Carador Income Share Discussion Threads

[dendria] 05/5/2016 18:36

Dividend received today (IWeb).

[cerrito] 21/4/2016 20:12

No surprise that like VTA and FAIR had a good March with a 4.95 NAV per share increase but even so March month end NAV was below that at end of January and December( the same situation as for FAIR);this is despite the fact that average loan prices were higher at the end of March than they had been at the end of December.
While they commented on the increase in loan default rates in the market generally could find no reference to CIFU’s March experience.
Also interesting that a decrease in Mezzanine Notes and an increase in cash.

[dendria] 21/4/2016 07:57

Mar 16 NAV = $0.6576 (+4.95%).

$2.25c div payable 4 May 16 (ex-div 28 Apr 16).

[davebowler] 31/3/2016 10:40

Liberum;
Relative outperformance continues

Event
Volta's NAV at 29 February 2016 was €7.29 per share which represents a 2.9% decline in the month. The NAV performance is due to mark-to-market losses mainly on the portfolio's CLO equity and debt tranches. The mark-to-market movement across portfolio sub-sectors was CLO equity -3.3%, CLO debt -4.0%, Cash corporate credit -0.6%, synthetic corporate credit +0.0% and ABS -0.1%.

Volta had one CLO warehouse position at the end of February and the month-end valuation was negatively impacted by the drop in European loan prices. The CLO subsequently priced successfully and will close at the end of March 2016 with the warehoused loan portfolio transferred to the CLO at acquisition cost. The estimated impact on the March NAV is +1.4%.

In terms of portfolio activity, one European CLO debt tranche was sold for €1.8m and four US CLO BB debt tranches were acquired with an average projected yield of 12.0%.

Liberum view
Volta's relative outperformance against peers continues and this is predominantly due to the company's defensive portfolio positioning ahead of the market correction in H2 2015. Volta's NAV total return since 30 June 2015 is -7.6% which compares to -22.2% for Carador.

The newly acquired BB CLO debt tranches are extremely attractive given the available yields and protection from default through the subordinated tranches. These should also lead to further improvements in the portfolio cash flow as capital has been rotated out of lower yielding debt assets to fund these investments.

Volta currently trades on a 14.4% discount to NAV (vs. 1.8% average discount for peers) and we believe it offers compelling value given the manager's track record of outperformance and ability to access attractive returns in other asset classes (e.g. bank balance sheet transactions and warehouse transactions).

[dendria] 29/3/2016 13:26

Analyst comment on Feb 16 NAV:

Note Dexion Capital has changed to Fidante Capital following takeover.

Fidante Capital, 22 March 2016, "Carador Income - February 2016 NAV"
The NAV as at 29 February 2016 was $0.6266 per share, down 5.39% in February and down 10.07% year-to-date. The company received net cashflows of $20.1m (or $0.0369 per share) in the first two months of 2016 ($17.5m in the first two months of Q4 2015).The weighted average annualised cash on cash payments for the income notes in January and February 2016 were 40.70% based on the latest valuations. Of the cashflows received on the income notes over the period, 33.99% was allocated to principal (October and November 2015: 27.93%).

Liberum Capital, 22 March 2016, "Recylcing capital into discounted investments"
Carador's NAV total return in February 2016 was -5.2% due to ongoing mark-to-market losses in the portfolio. The JP Morgan CLO Index highlighted returns of -6.4% for post-crisis BB tranches and -10.2% for post-crisis B tranches during the month. Post-crisis equity tranches were marked down 6.85% on average. NAV total return in the eight months since 30 June 2015 is now -21%.

[skyship] 25/3/2016 12:31

Hmm - the only good thing to say about that CS liquidation is that at least it shows there is still a good secondary Market - albeit at markedly lower levels.

CIFU has been the hardest hit; and prices seem to have bottomed out judging by the NBDG NAV. NBDG declares daily; so am particularly interested in the upcoming monthly declaration by Volta (VTA).

