Limited Liability Company)

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Certain statements within this document may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA").  These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the "safe harbor" provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements.  Forward-looking statements are those that do not relate solely to historical fact.  They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events.  You can identify these statements by the use of words such as "may," "will," "could," "anticipate," "believe," "estimate," "expect," "continue," "further," "plan," "seek," "intend," "predict" or "project" and variations of these words or comparable words or phrases of similar meaning.  These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected.  We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

·	Visiting www.iconinvestments.com, or

·	Visiting www.sec.gov, or

·	Writing us at:  Angie Seenauth c/o ICON Investments, 3 Park Avenue, 36th Floor, New York, NY 10016

 

We do not distribute these reports to you directly in order to keep our expenses down as the cost of mailing this report to all investors is significant.  Nevertheless, the reports are immediately available upon your request.