Volta Finance Share Discussion Threads

[yieldsearch] 01/3/2016 17:25

"Banks cut issuance outlook on collateralised loan obligations"


I guess could also impact on the refinancing of existing positions held by CIFU, VTA

[skyship] 26/2/2016 15:17

By the way, some here may recollect I ducked out of VTA last time I held, sold @ 7.00 in November so as to buy into LMS. It was a great trade as LMS announced another Tender in their liquidation programme.

LMS have since drifted back to a great BUY level again. They are just starting to move better ahead of the Prelims in c2weeks time.

In the meantime the NAV should have been advancing due to the $ strength. I estimate now at 100p versus the share price of 69.5p-71.2p.

I don't have to sell VTA this time around as they appear to be great value on a 21% discount and 10.4% yield. Still, I've loaded up with LMS again, ready for the next roll of the dice there...

[skyship] 26/2/2016 15:09

Likewise of course - thnx DB

By the way, does anyone know whether there is a wind-up date for this trust; or perhaps a Continuation Vote?

[yieldsearch] 26/2/2016 14:27

Davebowler: tks for posting, always appreciated

[davebowler] 26/2/2016 11:51

Liberum;
Volta Finance (BUY)
Mark-to-market losses drive 4% NAV fall in January

Event
Volta's NAV at 31 January 2016 was €7.51 per share which represents a decline of 4.0% in the month mainly due to a mark-to-market decline in prices of CLO debt tranches.

The mark-to-market performance by asset class was CLO equity -2.4%, CLO debt -5.7%, Cash corporate credit +2.5%, synthetic corporate credit -0.2% and ABS +0.6%.

In terms of portfolio activity, Volta sold two US CLO debt tranches at an average projected yield of Libor +350bps and received the principal payment from one Euro CLO debt tranche. These proceeds were recycled into assets with significantly wider spreads (Libor +975bps on average).

Liberum view
The CLO market has experienced significant mark-to-market movement since the end of June 2015. During this time, Volta's NAV total return has been -4.8% which is ahead of peers that value on a mark-to-market basis (BGLF uses a mark-to-model approach rather than mark-to-market and has a smoother NAV return profile as a result). Volta's relative outperformance is due to the company's defensive weighting to pre-crisis CLO debt tranches.


VTA currently trades on a 22.6% discount to NAV (10.5% prospective dividend yield) which represents a 10% discount to the sector which we believe is unwarranted given the manager's track record of outperformance and ability to access attractive returns in other asset classes (e.g. bank balance sheet transactions).

[davebowler] 19/2/2016 09:44

Liberum;
Carador Income Fund
Further NAV decline in January

Event
CIFU's NAV fell 5.0% in January 2016 to $0.6873 per share due to ongoing volatility in credit markets. Every tranche within the JPM CLO Index experienced negative returns in January.

The US CLO new issue market experienced a slow start to the year with weakened demand for CLO equity following the decline in CLO equity positions in the second half of 2015. Market forecasts for the expected leveraged loan default rate have risen from 2% to 3% but this is still below the long-run average.

CIFU recently 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 NAV decrease in January follows a NAV total return of -8.5% for 2015 which is predominantly due to the high weighting to post-crisis USD CLO equity investments. CIFU currently trades on an 11.5% discount to NAV. The combnation of the discount and the 14.1% dividend yield will attract attention from opportunistic investors but we believe VTA offers better value (25% discount to NAV) and has had a superior track record in recent years

[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

[skyship] 26/1/2016 16:08

Bought another 2500 @ E5.80 with cash raised from selling the last of my CIFU - stupidly hung on to a few of those when selling half back up in the 80s versus the 64 now! Hope this will recover a good part of that loss.

[badtime] 26/1/2016 15:13

Looks a well timed buy..I would hav bought yesterday myself but no free funds apart from the SIPP in preparation for another tranche due to be withdrawn in April

[skyship] 25/1/2016 11:00

"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)."

Exactly; actually a 26.6% at the E5.74 I've just paid for 2500. A small re-entry and may add. After reading through today's RNS the value here does now look rather extreme and the fall well overdone.

