Volta Finance Share Discussion Threads

[skyship] 13/9/2020 13:31

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 21:49

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 21:45

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 10:07

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

[davebowler] 24/8/2020 08:10

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 09:08

Thanks, db

[davebowler] 19/8/2020 08:33

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 20:32

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

[rambutan2] 13/7/2020 14:36

Yieldsearch, thanks for that info, stupidly I'd not bothered to look at the Amsterdam quote, assuming it would be even worse than the London one.

[yieldsearch] 13/7/2020 10:18

Sky: The uk version is always illiquid, order should be placed on the one listed on euronext.

Euronext order book is showing 4.40/4.45

[skyship] 13/7/2020 10:09

Has VTA always had this absurd spread? Don't recollect that last time I held...

[davebowler] 13/7/2020 08:30

Liberum;
Increased confidence on cash flows

Mkt Cap £147m | Prem/(disc) -21.8% | Div yield 9.8%

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] 10/7/2020 17:48

I agree Yieldsearch that the situation is far less dark than it seemed a few months ago.....but one feels there will be twists and turns coming up.

[yieldsearch] 10/7/2020 17:30

Nav up. Ok/good disclosure

[hpcg] 26/6/2020 08:49

I must admit I am getting a bit tempted to buy, but I have to admit I would be entirely reliant on the statements of the company, together it has to be said Fed and to an extent ECB activity. Pondering.

davebowler - I echo the thanks of others, your research posting is extremely helpful.

[davebowler] 26/6/2020 08:21

Liberum-10% uplift in quarterly dividend Mkt Cap £150m | Prem/(disc) -18.6% | Div yield 9.6%EventVolta Finance has declared a dividend of €0.11 per share for Q2 2020. This is 10% ahead of last quarter's dividend and reflects the mark-to-market improvement in NAV in recent months. The manager recently guided towards an annual distribution of 8% of NAV and NAV per share has risen by 10% since March. The dividend could increase further in coming quarters as we expect additional near-term NAV uplifts. The price reaction of CLO equity tranches is closely correlated with the movement in loan market prices with typical betas of between 2 and 3. We also note the ongoing strength of loan markets in June to date (+1.8% for US and +2.0% for Europe). CLO debt tranches have experienced yield compression since the end of May (the Palmer Square CLO BB Index has increased by 12.5% since 31 May). We also note the recent bullish outlook statement from the manager, pointing to the likelihood of further valuation gains and improved expectations on cash flows to CLO equity tranches.  

[yieldsearch] 26/6/2020 07:44

Next DVD announced:

Interim Eur0.11 (equivalent to annualised 8% of NAV)

Payment date: 29.07
Ex dvd date: 02.07
Record date: 03.07

and yes thanks davebowler for posting research, always appreciated!!

[cerrito] 11/6/2020 16:33

Thanks as always for posting that davebowler and as Liberum says Volta were more bullish than normal.
I read the comments about breaching the reinvestment test different from Liberum, who said that none of their positions suffered any diversion. For me VTA specified the USD position but did not comment on the larger Euro position. Not sure how you all read it.
Looks good but for various reasons I do not envisage either buying more or selling in the foreseeable future.

[davebowler] 11/6/2020 08:54

Liberum;
Mark-to-market recovery set to continue

Mkt Cap £151m | Prem/(disc) -17.2% | Div yield 8.6%

Event

Volta Finance's NAV per share rose by 4.5% in May to €5.59. Mark-to-market performance across the company's asset classes was +5.7% for CLO equity, +5.8% for CLO debt, -3.5% for cash corporate credit and +0.8% for ABS. Average prices for CLO equity tranches were 42.6c and 38.3c respectively for USD and Euro positions. USD CLO debt tranches were priced at 63.2c.


The default rate in loan markets has risen to 3.1% in the US and 1.4% in Europe. Market expectations for the end of 2020 are c.5% for the US and 3.5% in Europe. This is significantly lower than recent projections of c.10%. 20% of the US CLO universe was in breach of reinvestment tests, resulting in a partial diversion of cash flows away from the equity tranche. None of Volta's positions have suffered any diversion. Furthermore, the manager expects loan defaults to remain at a level that could enable the maintenance of full payments for the CLO equity tranches.


Volta is now almost fully invested following a €3m investment of a newly issued Euro CLO BB tranche. The tranche was purchased at 90% of par with a discount margin of 911bps. The manager believes it is now trading close to par.

Liberum view

We expect further material NAV uplifts in the coming months for the funds with CLO equity and debt exposure. The price reaction of CLO equity tranches is closely correlated with the movement in loan market prices with typical betas of between 2 and 3. Volta's 4.5% NAV increase is likely to be followed by significant uplifts for Fair Oaks Income Fund and Marble Point Loan Financing. We also note the ongoing strength of loan markets in June to date (+2.4% for US and +2.3% for Europe).

New CLO BB tranches have experienced 150 bps of yield compression since the end of May. The Palmer Square CLO BB Index has also increased by 12.9% since 31 May. The manager has typically been cautious when it comes to guidance but yesterday's statement was notably bullish, pointing to the likelihood of further valuation gains and improved expectations on cash flows to CLO equity tranches.

[cerrito] 28/5/2020 11:20

Interview with Hardman analyst

[rambutan2] 15/5/2020 02:36

Worth a listen:

S8 E12 What the CLO market can tell us about the state of corporate credit ft Joe Mezyk

[yieldsearch] 14/5/2020 17:42

April 2020 report:

VTA Nav end april 2020: Eur5.35 per shares

Only one VTA position might suffer cash flow diversion due to CCC bucket

Seems that VTA did much better than the market in USD Clo equity: 20% suffered diversion vs none of VTA positions

USD CLO potential cure of tests through reinvestment at discount. would be beneficial for clo equity investors like VTA.

[yieldsearch] 13/5/2020 14:34

FT Big Read
focused on senior bond and nochu but good explanation of the triple C bucket


CLOs: ground zero for the next stage of the financial crisis?

[cerrito] 11/5/2020 09:34

Pleasantly surprised that the dividend has been reinstated even if reduced.
Being the 11th of the month I would have expected to know the NAV at 30.4- even if this figure has to be taken with a pinch of salt in these markets.