Volta Finance Share Discussion Threads

[hpcg] 13/10/2020 12:27

Yieldsearch - well yes, you named some. Non-retail property debt, funds of CLOs, home mortgages, funds of consumer debt even. The fiscal response is materially beneficial to any lender, and low interest rates also as they increase the pool of new money to support prices and businesses. I am also in RECI and haven't owned UEX as I did not get timing right. Mallinkrodt bankruptcy over the weekend pushed leverage loan default rate up to just over 4% from just below, and expectations now are for that to top out at 6.6%. httPs://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/us-leveraged-loan-default-rate-expected-to-peak-at-6-6-lcd-survey-60554195 VTA is 47% CLO equity, which gets impaired much before CLO debt. If we model that half the CLO equity ended up being worth nothing, and 10% of the debt*, then that would make a 35% loss of capital. Income would fall by lets say 50% as the equity will be the lions share. That would mean for a VTA holder a dividend of half as much (5% at purchase), still twice covered. The share price would of course drop in those circumstances, indeed the discount would likely widen, but that is immaterial to the long term return of the circumstances I outlined. As it is the NAV of our underlying already to an extent discounts anticipated losses. My understanding is that there is effectively no bid for impaired instruments that fall below 80% until investors in distress get interested at 60% so there are potentially step function changes, but otherwise the NAV of the collateralised unit incorporates loss expectations. Actually what the month to month NAV changes show is that overall loss expectations are actually retreating. *From what I can see in the asset list our CLO debt is quite a long way down the stack too, so perhaps 10% is optimistic if equity took such a big haircut. It is step functions all the way down.

[yieldsearch] 13/10/2020 09:40

hpcg: re pools of debts could you elaborate? I am in ukml and reci. sold uex i think fully priced. bought vta at 3.93 recently

[hpcg] 13/10/2020 09:11

Skyship - I think there are pools of debt that are materially underpriced. We can see this exhibited in several investment trusts listed in London. I have seen some fund manager commentary saying the same. It is fear of the unknown, and I think flows to big tech equity that are providing this opportunity. The good thing about it from our point of view is that we are paid handsomely to wait. Indeed we are paid handsomely even if the market is correct about NAV.

[skyship] 13/10/2020 07:58

So at E4.13 the discount is now 32%! Allied to the 10.65% yield, surely some institution or other will recognise the value here and buy a few. Not holding my breath; but certainly holding my stock.

[yieldsearch] 12/10/2020 21:29

Sept. monthly perf: +4.8%

[hpcg] 07/10/2020 16:27

The discount certainly covers a multitude of bad outcomes. Worse than any seen in the CLO space after the GFC.

[skyship] 07/10/2020 16:09

hpcg - XD now. I've made a small top-up today @ 413c (377p), available due to that 30k sale at 400c. At that price the discount is 28.8% and the yield a remarkable 10.65% The only problem is the immediate markdown in the portfolio due to the wide spread; but that's a bit of a short-term irrelevance.

[hpcg] 30/9/2020 17:09

I bought some this afternoon and will look to add more in October assuming the price comes down by the dividend. My hypothesis is that the dividend will increase for the next quarter's payment. I was tempted to get the Dutch shares where the spread is more transparent but they have seemingly dozens of initiatives around withholding taxes at the moment.

[cerrito] 30/9/2020 16:31

Interested in his comment that if VTA had a mark to modal at the moment their NAV would be 10/15pc higher.

[astonedt] 30/9/2020 09:15

Listen to our exclusive interview with Hardman & Co discussing their recent report ‘Value added by active portfolio management' hTtps://www.directorstalk.net/volta-finance-resilient-portfolio-will-lead-to-a-more-resilient-nav-analyst-interview/

[rambutan2] 22/9/2020 02:44

SKY, likewise I don't hold many as wary of the economic outlook, the leverage and the mkts distrust of CLO vehicles. Would be happy to add if became really oversold though ie was able to pick up a few FAIR in march when it looked too cheap and now up over 50% with chunky div.

[skyship] 21/9/2020 08:56

RAM - I remain very much on the fence with this one. In spite of the 25% discount and fantastic 10% yield I still hold only a 3.8% allocation. I'll seek to add on a dull day......but with the Market down 2.5%, VTA, as ever, unchanged!

