Carador Income Share Discussion Threads

[fenners66] 20/10/2017 10:33

thanks jonwig - nice to have another opinion that in theory I have not missed anything

[jonwig] 20/10/2017 10:08

fenners - it does seem a bit fabricated. The discount mechanism hasn't been triggered, so the board could have left it at that. Instead they followed the rules and put it to an AGM vote which shareholders passed.

I guess some large shareholders leaned on them to achieve an exit without dealing costs or effect on the share price.

On your post #570, if you can find a broker who lets you keep a USD cash balance, you can avoid the frictional forex charges which are pretty penal. TDD does, but that might not last now they've been taken over by I I.

[fenners66] 20/10/2017 09:54

Got my corporate action notice - what's the point?
If there was a massive discount to net asset value that they were looking to liquidate and return to shareholders then maybe - but I can't see that and they are adding costs on the distribution anyway, thoughts anyone?

[fenners66] 19/10/2017 09:37

stemis I have had them for a few years as well and have not added . I am probably up on the dividends overall but there is the currency FX rate that the brokers takes me for a ride on as well to worry about.

[stemis] 19/10/2017 09:23

I've held Carador for 6 years this January. It's not a big holding for me and I tend not to pay it much attention. It's up a mere 3% which I guess is all exchange gain. However I'm up 79% in dividends. It currently yields about 12%. Hard to get that yield anywhere else and it's a good hedge against the pound. I do sometimes wonder if I'm picking up pound coins on the railway line though...

[dendria] 19/10/2017 07:20

Sep 17 NAV = $0.7520 (+0.45%). Monthly = +0.45%. YTD = +6.53%.

$2.25c div to be paid 1 Nov 2017 (Ex-div 26 Oct 2017).

[cerrito] 15/10/2017 22:58

I have been through the Prospectus and I am currently thinking of opting for the Repurchase Pool Option 2.This is partly for the same reasons that I went into the FAIR 2014 shares at the March election ie we will probably get some market dislocation in the next few years and to some extent I know notihng of current management and their propensity to continue with CIFU. Also for other reasons I am looking to increase my cash holdings.
I note they are talking about returning all the capital within 6/12 months of the conversion date-ie a much shorter horizon than that envisaged for FAIR.
Be interested in how others are looking at this.

[dendria] 22/9/2017 13:34

Analyst comment on Aug 17 NAV:

N+1 Singer, 21 September 2017, "High new CLO issuance within US"
CLO new issuance in the US picked up significantly in August with US$12.4bn raised across 25 transactions being the second busiest month so far this year. Elsewhere new CLO issuance in Europe was half the volume seen in July at €0.8bn with just two transactions. YTD CLO new issuance volumes now stand at US$73.3bn across 132 CLOs within the US and €10.8bn across 27 CLOs in Europe. NAV as at 31st August stood at 74.86c up 0.21% on the previous month. Shares are trading on a discount of 3.3%


Fidante Capital, 21 September 2017, "CIFU - Carador Income - April 2017 NAV"
The NAV as at 31 August 2017 was $0.7486 per share, up $0.0016 per share (0.21%) in August and up 6.05% year-to-date (total return). The company received net cashflows of $16.5m (or $0.0304 per share) during the first two months of Q3 2017 (first two months of Q2 2017: $16.7m). The weighted average annualised cash on cash payments for the income notes in July and August was 20.47% based on the latest valuations. Of the cashflows received on the income notes during July and August, 16.47% was allocated to principal (April and May 2017: 23.68%).


Liberum Capital, 21 September 2017, "US issuance picks up in August"
Compared to a slow July, loan issuance was strong in August in the U.S., with $35.3 billion issued, but limited to €0.9 billion in Europe. US CLO issuance was also stronger in August totaling $12.4bn across 25 transactions; while again Europe was quiet. Refinancing / reset activity in CLOs slowed in both the U.S. and Europe. Weighted average spreads continue to tighten and seasoned CLOs refinance liabilities where possible. Carador expects refinancing/reset activity to increase for the remainder of the year and intends to focus investment activity on this segment. The Blackstone shares currently trade a 4.9% premium to NAV compared to the Carador shares which are on a 3.5% discount; the two funds have a current yield of 9.9% and 12.5% respectively.