[cerrito] 25/3/2016 10:01

Comment in the paper yesterday that Credit Suisse sold off half their CLO exposure in the first quarter-which would have done nothing to help prices

[yieldsearch] 24/3/2016 09:57

Tks Cerrito, I am not concerned by a Valeant default creating losses in the underlying CLO, more the risk that this corporate credit could actually trigger liquidations of the CLOs (rating downgrade causing no reinvestment i guess?) or stop paying interest to some junior classes of clo.

CIFU is mainly equity piece of CLO so may be impacted by increase default in underlying corporate credit. The market value of such CLO equity piece went down for few months because people are anticipating less income available to these equity pieces.
I read also that some CLO asset managers had large exposure to Valeant but also the oil sector in the US. Com (seems that some were not smart in picking up the right corporate..). Combination of both for those CLO could be fatal. So it all comes down to the CIFU asset manager being smart: have they bought the good CLOs or the bad one? I dont have an answer to this question..gut feel i tend to trust more Volta manager.

[cerrito] 24/3/2016 09:31

Good article in the FT about Valeant which is the largest exposure of CIFU on a see through basis-1.16% of the portfolio as at end Feb. Has been the largest exposure in both end December and Jan.
Apparently $3.4b of Valeant loans held by CLO’s. The average exposure is what CIFU has 1.1% of the portfolio. Ft says Moodys has downgraded them from Ba3 to B1 and are on review for a further downgrade; the monthly report has them at a Ba1.
Irritating but not a game changer for CIFU and may all blow over and we do not know if they have income or mezzanine exposure to this name.

[cerrito] 23/3/2016 22:29

I had been hoping for an uptick in NAV net of the dividend payment in Feb but was optimistic and hopeful we can have one in March. Note cash has gone down from 8% of the portfolio to 3% following the purchases and the dividend payment. Good to see increase in Net Income over the last quarter and the Feb figure is at the highest figure since September.

[dendria] 22/3/2016 08:17

Feb 16 NAV = $0.6266 (-8.83%).

[pejaten] 15/3/2016 14:39

No comment yet but with market recovering should expect a bounce back.. At end Jan Carador at 8% of assets in cash. Some would have been kept back for dividend but will interesting to see whether either Volta or carador bought back in at the bottom

[skyship] 15/3/2016 09:25

Big bounce here, but no comment. Up over 12% in a week...

[cerrito] 22/2/2016 20:17

Thanks for those relevant articles, Yieldsearch
Pleasing to see O&G restricted to 3.3% of portfolio; I wonder what exposure is to O&G suppliers as I see this industry is not broken out but a least not in the top 10 exposure on a look through basis.
Bearing in mind what written in the articles note that in the Manager Commentary they say more was applied to principal.

[dendria] 19/2/2016 07:16

Jan 16 NAV = $0.6873. -4.95% monthly change. 1Q net income per share = $2.22c (+12.86%).

[dendria] 27/1/2016 12:55

I'm happy to hold both.

[davebowler] 27/1/2016 10:50

Liberum;
Carador Income Fund
Reduced dividend for 2016

Event
CIFU has guided towards a target dividend of $0.09 per share for 2016 which is expected to be covered from net cashflows. This reflects a 10% reduction from 2015 ($0.10 per share).

The reduced dividend is a result of a lower allocation to CLO equity positions and a higher weighting in cash in order to offer some downside protection to the company's NAV.

Liberum view
The target dividend for 2016 is still comfortably the highest yield in the alternative fund space at 13.7%. The reduction is not unexpected as the company's capital base has been declining in recent years as dividends have tended to be well ahead of NAV total return. The company's total asset value has fallen from $557m at December 2012 to $393m at the end of 2015. CIFU currently trades on a 9.4% discount to NAV. The 13.7% dividend yield will inevitably attract attention but we believe VTA offers better value (23% discount to NAV) and has had a superior track record in recent years.

Real Estate

[dendria] 27/1/2016 07:27

$9c target annual dividend for 2016.

[yeild hunter] 26/1/2016 12:20

I can now see why CIFU has underperformed, lower quality loans but higher yielding. These could well recover strongly when sentiment turns as they have fallen further. Ultimately it will be the default rate that counts. CIFU has previously had a good record here, lets hope it wasnt all down to the previous manager now at Fair oaks.