Liberum's target of E8.55 may be relevant in the long term; but in the Medium Term, if they continue to avoid bullets in the way they have done, a return to the E7.00 level could well be on the cards. At that level, 22% up on where we are now, the discount to the current NAV would be 10.5% and the yield 8.9%.

Surprised I was able to buy at no price change today!

[davebowler] 25/1/2016 09:44

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).

[skyship] 22/1/2016 08:25

CIFU announced an NAV fall for December of 5.4%!

[yieldsearch] 19/1/2016 12:19

thank you davebowler, i pasted it in the FAIR chat

[davebowler] 19/1/2016 11:50

Liberum on FAIR;
Event
FAIR's NAV fell by 3.3% in December 2015 to $0.866 as the company's CLO equity positions were marked down in the month because of lower loan prices within their portfolios.

The Master Fund may benefit from the loan price volatility over time as loan prepayments can be recycled into new opportunities at discounted levels (average price of S&P Leveraged Loan Index is 90.5).

The underlying portfolio continues to perform well with zero loan defaults to date and the company's CLO equity positions are expected to make quarterly cash distributions of $14.7m in January 2016 (compared to a projection of $11.3m at the time of investment). Dividends for 2015 were equivalent to 11.5% of the December NAV.

Liberum view
Of the listed CLO fund peer group, Carador and FAIR are likely to have been most affected by recent mark-to-market movements given their high weightings to USD CLO 2.0 equity tranches. The key risks to the realised return of equity tranche investors are loan defaults, Libor rate increases (removing the benefit of the Libor floor) and a decrease in the spread on the loan portfolio. Loan defaults in the market have risen slightly but are still well below historical averages and the 3 month US Libor rate has moved up to c.60bps following the Fed rate rise. The impact of these will be partially offset by the rise in loan spreads which will present opportunities for CLOs that are still in their reinvestment period. FAIR is currently trading on a 7.4% premium to NAV compared to a 10% average discount for the peer group (assuming an average 2% NAV drop in December for peers).

[davebowler] 30/12/2015 11:54

Guernsey, 18 December 2015

PERFORMANCE

At the end of November 2015, the Estimated NAV of Volta Finance Limited
(the "Company", "Volta Finance" or "Volta") was EUR296.7m or EUR8.13 per
share, an increase of EUR0.10 per share, or +1.2%, since the end of
October 2015.

The YTD NAV performance for the 2015 calendar year, including the April
dividend paid, stood at +10.0% as at the end of November.

The GAV stood at EUR344.4m at the end of November.

On 14 December 2015, the Company paid a further dividend of 31 cents per
share, to shareholders on the register on 4 December 2015. On an
ex-dividend basis, the Estimated NAV at 30 November 2015 would have been
EUR7.82 per share.

Volta's share price has seen some weakness in recent weeks, commencing
in late November and continuing into December. At the time of writing,
the share price is trading at around a 19% discount to this ex-dividend
Estimated NAV. This widening discount probably reflects the recent
weakness and stress in the US loan market, the high yield markets and
the broader credit markets.

We would note that valuations at the end of November already reflected a
significant level of this stress. For example, as at the end of
November:


-- Volta's USD CLO Equity tranches were priced, on average, at 55.1% of par
(significantly below the 75.5% average price recorded at the end of June
2015). These assets were valued at EUR45.1m at the end of November and
generated cash flows of EUR2.9m in the last 3 months
(September/October/November), implying an annualised yield in excess of
26% of the end of November valuation.

-- Volta's USD CLO Debt tranches are priced, on average, at 88.5% of par
(compared with 95.4% at the end of June 2015).


The view of AXA IM, is that the current stress in the US loan and other
credit markets reflects the expectation of an increase in default rates
in the US loan market from prevailing levels, which are far below the
historical average, to be closer to historical average levels by end
2016 - mid 2017. This potential turn in the credit markets seems to have
taken some participants by surprise. However, this has been AXA's
central scenario for some time. Accordingly the portfolio has been
orientated to retain a significant portion of 1.0 CLO tranches (which
have less sensitivity to episodes of stress such as that currently being
experienced), to be very selective in our exposure to CLO Equity
tranches and to increase the exposure to European assets.