[dendria] 21/9/2017 07:50

Aug 17 NAV = $0.7486 (+0.21%). Monthly = +0.21%. YTD = +6.05%.

[atholl91] 05/9/2017 16:53

I have been bearish on GBP since the Brexit vote & remain so. Can't see holding any reason to hold GBP over the USD. Still think FAIR ( due to superior management) the pick over CIFU & VTA although continue to hold all three.

[flying pig] 04/9/2017 08:24

Euro seems overvalued on fundamentals against £, but $-£ is more uncertain. Foresight is c50% but hindsight always 100%

[danieldruff2] 01/9/2017 11:22

At the moment the volatility in currency is outweighing any deliberations on default rates or sector performance. Worth remembering in recent years that sterling has collapsed by about a third relative to the Euro and not much better against the dollar. It's difficult to see a case for buying these unless you see a further sterling collapse.

[cerrito] 31/8/2017 20:41

I have gone through the Interims and too bad that both the Chairman’s and the Investment Manager’s statement written in such a way that for me at least difficult to understand the point that they were making. Indeed-and perhaps it was me- I did not get the sense of the big transformation that has happened in the portfolio with the percentage in income notes going up from 72% to 85%. Also note-as highlighted in the Monthly’s- the decrease in cash of $15m matching the excess of $15m in investments over disposals.
The ay I interpreted it is that neither the Manager or the Chairman were sending out any major warning signals
Just 0.14% of defaulted assets on a see through basis.Note no real movement in OPEX year on year though the figure-$3.3m in 6 months-is small compared to the $27m of distributions. A 1% in interest rate would impact P&L by $17m-inconvenient but manageable.
Basically I have enough FAIR,CIFU and VTA for my comfort-may add a bit of CIFU and my desire to have $ assets influences my thinking.
As always interested to hear how you all see it.

[dendria] 25/8/2017 12:58

Analyst comment on Jul 17 NAV:

Fidante Capital, 22 August 2017, "CIFU - Carador Income - July 2017 NAV"

The NAV as at 31 July 2017 was $0.7470 per share, up 1.52% in July and up 5.83% year-to-date (total return). The company received net cashflows of $16.4m (or $0.0303 per share) during the month (April 2017: $13.9m). The weighted average annualised cash on cash payments for the income notes in July was 20.96% based on the latest valuations. Of the cashflows received on the income notes during the month, 16.81% was allocated to principal (April 2017: 21.23%).


N+1 Singer, 22 August 2017, "Slowdown in US new CLO issuance, but continued portfolio activity"

CLO new issuance in the US slowed during July with 14 transactions raising a total of US$8.4bn, half of the amount raised in June. However, within Europe, CLO issuance remained at the same pace as the previous month with a further €1.6bn raised across 4 transactions. YTD CLO issuance stands at US$60.8bn across 107 transactions within the US and €10.0bn across 25 transactions in Europe. CIFU NAV as at 31st July stood at 74.7c up 1.5% on a total return basis on the previous month. Shares are currently trading on a discount of 5%.


Liberum Capital, 22 August 2017, "Slow month for issuance and refinancing"

Carador Income Fund's 31 July 2017 NAV per share was $0.7470, the return for the month was 1.52%. The company received estimated net cash flows of $16m or approximately $0.0303 per share in the month. In July, CGMS 2015-1A SUB was refinanced with its AAA coupon lowered to L+100bp from L+153bp. Given the pronounced tightening of shorter dated investment-grade CLO liabilities, its valuation increased by 15.4% month-on-month. The steepening of the investment grade CLO liability term structure is generally positive for Carador's CLO equity positions given the future embedded optionality. YTD NAV return was 5.83%.

