Carador Income Share Discussion Threads

[badtime] 02/10/2015 21:56

Yes was thinking the same....might nip back in

[skyship] 02/10/2015 17:50

The steadying of the price amidst good volume, especially today, suggests the bottom may be in; and not before time!


free stock charts from uk.advfn.com

[ben12358] 29/9/2015 19:00

This share falls on low volume and people hit their stop losses, which creates a vicious circle. I don't think people appreciate the worst that should happen is a suspension of divis for a few quarters (in theory)..People mix up cdo's with clo's.I am holding for a long time so I trying to ignore the drop. Others don't have the same luxury. From a chartists viewpoint it's a massacre currently!!

[yeild hunter] 29/9/2015 13:02

Why the fall?

It looks to me like its a combination of upcoming interest rate rises,a slowing world economy,US high yield bonds falling in value and the 5% rule change around CLO providers. In this environment perhaps its not surprising to see the share price widen to a larger discount to NAV like Volta. Odd that fairoaks and Blackstone GSO are still trading at a premium to NAV though, maybe its because they are recent launches and their inst.shareholders havnt yet sold.

[ben12358] 28/9/2015 08:21

I think the distibutable reserves are approximately the balance sheet value/nav, ignoring accruals. I.e. There appears to be no debt within the company itself. Having said that my understanding is that the clo's themselves may carry debt so this isn't straightforward!

[cerrito] 27/9/2015 15:02

Thanks for that Ben12358
I agree that not a normal company; I also note in both H1 14 and H1 15 FWIW operating cash flow was greater tha dividends paid.
You refer to using up reserves to pay dividends and I could not find out what the revenue reserves are-although I appreciate as they have to pay out 85% of income will not be great.
For me the moral is that until I understand a bit better the dynamics, keep my holdings modest

[ben12358] 26/9/2015 22:18

Cerrito - I wouldn't say this is like a 'normal' business where what you say about paying divs out of reserves would be accurate. At the balance sheet date they have to 'mark to market' the value of the clo's so when market volatility + perceived risk increases in the market market, Nav decreases -this is a function of the fear and greed of the market rather than a case of 'using up reserves to pay dividends'In fact, when volatility is high this sows the seed of future profitability because they can buy more with less at that point. When things calm down Nav should increase.However, it could all go terribly wrong so dyor as always...it really is a share for long term income rather than a trading opportunity, in my opinion.Hope that helps.

[eeza] 26/9/2015 21:30

Mentioned earlier by joan of arc.

But now declining faster than the div payment.


Joan of Arc
23 May'15 - 12:40 - 394 of 439 0 0

The reason why this won't get rerated in a hurry is because the share price and NAV have just been going down in line with the dividend payment for the last couple of years. So during that time my net return has been practically zilch. All in all this has been a pretty lousy investment.

[cerrito] 26/9/2015 20:54

I have bought a small amount of CIFU and have been looking at buying more.
Had a good look at the financials. I think I am comfortable with their calculation as at June 30 2015 that a 1% increase in interest rates will have a negative impact on Net assets of $13.2m-ie roughly 2.6%.
Where I am having difficulty is that they seem to be paying dividends out of capital over the recent years…with the consequent reduction in net assets ie from $557m to $488m between 31.12.12. and 31.12.14. Appreciate the take any of you have on this.
Thanks

[specuvestor] 26/9/2015 20:08

I was getting a bit worried with the downward drift in the share price but what has reassured me in the ft adviser article is:

1) secured against assets 2) rank above bonds & 3) floating rate loans (interest rates likely to rise)

Can anybody confirm that these three attributes are still possessed by Carador?

I have held for nearly 6 years now and can recall when Carador was on a 40% discount to NAV and ridiculous 25% bid offer spread.

Hope those days are not returning!

[skyship] 26/9/2015 17:53

Ben - an excellent article - thnx for that...

[ben12358] 24/9/2015 19:49

Maybe industry propoganda, but it explains clo's a littlehttp://www.ftadviser.com/2015/03/30/investments/investment-trusts/unfairly-tainted-clos-offer-safe-and-steady-returns-Emsl6TBJvD8wrFtRlMquAO/article.html

[ben12358] 24/9/2015 18:15

Wouldn't higher capital requirements lower risk and so increase the value of loans so Nav neutral re new purchases on the secondary mkt?Net purchases today by my reckoning?

[skyship] 24/9/2015 16:06

Daniel - thnx for that. Makes an interesting read (link below); but surely as CIFU is a Fund investing in the secondary market any arduous capital rules on issuance don't really affect us. Am I missing something else perhaps...