The key question from here is whether this expected increase in default
rates is the sign of the turn of the present credit cycle, with broad
implications, or the consequence of few sectorial issues, such as the
energy and materials crisis and the difficulties for some retailers to
adapt to the on-line consumerism. Our current view is that the latter
explanation is the more likely and that current low prices in the US
loan market offer good investment opportunities.

Although we expect the US loan market to see an increase of default
rates to reach, or even slightly exceed, the historical average level by
the end of 2017, this should not have, in our present opinion, a
significant impact on Volta's expected CLO cash flows.

MARKET REVIEW AND PORTFOLIO ACTIVITY

In November, credit markets were shaky again, with a negative
performance of both corporate credit bonds and the US and the European
loan markets.

On average during the last 4 months, declines in prices were roughly
compensated by cash flows received. This month again, mark-to-market
variations* of Volta's asset classes were neither significantly down nor
up: -1.4% for Synthetic Corporate Credit deals; -0.9% for CLO Equity
tranches; +0.3% for CLO Debt tranches, 0.0% for Cash Corporate Credit
deals; and, +0.6% for ABS. During the month, the US Dollar appreciated
by 4.2% against the Euro, contributing positively to the overall
performance. However, following the recent strength in the Dollar
against the Euro we increased our currency hedging and the Company's
exposure to the Dollar has been reduced somewhat standing at 36.5% of
the Estimated NAV as at the end of November.

In November, Volta received the equivalent of EUR1.8m in interest and
coupons (non-Euro amounts translated into Euro using end-of-month cross
currency rates) bringing the total cash amount received in terms of
interest and coupons during the last six months to EUR13.3m. Cash or
cash equivalent instruments, at the end of November was at EUR21.6m.
Accounting for the December dividend payment, Volta could be considered
as having approximatively EUR6m available to deploy.

In November Volta did not execute any trades in anticipation of better
opportunities in due course. We anticipate that we will continue to sell
part of the 1.0 tranches and purchase more recent transactions at deeper
discount margins.

Overall we continue to see opportunities in several structured credit
sectors including mezzanine or equity tranches of CLOs, RMBS tranches as
well as tranches of Cash or Synthetic Corporate Credit portfolios.

* "Mark-to-market variation" is calculated as the Dietz-performance of
the assets in each bucket, taking into account the Mark-to-Market of the
assets at month-end, payments received from the assets over the period,
and ignoring changes in cross currency rates Nevertheless, some residual
currency effects could impact the aggregate value of the portfolio when
aggregating each bucket.

CONTACTS

For the Investment Manager

AXA Investment Managers Paris

Serge Demay

[e-mail]

[davebowler] 21/12/2015 09:01

Liberum;
Volta Finance Fund (BUY)
1.2% NAV increase

Event
VTA's November 2015 NAV per share was €8.13, increased by 1.2% since October 2015. YTD NAV performance in 2015, including the paid dividend, was 10.0%. The US Dollar appreciated by 4.2% against the Euro in November positively affecting the NAV.

Mark-to-market performance of VTA's assets in November 2015 were -1.4% for Synthetic Corporate Credit deals, -0.9% for CLO Equity tranches, +0.3% for CLO Debt tranches and +0.6% for ABS.

VTA did not execute new trades and received €1.8m in interest and coupons in November bringing the total cash amount received in terms of interest and coupons during the last six months to €13.3m. Cash and cash equivalent available for deployment after adjusting for the December dividend is €6m.

Liberum view
The US Dollar appreciation and the stresses on US credit are basic points of VTA's portfolio strategy that focuses on 1.0 CLO tranches and selective exposure to CLO Equity and European assets. VTA's YTD total return is 8.5% and it is trading at a 24% discount against the November NAV.

[skyship] 15/12/2015 16:48

Hmm - what do you think of NBDG offered at 65.5p versus last NAV of 73.3p - perhaps lower now of course! Likely to start buybacks again in the first week of the New Year, so suspect we are at or very close to the bottom over there...

