Investment update and share repurchase programme

 

TIDMCDO 
 
RNS Number : 0505H 
Carador PLC 
12 February 2010 
 

12 February 2010 
 
                                  Carador plc 
                          ("Carador" or the "Company") 
                Investment Update and Share Repurchase Programme 
 
The Company announces that it has today posted a circular to shareholders in 
order to provide an update on GSO Capital Partners International LLP's (the 
"Investment Manager") implementation of the Company's investment strategy and to 
notify them of the implementation of a share repurchase programme by the Company 
(the "Share Repurchase Programme"). 
 
Update on the Company's investment strategy 
 
The Company's investment objective is to produce attractive and stable returns 
with low volatility compared to equity markets by investing in a diversified 
portfolio of Senior Notes of CDOs collateralised by senior secured bank loans 
and equity and mezzanine tranches of CDOs.  It is intended that the Company's 
investments primarily comprise actively managed CDOs, with a variety of 
portfolio managers. In aggregate, the Company has made 10 investments and sold 
16 investments in the year ended 31 December 2009. 
 
During 2009 the Company's Net Asset Value per Share declined by 10.2% (EUR Class) 
and 8.7% (US$ Class). This was offset by the dividends distributed during the 
year which equated to 10.0% of the opening EUR Class Net Asset Value per Share and 
11.1% of the opening US$ Class Net Asset Value per Share, giving a total return 
for the EUR Class of -0.2% and for the US$ Class of +2.4%. 
 
Senior Notes and Mezzanine Notes 
As a result of the amendment to the investment policy and investment objective 
approved by Shareholders in March 2009, the Investment Manager has been able to 
take advantage of attractive investment opportunities to acquire Senior Notes in 
the secondary market. In aggregate the Company acquired 5 Senior Notes in the 
period at a cost of EUR11.3 million of which one has subsequently been realised. 
This realisation produced total cash on cash returns of 1.4 times the initial 
investment. As at the year end, the balance of the Senior Notes and Mezzanine 
Notes purchased represented 27% of the portfolio and are currently being held at 
an unrealised gain. 
 
Equity Notes 
 
In light of a rally in CLO paper in the autumn of 2009, the Investment Manager 
decided to sell certain of the CLO equity positions which it believed had 
limited future upside. Consequently, two bids wanted in competition ("BWICs") 
were undertaken toward the end of the fourth quarter relating to, in aggregate, 
20 positions out of a total of 36 equity holdings in the portfolio. Multiple 
bids were received on all positions and, in aggregate, 6 positions were retained 
and the balance sold. The average bid received for the 20 positions as a 
percentage of the Company's latest valuation of each position for the purpose of 
calculating Net Asset Value was 102.3%, resulting in a small realised gain on 
disposal. 
 
The Investment Manager believes that this trading activity has underscored the 
accuracy of the Company's Net Asset Value calculation. In addition, in January 
2010 the Company sold just under one third of its largest position, Gale Force 4 
CLO, at a price 10% above the 31 December 2009 NAV valuation. 
 
Dividends 
 
The Board declared an interim dividend of EUR0.01 (US$0.0145) per ordinary share 
in respect of the quarter ended 31 December 2009, representing an annualised 
yield of 9% (EUR Class) and 10% (US$ class) to the latest available estimated 
unaudited Net Asset Value as at 31 December 2009. 
 
Unaudited portfolio analysis as at 31 December 2009 
 
+------------------------------------------------+--------+ 
| By currency (excluding cash):                  |     %  | 
+------------------------------------------------+--------+ 
| EUR:                                           | 14.5%  | 
+------------------------------------------------+--------+ 
| USD:                                           |  85.5% | 
+------------------------------------------------+--------+ 
 
+------------------------------------------------+--------+ 
| By security:                                   |      % | 
|                                                |    NAV | 
+------------------------------------------------+--------+ 
| Senior Notes                                   | 20.96% | 
+------------------------------------------------+--------+ 
| Mezzanine Notes                                |  7.30% | 
+------------------------------------------------+--------+ 
| Equity Notes                                   | 45.12% | 
+------------------------------------------------+--------+ 
 
 
+------------------------------------------------+--------+ 
| By asset class:                                |      % | 
|                                                |    NAV | 
+------------------------------------------------+--------+ 
| Broadly Syndicated Sub-Investment Grade        | 19.03% | 
| Secured Loans-Europe                           |        | 
+------------------------------------------------+--------+ 
| Broadly Syndicated Sub-Investment Grade        | 53.51% | 
| Secured Loans-US                               |        | 
+------------------------------------------------+--------+ 
| Middle Markets Secured Loans-US                |  0.85% | 
+------------------------------------------------+--------+ 
| Cash                                           | 26.62% | 
+------------------------------------------------+--------+ 
 
Top 3 portfolio holdings 
 
+--+---------------------------------------------+--------+ 
|  | Investment/Manager:                         |      % | 
|  |                                             |    NAV | 
+--+---------------------------------------------+--------+ 
| 1| Gale Force 4 CLO (GSO/Blackstone Debt Funds | 13.98% | 
|  | Management LLC)                             |        | 
+--+---------------------------------------------+--------+ 
| 2| Gale Force 2 CLO (GSO/Blackstone Debt Funds | 11.84% | 
|  | Management LLC)                             |        | 
+--+---------------------------------------------+--------+ 
| 3| Leopard V CLO (Prudential M&G)              |  6.12% | 
+--+---------------------------------------------+--------+ 
 
Outlook 
As with other credit assets, the CLO market has continued to rally in the first 
weeks of 2010 and the Investment Manager believes that this strength will 
continue through the year as default rates ease and funds continue to flow into 
the asset class. 
 