[danieldruff2] 24/9/2015 15:53

The article you want to read is from early September in the FT
"Rule change puts pressure on CLO managers"

[skyship] 24/9/2015 15:49

Incidentally, as the monthly fact sheet shows, the portfolio is incredibly well diversified; and only 3.5% exposure to O&G. We may be seeing a further Mark-to-Market NAV fall for September, but these now looking well oversold.

In £Sterling terms the share price hasn't fallen quite so much because of the strong $.

[badtime] 24/9/2015 15:43

Decided to sell earlier today at 79 cents ..on a gut basis plus it's nice having a large div but equalled by capital loss? hmmmGLA

[skyship] 24/9/2015 15:41

Apparently credit markets have held up well; but not stopping this from now registering quite a serious sell-off! 78c!!!

[ben12358] 22/9/2015 08:25

Badtime -when interest rates do increase I think the hope is that the increased returns from floating rate loans will more than offset any additional delinquent payers

[cerrito] 21/9/2015 20:03

My thanks too Dendria

[badtime] 21/9/2015 19:06

Thanks for that Dendria....so they think US rates q1 next year...with the bias on upward movement is the future a tad dark for CIFU?

[dendria] 21/9/2015 18:44

Analyst comment on the Aug 15 NAV (-3.15%):

N+1 Singer, 21 September 2015, "August lull proves a tough month for US CLO equity"
August proved a tough month for CIFU as the NAV declined 3.15% amid broader market volatility and soft pricing of US CLO equity in the secondary. Thursday's 'hold' decision from the Fed along with the accompanying dovish statement has likely pushed back the first US rate increase into Q1 2016 which is supportive for CLO equity. Despite providing floating rate exposure, the presence of Libor floors in loans acts to marginally compress equity distributions until Libor crosses the floor level. Post August end, lower market volatility, improved risk sentiment and now dampened rate expectations provide the potential for secondary pricing to rebound with CIFU positioned to take advantage of pricing dislocations via current cash of 4%. The shares trade on a 3.9% discount to August NAV and now yield over 12.2% with the Q3 dividend already fully covered.

Liberum Capital, 21 September 2015, "Mark-to-market volatility impacts NAV"
CIFU's NAV fell 3.2% to $0.8438 per share mainly due to a decline in asset values from market volatility in the month. NAV total return in 2015 to date is now +2.1%.
The manager reports that some post-crisis CLO equity positions were quoted 3-10 points lower in the month. The weighted average decrease in the valuation of the CLO equity and debt positions was -2.9% and -0.8% respectively.

Dexion Capital, 21 September 2015, "Carador Income - August 2015 NAV"
The NAV as at 31 August 2015 was $0.8438 per share, down 3.15% in August and up 2.10% year-to-date. The decline in the income notes (63.2% of the portfolio at the end of the month) contributed -2.89%, with the decline in mezzanine notes (32.8% of the portfolio at the end of the month) contributing -0.81%.

[yieldsearch] 14/9/2015 19:47

Cerrito re your post 421:
yes income notes are the most junior part of the clo. they are getting all excess cash after payment of interest on the senior and mezz bonds, and if the performance of the clo is deteriorating, the income is switched off. Unlikely that default rate is increasing soon but with interest rate going up, the default rate may slighlty increase (debt will become more expensive and refinancing more difficult.

Out of the top 5 exposures, 3 are from blackstone. So Blackstone are getting a fee for managing the clo (as CLO manager) , and then getting a fee for buying and managing the clo notes (as CIFU manager). Nice no?

and in the reporting:
"The Company also limits its exposure to transactions managed by the same portfolio manager to 15% of the NAV, at the time of investment. However, if the portfolio manager is an affiliate of the Investment Manager, this limit is increased to 60% of the Net Asset Value, at the time of investment."

so do I read correctly that up to 60% of the CIFU assets can be exposure from blackstone managed funds, and therefore blackstone getting two management fees for those?

And also seems interesting that the limit is higher for the related party than a third party portfolio manager. Some people may like Blackstone (I do btw) , but the basic of a CLO and also I guess CIFU is diversification.

Not a holder but monitoring, i am a holder of volta finance.

[cwa1] 11/9/2015 13:29

Decided to use up the "dross" at the bottom of one of my accounts for a top up here. Got them at $0.81 so I assume there's plenty of stock about for now.

[danieldruff2] 11/9/2015 10:59

Sometimes it's better to travel than arrive. How else could one explain FAIR on a premium and CIFU on a discount although the latter has a much longer track record.