Nice fat dividends in my ii accounts this morning. Love these high yielders. |
The current discount gives room for a decent return even if there are some bad loans, and a par return even if there are a lot. More run of the mill will be discounts for early realisations, but my reading of the last RNS is that these are built into the new NAV, |
The big red flag was the muppets who ran this lending money to themselves to go have fun withFortunately that only happened a few times and the loan book isn't toxic like all those peer to peer/mini bond frauds set up during QE |
Yep - it's a risk but it's one that looks well priced in |
Hence the 30% upside to NAV and 9.7% dividend yield, paid quarterly. |
Yep there was at least one very long duration loan but think that got repaid The NAV is the loan par value discounted back so there's at least some room to sell them before maturity |
I believe average outstanding loan duration is around 9 months. On 7 February had £15 Million in cash, about 7p a share. |
What is the timeline for Gabi to fully wind down is that known? |
Poor GABI feeling sorry for itself. |
Added 4500 at 65.364p, with cash from TENT capital return.
GABI now my largest holding followed by AEET SEIT ADIG MNG RMII. |
My floating rate high yield credit exposure has long been US BDCs - 12-14 CAGRs over 15 years - but with the prospect of possibly lower US rates and credit losses racking up I've reduced those a lot Want to get exposure to Eurpean CLO mezz notes - alas TFIF has a lot of US exposure and quite a lot of CLO equity The Aroundtown junior perpetuals have held up very well - they all reset in a few years to a spread over floating rates - I dumped mine at a yield to call of 6.5% and would want to get c8 before going back in |
I like all three! They all have short duration, and that is a nice place to be while the best part of a trillion Euros is found to expand Europe's (and UK's) military. Clearly, some of that will need to be borrowed.
RECI has very low duration and is another big position. Only moved higher the past few days as well.
I also like inflation linkage, with SOHO and SUPR being top choices. SEQI is my long duration (not that it is too long) holding of choice outside of these. Trying to add roughly 3% [effective] yield to these by trading a portion of them. Owing to the range they have been stuck in, it's closer to around 5%. Add that to, for example, NESF and SEIT at an already c. 13%, and we'll soon be talking real money!
Global lunacy on the increase forces me to keep a fair dollop of readies. |
Sold 20K RMII AT 73.35p, Ex Dibidend. Added another 20000 GABI AT 65.3p.
RMII May well be worth a couple percent more than GABI, however certainly not 12% more.
Used leftover cash to buy ASLI at 55.684p. |
Thanks chucko
Added 20,638 at 65.65p.
Next capital return should be around 84.5p, 30% premium to my purchase price today.
Plus a nice 9.7% dividend yield paid quarterly. |
 The write down of 4.5p GABI NAV appears to have caused concern. Mind you, the share price is effectively off twice that amount (almost, and dividend adjusted). Trying to make economic comparisons when these trusts are in different stages of wind down is difficult as it takes just one loan to change perspective when the portfolios are now somewhat undiversified.
On GABI, there have rarely, if ever, been untoward events (there have been fears of it when the matter of the connected parties was a potential concern, although most of that is now settled). Also, it's not as though either of RMII or GABI have clearly keen seller, but don't forget, we've seen GABI all over the map before on little real information. What I would say, is that the July wind down plan published by GABI was very well received, but once the NAV write down came to pass, you could read the same document and realised that you understood very little since each of their 5 scenarios was more descriptive than numeric, at least as far as the inputs were concerned. But if you have faith in the GABI management (I do, for choice) then the total repayaments from here should yield a really good return, no matter the stated IRR (as we do not know the average lifespan of each scenario).
Meanwhile, RMII announced via its Feb NAV statement of the two significant loan repayments. Seems to be little other than a momentum thing to differentiate between RMII and GABI. |
Added 9491 at 65.57p.
Quite a discrepancy between GABI & RMII considering they are both in wind up and have similar NAV. RMII has more cash and shorter loan duration. Although can ⁿquickly change with the odd extension here and early repayment there. I don't think a 2 fold discount differential is justified.
What's you're view chucko? You probably have more knowledge of the loan books. |
I sold 9000 for 69.14p at the opening on Ex Dividend day.
Purchased 3200 at 66.552p this morning. |
Nicely glossed over Ex Dividend fall being around 3 x and not 7x.
Would like to be buying down here, but fully committed elsewhere and will probably be a while before we get further news. |
Indeed. Sold those, but bought a lot at 70p (68.4p div adj.). So I'm out of pocket by 2.5p, but as posted above, see decent risk metrics on this. Also bought a few at 65p, but many more at 68.4p. Could be worse as I did sell the original holding at the equivalent of 76p as I thought they had got a little too expensive.
So I got it about 2/3 right (for now). |
Chucko didn't you post a week before Ex Dividend day that you'd purchased a few in low 67p area?
Already down to 71p before and fell sharply a few hours following NAV update. Traded around 69-70p during last 3 days before going Ex Dividend. |
But this time, it fell from 75 to 64 with only a 1.58p dividend. That's something else besides. That's 7x, although with a notable NAV cut in the middle. |
Noticed lots of these very high dividend yielding companies often see share price fall 1.5 x to treble dividend amount. Between 1 to 4 days before and some weeks after going Ex Dividend. |
Clearly a keen seller, concerned with the sudden NAV drop of a couple of weeks back.
They may have fooled themselves: under a tender "program", which is effectively what is going on you are committing to repurchase further shares at the NAV (you don't have to, but that is what they have done for already 51% of the shares). But if you keep buying at an NAV higher than what you might expect to get back from the loans, then at some stage you will be buying at an implausibly high price, and any small remaining purchases could only occur at a totally collapsed rump NAV. Even the risk of this occurring is to be avoided. They know that there will be one or two tricky loans after December 2025 and that is amply signalled in the July wind down plan.
Let's say they buy back the remaining shares at the current NAV (being 84.6p with the previous half having been bought back at roughly 89.6p, then the average is 87.1p, not far from the base case Recovery Value of 86.0p. The downside case is 77.1p, so you could form an argument that the current share price of 65p is the recovery value required to achieve the total average being the 77.1p.
But these Recovery Values represent the discounted value of the cashflows at 12% and the downside case has a rather longer average life, so it is not so bad. This is demonstrated by the Total Distributions being broadly similar when compared between the best case and the worst case. Frankly, that is all I care about as I do not discount future flows at 12%, especially when the downside case has effectively priced in a poor result from loans which is itself "predicted" from such a high discount rate.
To add to the complexity, in the plan, they refer to "new shares" as if these are the shares that were reissued after the first return of capital, being some 37.5% of the NAV. If that is the case, then the high IRRs, which caused such a rally in the shares when announced, are based on a riskier average portfolio (some of the easier loans having been redeemed already). This confidence is consistent with the high aggregate expected Total Distributions across all scenarios, and also with the low 0.5% average default rate since inception.
At the now 65pps, the 77p return represents a total return of around 30% given an average life of a year or so, but would actually be higher given that the 77p is a discounted value. Add 12% to that number and the total return could be nearer 40%.
This is all mathematical/theoretical, but if an investor has an inkling that some big loan is going bad and that explains the reason for the large NAV fall, then that's another matter. But I am putting my money on the average NAV argument. |
Another falling knife impression going on here, steeper than 2023. I've started to try and catch it... |
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