[dendria] 22/8/2017 07:25

Jul 17 NAV = $0.7470 (-1.45%). Monthly Perf. = +1.52%. YTD = +5.83%.

[dendria] 20/7/2017 12:45

Analyst comment on Jun NAV and Upcoming Redemption


N+1 Singer, 20 July 2017, "CLO new issuance and reset activity continues"
CLO new issuance continues with a pace in both US and Europe, original strategists forecasts at start of year for CLO new issuance have been increased significantly. Refinancing and reset activity also continues and the manager has benefitted from its fourth resetting in Q2. NAV as at 30th June was 75.8c up 0.41% on a TR basis from last month putting the shares on a discount of 3.9% as at the month end. Q2 dividend of 2.25c declared in line with expectations.

Liberum Capital, 20 July 2017, "4.2% NAV return in H1 2017"
We would expect a relatively low take-up for the repurchase pool despite the recent widening of the discount to 5% (0.9% average discount for the peer group). Performance has picked up over the past 12 months (we calculate +23.5% NAV return assuming no reinvestment of dividends) although the performance over a two year period remains some way behind the peer group.

Fidante Capital, 07 July 2017, "CIFU - Carador Income - Redemption opportunity and placing programme"
The company's AGM will take place on 31 July 2017. A circular convening the AGM and detailing the resolutions to be put to shareholders has been published. In addition to the ordinary business of the AGM, shareholders will be asked to consider: (a) the approval of a repurchase opportunity for shareholders to realise all or part of their investment in the company; and (b) the approval of facilities to allow for the raising of additional capital. If the repurchase opportunity is approved by shareholders, the company expects to send the appropriate documentation to shareholders, setting out the procedure for participation and any associated transaction charges, by early September 2017 (subject to regulatory approval).

Numis Securities, 07 July 2017, "Carador Income - Exit opportunity"
In May, the Board of Carador Income highlighted it intended to offer a full exit to shareholders, subject to shareholder approval at the AGM on 31 July. The AGM notice contains some additional information and market backdrop. If approved, full details will be circulated by early September. The exit will be via a realisation pool, with exiting investors bearing an exit charge representing the costs of the transaction. The realisation is expected to take six to nine months. Going forward, the Board intends to offer a similar exit every two and a half years. The Board is also seeking authority for a placing programme to allow it issue up to 300m shares (55.2% of share capital) over the next 12 months, as well as its 10% tap issuance facility.

[dendria] 20/7/2017 07:36

Jun 17 NAV = $0.7580 (+0.41%). Monthly Perf. = +0.41%. YTD = +4.24%.

$2.25c div to be paid 2 Aug 17 (ex-div 27 Jul 17).

[dendria] 22/6/2017 17:53

Analyst comment on May 17 NAV:

N+1 Singer, 22 June 2017, "Level of refinancing and reset activity remains high"

The level of refinancing activity across the CLO market was still strong during May, although lower than in April. Portfolio activity remained high with continued level of resets and refinancing opportunities delivering good uplifts. NAV as at end of May was 75.49c, up by 0.91% on a TR basis from last month. Shares were trading on a discount of 4.3% as at the month end, and currently on 4.6% discount based upon price of 72c.

Fidante Capital, 22 June 2017, "CIFU - Carador Income - May 2017 NAV"

The NAV as at 31 May 2017 was $0.7549 per share, up $0.0068 per share (0.91%) in May and up 3.82% year-to-date (total return). The company received net cashflows of $16.7m (or $0.0308 per share) over the first two months of Q2 2017 (first two months of Q1 2017: $14.2m). The weighted average annualised cash on cash payments for the income notes in April and May 2017 was 22.37% based on the latest valuations. Of the cashflows received on the income notes during the month, 23.68% was allocated to principal (January and February 2017: 20.24%).