As at 31 December 2009, following the realisations set out above, the Company 
had approximately 20% of its total Net Asset Value in cash and available for 
investment, after the retention of funds for the purposes of the Share 
Repurchase Programme (further details of which are set out below) and payment of 
the dividend. The Investment Manager intends to invest this cash with a spread 
of risk and return in Senior Notes and Mezzanine Notes in accordance with the 
Company's investment policy. The Investment Manager intends to continue to 
manage the portfolio to produce an attractive dividend yield, together with 
capital appreciation. 
 
Assuming market conditions remain favourable it is anticipated that the 
portfolio will be more actively traded in 2010. While not forming part of its 
investment objective, and subject to the opportunities for investment of the 
current cash holdings, the Company is targeting a dividend yield as a percentage 
of NAV in the range of 6-8%. This, however, is a target and not a forecast and 
there can be no guarantee or assurance that it will be achieved. The actual 
dividend yield may be outside of this indicative range. 
 
Share Repurchase Programme 
 
The Board of Directors of the Company has resolved to approve the repurchase by 
the Company of its own Shares in accordance with the Company's Articles of 
Association. The Board believes that repurchasing Shares at a discount to NAV 
will be advantageous to the Company and Shareholders, both by being accretive to 
the NAV per Share and by potentially reducing the discount at which the Shares 
currently trade. In addition, the Board believes that repurchases will provide 
some additional liquidity in the market for the Shares. 
 
In this regard, the Board has granted discretion to The Royal Bank of Scotland 
N.V. (London Branch), to effect on-market Share repurchases on behalf of the 
Company subject to the following parameters: 
 
-       Share repurchases shall be funded out of the Company's existing 
available cash; 
-       the maximum amount of the Company's cash applied towards Share 
repurchases shall be EUR2,000,000; 
-       in accordance with Listing Rule 12.4.1, the maximum price to be paid per 
Share shall not be more than the higher of: 
(i)    5% above the average market value of the Shares for the five Business 
Days before the purchase is made; and 
(ii)   the higher of the price of the last independent trade and the highest 
current independent bid on the regulated market where the purchase is carried 
out. 
 
The Share Repurchase Programme shall commence with effect from 19 February 2010. 
As long as the Company experiences extremely low liquidity in relation to its 
Shares, any buy back of Shares on any trading day may represent a significant 
proportion of the daily trading volume. 
 
In accordance with the requirements of the United Kingdom Listing Authority, an 
RNS announcement of any market repurchase of Shares shall be made by the Company 
as soon as possible and in any event by no later than 7.30 am on the Business 
Day following the date on which dealing occurred. Shares repurchased will be 
cancelled. 
 
Terms used in this announcement shall, unless the context otherwise requires, 
bear the meanings given to them in the prospectus of the Company dated 30 
September 2008, as amended by the supplement dated 10 March 2009 (together, the 
"Prospectus"). 
 
A copy of the Circular will shortly be available for public inspection at the 
Document Viewing Facility, the Financial Services Authority, 25 North Colonnade, 
Canary Wharf, London E14 5HS. An electronic copy of the Circular will also be 
available on the Company's website later today. 
 
 
Investor Enquiries: 
Paul Noonan 
Northern Trust Investor Services (Ireland) Limited 
                      Tel:  + 353 1 542 2487 
 
 
Notes to Editors: 
 
About Carador plc: 
 
Carador is a close-ended limited liability investment company which was 
incorporated under the laws of Ireland on 20 February 2006 and is authorised by 
the Irish Financial Services Regulatory Authority. It was the first London Stock 
Exchange traded diversified cash flow CDO fund. The Company's investment 
objective is to produce attractive and stable returns, with low volatility 
compared to equity markets, by investing in a diversified portfolio of senior 
notes of collateralised debt obligations or "CDOs" collateralised by senior 
secured bank loans and equity and mezzanine tranches of CDOs. 
 
Further information relating to Carador, including monthly factsheets published 
since inception, can be found at the Company's website on www.carador.co.uk. 
However, due to applicable securities laws and regulations, this information is 
only availably to persons resident in certain jurisdictions. 
 
About GSO Capital Partners LP: 
 
GSO Capital Partners LP (together with its affiliates, including GSO Capital 
Partners International LLP, Carador's investment manager ("GSO")) is a leading 
credit-oriented alternative asset manager with approximately $24.3 billion of 
assets under management as of 31 October 2009.  GSO manages senior debt funds, 
hedge funds and mezzanine funds focused on the leveraged finance marketplace. 
GSO was acquired by The Blackstone Group L.P. in March 2008, following which 
Blackstone's debt investment businesses were combined with GSO's operations. 
Further information is available at www.blackstone.com. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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