[tiltonboy] 15/12/2015 16:30

Getting a little uncomfortable in the short-term, and will undoubtedly throw up some opportunities, but can we take advantage of them!

[skyship] 15/12/2015 14:39

There are currently a considerable number of articles on the problems in the debt markets. IMO the inference from these articles is that no matter which section of the debt market you look at, the overall move is to falling prices, higher yields, increasing spreads. With the mark-to-market requirements, fund prices will fall and opportunities will appear.

ACD, CIFU, DREF, NBDD, NBDG, VTA etc have already fallen and may be nearing attractive buy levels.

Chaos in the debt markets as Third Avenue liquidates:



Could be opportunities for cheap stock soon - as GS suggest:

[cousin jack] 28/11/2015 22:53

Thanks Skyship. Should be an interesting 2/3 weeks.

[skyship] 28/11/2015 08:10

CJ - thnx for your kind comments.

Personally I have found over now 4yrs of playing these Tender offers from liquidating companies (as per the SL thread); that for the best outcome you should tender 100% and wait for your allocation, as one can get lucky with the overages and do a lot better than the official rate.

In liquidation scenarios the shares never fall back too far as there is always another Tender around the corner.

I have the utmost respect for Tilts, a friend and a broker who really knows his stuff, especially in the absolute returns sectors of the Market. In the case of LMS I think his concerns about portfolio concentration are not yet relevant; and also there are obvious reasons for believing that the rump holdings may be unlikely to contain a few duds as the Rayne interests were more than happy to assume the assets & liabilities, as were the potential new holders.

[cousin jack] 27/11/2015 17:39

Skyship: I bought some after the Boards change of direction a few months ago. I wouldn't have considered them had you not highlighted them on a number of boards so thank you for doing so. And for holding firm to your view about the likely tender despite the doubts of recent weeks and mistrust of the Board.

Bearing in mind the views of Tilts and others I am now minded to play safe, take the profits and move on........but am unsure whether to do so I would be better (a) tendering everything and then selling what is not accepted in the tender at whatever the price drops to ; or (b) simply selling everything on the last possible day before tender submission. Based on your experience of these situations have you a view on this?

Thanks

[skyship] 27/11/2015 16:22

I do hope others followed that LMS trade I recommended on the 19th. All in all I haven't played this year very well; but that was a real no-brainer...the Tender duly arrived this morning and the share price now up 8%.

[davebowler] 23/11/2015 14:41

Liberum;
NAV benefits from currency gains

Event
VTA's NAV rose 0.1% in October 2015 to €8.03 per share. YTD NAV performance for 2015 is +8.7%. NAV performance benefitted from the US Dollar's 1.6% appreciation against the Euro in the month.

The mark-to-market performance by asset class was CLO equity +0.7%, CLO debt -1.4%, Cash corporate credit +0.1%, synthetic corporate credit +0.9% and ABS +0.3%.

Volta acquired three assets in the month: two BB rated debt tranches of USD CLOs and an additional investment in Saint Bernard Fund (which predominantly invests in US RMBS). The average projected yield on the CLO debt tranches is 9.5% and the Saint Bernard Fund has delivered 14% p.a. since inception in 2008. The CLO debt tranches acquired are longer duration (and therefore more sensitive to spread widening) and the manager expects to rotate out of older CLO debt tranches that are less sensitive to market volatility into more sensitive assets that can be purchased at lower prices (higher discount margin).

€9.1m of principal was received from two deals in October: a USD CLO debt position and a USD CLO equity position that the manager decided to call. The CLO equity tranche has delivered an 18.8% IRR and was reimbursed at 133% of par.

Liberum view
Volta's portfolio continues to perform steadily with a YTD NAV total return of 8.7% which remains the highest of the London-listed CLO funds (BGLF +7.7%, FAIR +1.7%, CIFU -1.9%). We note the significant beneficial movement in the USD/EUR FX rate in November which we estimate will add c1.5% to NAV in November (based on the latest FX rate). We believe the flexibility to access asset classes offering relative value opportunities (such as the CLO warehouse and bank balance sheet investments) gives it an edge over peers. Volta trades on a 13.6% discount to NAV which is c.10 percentage points wider than the peer group average.