Liberum Capital, 22 June 2017, "Slowdown in loan compression"

Carador Income Fund and Blackstone GSO Loan Financing (BGLF) have both announced NAV gains of 0.9% for May. US CLO debt tranches performed relatively well in the month (gains of 1.1% and 1.8% BB and B tranches) during a broadly positive period for credit markets.

[dendria] 22/6/2017 07:24

May 17 NAV = $0.7549 (+0.91%). Monthly Perf. = +0.91%. YTD = +3.82%.

[cerrito] 23/5/2017 19:07

Just read the monthly report.
Interesting that once again no mention of credit defaults-either in the industry or in their portfolio. Last year many such references. Perhaps there were none which would be good news.
This is especially true as like VTA they continue to increase the share of income notes in their portfolio ie at 30.4.17 the percentage was 86% compared to 63% a year before and the percentage of mezzanine notes falling from 28% to 10% and to show how much more ballsy the portfolio has become cash has gone in the same period from a positive 8% to a negative 5.6%.
Be interested in how others view this

[dendria] 22/5/2017 12:11

Analyst comment on Apr 17 NAV

N+1 Singer, 22 May 2017, "Strong primary and secondary market CLO activity"
US CLO issuance has remained strong during 2017 at $27.6bn across 49 deals, double the volume in US CLO issuance compared to same period last year. Within the portfolio the level of reset activity has also been high, with two deals being reset with returns of between 14.2% and 17.3%. Average duration of the reinvestment period of its equity holdings now stands at around 3.1years, providing a better position for future loan volatility. TR NAV performance for April was up 2.7%, inclusive of 2.25c Q1 dividend declared on 20th April and paid on 3rd May.

Fidante Capital, 22 May 2017, "CIFU - Carador Income - April 2017 NAV"
The NAV as at 30 April 2017 was $0.7481 per share, up 2.71% in April and up 2.88% year-to-date (total return). The company received net cashflows of $13.9m (or $0.0256 per share) in April 2017 (January 2017: $12.7m). The weighted average annualised cash on cash payments for the income notes in April 2017 was 23.68% based on the latest valuations. Of the cashflows received on the income notes during the month, 21.23% was allocated to principal (January 2017: 20.47%).

Liberum Capital, 22 May 2017, "Reset activity drives 2.7% NAV uplift for Carador"
CLO equity investors have largely been able to offset the reduced yield on loan portfolios as a result of excess demand by refinancing/resetting CLO liabilities. Loan portfolios of CLOs issued in mid-2016 had a gross yield of Libor +440bps compared to current loan portfolios yielding Libor +390 bps following a wave of repricing activity in the market. CLO equity tranches have benefited from the ability to refinance/reset CLO debt tranches at a lower average cost to maintain the arbitrage. The length of reinvestment periods is also increasing to the benefit of equity investors. The CLO funds trade on an average 0.8% discount to NAV (9.9% dividend yield).

[dendria] 22/5/2017 07:31

Apr 17 NAV = $0.7481 (-0.29%). Monthly Perf. = +2.71%. YTD = +2.88%.

[cerrito] 01/5/2017 14:27

I have gone through the Annual report and not much that surprised me. When the £ strengthened to $1.25 a few weeks back I did buy a few more-obviously I should have waited.
I have the following observations:
The effects of higher interest rates continue to be manageable; with the portfolio at 12 16 a 1% increase would have hit net assets by $12m OK in the context of total assets of $400m
Note in 2016 no drawdowns under the credit facility.
Despite Note 10(b) laying out in gory detail the subordinated nature of its portfolio-72% of total assets in income notes at 12.16 and 79% as 3.17- could find no info on credit defaults. Note that the percentage of CIFU’s income notes were higher than FAIR’s(52% at 12.16) and VTA’s(24% at 12.16)
As I think we knew Directors have announced a 2017 dividend target of 0.09US$-the same target as fir 2016.
I found the Investment Manager’s outlook interesting and quote verbatim.
Quote

Most sell-side strategists are forecasting a continuation of the market's strong performance. The median 2017 total return forecast for senior loans is 5.5% with a few strategists expecting lower, but still positive, returns. History supports the median strategists' projections. Annual returns for senior loans have exhibited some auto-correlation. In other words, strong years like 2016 are often followed by another year of solid returns. In fact, the senior loan market is less likely to produce a negative return following an excellent year than it is when the prior year's returns are lower. The sample size is small but it follows that some investors will either chase returns or feel comfortable that the backdrop is advantageous to taking additional credit risk.