[cerrito] 25/1/2016 17:39

Too bad that no comment on the credit quality of the underlying loan portfolio in CIFU's December report.

[skyship] 25/1/2016 13:50

Sadly CIFU turned out to be a mistake. Happily sold half in the mid 80s; and the remaining half was to a degree cushioned by the strong $ and a dividend or two. Still, sold the other half today as I think I will get my money back far faster by switching into VTA.

Not only a demonstrably better performer (see today's RNS); but also offering a 26% NAV discount alongside the 10.7% yield. Can still be bought @ E5.80...

[dendria] 25/1/2016 12:16

The analyst comment on Dec 15 NAV:

N+1 Singer, 22 January 2016, "December NAV -5.4%, discount now 10%"
December was a torrid month in what was a challenging year overall for Carador. CIFU's NAV declined 5.44% to $0.7231 on the back of significant weakness in both post-crisis US CLO equity and mezz valuations. This fall brings the 2015 NAV TR to -9.7% while the shares delivered a TR of -7.2%. During December one primary equity investment was made bringing cash down to 3.3% of NAV, a Q4 distribution of $0.025 was also declared. Following recent share price weakness the yield is now over 15% with the shares trading at a steep 10% discount to the December NAV.

Dexion Capital, 22 January 2016, "Carador Income - December 2015 NAV"
The NAV as at 31 December 2015 was $0.7231 per share, down $0.0416 per share (5.44%) in December and down 9.71% in 2015. A quarterly dividend of $0.025 per share (unchanged) has been declared, payable on 10 February 2016 with ex-dividend date 4 February 2016.

Liberum Capital, 22 January 2016, "5.4% NAV decline in December"
Carador's NAV declined by -5.4% in December 2015 due to mark-to-market losses on CLO equity tranches. We calculate a NAV total return of -8.5% for 2015 (assuming no reinvestment of dividends).

[davebowler] 25/1/2016 09:46

Volta Finance (BUY, TP €8.55)
10% NAV total return in 2015

Event
Volta's NAV at 31 December 2015 was €7.82 per share which is unchanged after adjusting for the dividend payment in the month. NAV total return for 2015 was +10.0%.

The mark-to-market performance by asset class was CLO equity -0.7%, CLO debt -0.8%, Cash corporate credit +1.6%, synthetic corporate credit +0.1% and ABS +35.8%. The ABS positions benefited from an upward revaluation resulting from the sale of one of the positions significantly above book value.

During the second half of the year, the average price of VTA's USD CLO equity tranches fell from 75.5 to 53.9 and now account for 13% of GAV. Within this, post-crisis CLOs account for only 5.6% of GAV.

The average price of USD CLO debt tranches declined to 86.8 from 95.4 at the end of June 2015. Current pricing more than discounts the manager's expectations that US loan defaults will rise towards average historical levels by the end of 2016. Accordingly, the manager does not expect much NAV volatility in 2016.

In terms of portfolio activity, VTA rotated capital out of its CLO debt tranches (which have been relatively insensitive to recent credit spread widening) into more recent transactions at deeper discount margins. Other acquisitions totaled €12m and have a projected IRR of 11%.

Liberum view
Volta's NAV performance in December has again been well ahead of peers that invest in US CLO assets. This has been achieved despite a c.-1% impact from adverse currency movements in the month (USD exposure is now equivalent to 32% of NAV). Over the year, Volta has the highest NAV return of the peer group partially due to FX gains and the company's more conservative portfolio positioning.


Recent market volatility has highlighted the benefit of the mandate which allows the manager flexibility to allocate capital to the best relative value opportunities in structured credit. The company's highly cash-generative ABS positions have delivered significant gains.

VTA currently trades on a 26% discount to NAV (10.8% prospective dividend yield) and we believe it offers the best value in the sector given the manager's track record of outperformance and ability to access attractive returns in other asset classes (e.g. bank balance sheet transactions).

[cerrito] 22/1/2016 22:16

WirralOwl
Do not want to be pedantic but my reading of Q4 income per share is 2.35USc so Q4 dividend is marginally uncovered
I assume FAIR and CIFU end of January NAV will not suffer now that 3 month libor has stabilized