[rambutan2] 20/9/2020 20:15

But remember, BGLF nav is mark to model, not mark to mkt, so deserves a bigger discount. imho

[stemis] 20/9/2020 12:28

Interesting that it highlights BGLF on a larger discount to NAV and yet the BGLF board on Advfn has only 4 posts on the last 6 years...

[rambutan2] 15/9/2020 21:19

Update from Hardman: htTps://www.hardmanandco.com/wp-content/uploads/2020/09/200915-Hardman-Volta-Finance-Value-added-by-active-portfolio-management-1.pdf

[skyship] 13/9/2020 14:31

Cerrito - at the EuroNext offer price of 436 the discount = 24.8% and the yield assuming 44c annual dividend = 10.1%. Think I may seek to add at that EuroNext price, as currently on only a 2.5% allocation.

[cerrito] 12/9/2020 22:49

I note that the discvount at the end of August between the LSE price(I assume the mid price and note of course wide spread)and NAV of about 25% is the highest iun the three years that I have been monitoring this yardstick.

[cerrito] 12/9/2020 22:45

Good that the August report came out earlier in the month than normal and even better to read that apart from one minor historical position all equity positions received their Q3 coupon payments and that in October the amount of these payments is expected to be higher.

[hpcg] 24/8/2020 11:07

Thanks as ever Dave for the broker updates; here and everywhere else you post!

[davebowler] 24/8/2020 09:10

Liberum; Underlying loan pools performing well Event The CLO funds have reported NAV figures for July with the majority reporting modest mark-to-market revaluation gains. Loan markets were relatively strong (US +2.0%, Europe 0.7%) on the back of favourable technical factors (low new issue supply and steady demand from CLOs). The US 12-month loan default rate (by amount) rose to 3.9% in July, the highest level since February 2015. Loan downgrades have continued, although the pace has slowed. 37% of the US loan market has been downgraded so far this year. According to S&P, the three-month rolling downgrade/upgrade ratio was 8x in July, compared to a peak of 43x in May. All of the funds have reported relatively strong cash flows from the July quarterly payments. According to Wells Fargo data, 24% of US CLOs suffered a breach of their interest diversion tests. Within the portfolios of listed funds, only one US CLO position (Volta) did not receive cash flows due to an interest coverage test breach. Returns in the month ranged from -1.2% for Volta Finance (partly due to FX) to 4.6% for Marble Point Loan Financing.

[cwa1] 19/8/2020 10:08

Thanks, db

[davebowler] 19/8/2020 09:33

Liberum; Event Volta Finance's NAV per share at 30 June 2020 was €5.87, representing a 6.9% NAV total return in the month. The company's NAV total return in Q2 is +18.0% following the 32% NAV decline in March. Mark-to-market performance across the company's asset classes was +9.5% for CLO equity, +13.0% for CLO debt, -0.6% for cash corporate credit and -6.2% for ABS. Average prices for CLO equity and debt tranches have continued to recover. The USD CLO debt tranches are now prices at 71.8% (vs. 63.2% at the end of May). The manager remains confident on the outlook for portfolio cash flows. All of the USD CLO debt tranches are receiving full coupons and none have been downgraded. 10 debt tranches are "Watch Neg" with Moody's or S&P, although the manager does not expect any loss on these positions during this crisis. The next quarterly cash payments are due on the CLO equity positions in the coming weeks. One of Volta's equity tranches is expected to experience a cash flow diversion. 3 of the remaining 46 CLO equity investments were close to breaching a reinvestment test in April but these have seen improvement during the market recovery in May and June and now have larger cushions. The manager expects an increase in M&A activity in the coming months as a result of the high level of private equity capital. This could drive strong prepayments at par, including some loans trading at a discount. Liberum view Volta's manager, AXA IM, remains notably upbeat on future cash flow generation and the likelihood of valuation uplifts. This was reflected in the reinstatement of the quarterly dividend which has subsequently increased by 10%. The manager has typically been cautious on guidance and has tended to under-promise and over-deliver. Market expectations of loan defaults have softened over the quarter. Default rates are now expected to rise to c.5% by the end of year, compared to initial expectations of c.10%. Over the quarter to June, the default rate in the US loan market has risen from 1.8% to 3.2%.

[cerrito] 12/8/2020 21:32

Commend the Manager for the clarity of his commentary on the July figures.