We believe two themes will dominate at the beginning of 2017 - supply/demand imbalance and repricing activity. First, demand for senior loans continues to overwhelm new, net supply of senior loans. For 10 consecutive months, quantifiable demand for loans (CLO issuance and retail flows) has exceeded net supply (approximated by the change in the size of the S&P/LSTA Loan Index). Given a fairly modest pipeline, this is unlikely to change over the near term. This technical backdrop supports loan valuations and has recently pushed over 70% of loans above par. Consequently, repricing activity has recently surged given the issuer-friendly environment. January has already surpassed the prior monthly record set in January 2013, according to S&P. As long as the market remains calm amidst a faster increase in the Fed funds rate relative to the prior two years, we expect issuers to continue to reprice their loans. In 2013, issuers were able to shave 27bp off the average cost of their debt. If that is replicated in 2017, repricing will offset some of the increase in the Libor base rate that results from Fed rate hikes.

Since the announcement of the final risk retention rules in the US, the number of managers issuing new CLOs has declined, resulting in a more concentrated CLO market. We expect managers with larger pre-existing CLO platforms, such as GSO, will fare better than smaller players. While implementation of the rules in the US may hinder issuance in the short-term, the market has prepared well for these rules, and so the drop in issuance is unlikely to be meaningful.

The U.S. CLO market may face some challenges as elevated loan prices reduce par building opportunities, and increased Libor and continued loan refinancing and repricing activity both put pressure on weighted average spread tests and may erode equity cashflows. However, we believe that Carador will continue to benefit from the value gained through the potential refinancings of certain CLO equity positions.

Looking forward we will continue to rotate the Income Note portfolio towards longer dated deals as we believe these investments will represent more attractive relative value opportunities. At the same time, we will selectively reposition our Mezzanine exposure and opportunistically look into redemption opportunities for older vintages deals when economically efficient.

unquote

[dendria] 20/4/2017 07:28

Mar 17 NAV = $0.7503(-0.33%). Monthly Perf. = -0.33%. YTD = +0.17%.

$2.25c div paid 3 May 2017. Ex-Div 27 Apr 2017.

[dendria] 22/3/2017 17:49

Analyst comment on Feb 17 NAV:

N+1 Singer, 22 March 2017, "Premium rating restored, high levels of refinancing activity"
Premium rating restored with shares trading at 0.5% premium to end of February NAV of 75.28c. CLO refinancing activity continues with four positions in the portfolio having been refinanced within the past month. Expectation for further refinancing activity for 2013 and 2014 deals remains high.

Fidante Capital, 22 March 2017, "CIFU - Carador Income - February 2017 NAV"
The NAV as at 28 February 2017 was $0.7528 per share, down 0.26% in February and up 0.51% year-to-date (total return). The company received net cashflows of $14.16m (or $0.0261 per share) in the first two months of Q1 2017 (October and November 2016: $16.7m). The weighted average annualised cash on cash payments for the income notes during this time period was 23.41% based on the latest valuations. Of the cashflows received on the income notes during the first few months of Q1 2017, 26.24% was allocated to principal (October and November 2016: 23.84%).

Liberum Capital, 22 March 2017, "Equity tranches reduce February returns"
February's returns for the CLO funds were slightly lower than recent months due to some pricing volatility for CLO equity tranches. CLO debt tranches generally performed well again in the month with an uplift of 0.97% and 0.95% respectively in BB and B US post-crisis tranches.