Volta Finance Share Discussion Threads

[davebowler] 14/1/2021 09:04

Liberum;
Positive 2021 outlook

Mkt Cap £183m | Prem/(disc) -15.7% | Div yield 9.5%

Event

Volta Finance's NAV total return in December was 4.3%. Mark-to-market performance across the company's asset classes was +9.7% for CLO equity, +5.9% for CLO debt, +0.5% for cash corporate credit (one-month lag in valuations) and -0.9% for ABS.

Trailing 12-month default rates declined again in December in the US. Almost 19% of US loans repaid in 2020, enabling CLO managers to reinvest capital in loans at a discount. The manager expects prepayments of 25% in the US and 20% in Europe in 2021.

Volta previously indicated that it did not expect any cash flow diversion in Q1 2021 and is optimistic on prospects beyond that. The manager also expects to take advantage of opportunities to call CLO equity investments this year and to refinance or reset some of the more recent CLO equity investments. The arbitrage spread for CLO equity positions is benefiting from an increasing spread on the loan pools and tightening spreads on CLO debt liabilities.

Volta expects the company's NAV will reach €7.00 per share in 2021 (€6.67 at 31 December 2020) and €7.50 over the medium term.

Liberum view

Volta's NAV total return in 2020 was -5.7%, having been down -33.5% at the end of March. Volta's manager, AXA IM, is notably bullish on the prospects for cash flow generation and CLO equity returns in 2021. The indication of potential NAV growth is unusual but reflects confidence in mark-to-market gains for both CLO equity and debt positions as CLO fundamentals improve. The manager has typically been cautious on guidance over the life of the vehicle. A NAV of €7.00 per share would imply a NAV total return of 13% based on the current distribution of 8% of NAV.

[skyship] 12/1/2021 09:17

Hmm - valid point.

Likely to be an RNS with the December NAV tomorrow...

[scburbs] 12/1/2021 09:03

When you have raised a $15bn new distressed debt fund you aren't an entirely neutral observer!

[cerrito] 11/1/2021 22:07

I have alot of time for Howard Marks and I agree with his recent comments on the difficulties that US companies will have servicing their debt so while not selling my VTA am not buying more.

[boystown] 05/1/2021 23:03

Thanks hpcg

[hpcg] 05/1/2021 22:35

Not at all. NAV is well north E6 so still at a discount. Not only that but the underlying is also at a discount. Sure there'll be a lot of resistance at E6 or E6.50 but the dividend will still be attractive then. I was buying below 4 and at various prices to 5.15. Investors go way overboard on what they think impairments will be compared with what actually happens.

[boystown] 05/1/2021 21:17

Isn't this looking close to fully valued now?

[cwa1] 04/1/2021 15:52

Good to see it perking up

[skyship] 04/1/2021 15:09

VTA now E5.50 to E5.60 on Euronext.

[cerrito] 11/12/2020 22:43

I have been coming a monthly tab on these since March 2016.
I see that the percentage in CLO equity at 56% was the highest since March 2016 as was the percentage of assets in US$ at 47pc-apart from the 48pc at end of August 2020.

[skyship] 10/12/2020 11:44

Indeed - a pretty dramatic performance - up 7.2% in November. It was pretty well flagged up; but I hadn't expected that degree of increase.

[davebowler] 10/12/2020 11:43

Liberum;
Large NAV uplift and positive outlook on cash flows

Mkt Cap £162m | Prem/(disc) -24.9% | Div yield 9.8%

Event

Volta Finance's NAV per share rose by 7.2% in November to €6.51. Mark-to-market performance across the company's asset classes was +11.0% for CLO equity, +10.2% for CLO debt, -2.8% for cash corporate credit (one-month lag in valuations) and +0.2% for ABS.

Following the improved macroeconomic outlook, Volta expects a lower level of loan defaults and consequently believes there is a lower likelihood that CLO equity positions will suffer cash diversions. The manager does not expect any cash flow diversion in Q1 2021 and is optimistic on prospects beyond that. The ratio of loan downgrade to upgrades continues to improve.

The manager also expects to take advantage of opportunities to call CLO equity investments next year and to refinance or reset some of the more recent CLO equity investments. The manager expects spread tightening for CLO debt tranches, providing enhanced arbitrage spread returns for CLO equity tranches.

Liberum view

Volta's YTD NAV total return is now -10.2%, having been down -33.5% at the end of March. The large NAV uplift has been driven by the strong recovery in loan markets. The price reaction of CLO tranches is closely correlated with the movement in loan market prices with typical betas of between 2 and 3. Volta's manager, AXA IM, is notably bullish on the prospects for cash flow generation and CLO equity returns in 2021. The manager has typically been cautious on guidance and has tended to under-promise and over-deliver. The improved outlook was also reflected in the 9% increase in the quarterly dividend earlier this week to €0.12 per share (dividend policy is to distribute 8% of NAV).

[horndean eagle] 10/12/2020 10:03

NAV 6.51 so dividend should be bumped up to 52c

[skyship] 08/12/2020 16:19

8% of NAV would be 48c - so today's 12c suggests an annual 48c is the figure to use for yield calcs; ie 9.6% at E5.00...

[yieldsearch] 23/11/2020 09:54

Hi Davebowler,
Thank you v much for diligently posting research articles across a number of board, it is very much appreciated (by me but i guess plenty others!)

i can see that you created this volta finance board, if you dont mind, could you add to the header the euronext link, it does have some good info such as rns, chart, bid/ask and depth of the market, see link below

[skyship] 20/11/2020 10:12

db - thnx for that

[davebowler] 20/11/2020 09:43

Liberum (for Sky!)-

CLO funds

Ongoing NAV recovery

Event

All of the listed CLO funds have reported NAV figures for October, with the majority reporting mark-to-market revaluation gains. The funds have benefited from the loan market rally and an improving credit outlook. In the seven month period since the end of March, the US and European loan markets have returned 14.5% and 16.7%. Over the same period, the listed CLO funds with mark-to-market valuation policies have generated an average NAV total return of 49%.


The rise in defaults has been much lower than initial projections and many rating agencies and banks have revised downward their 2020 and 2021 default expectations to 4-5% (originally 10%). The outlook for loan defaults has benefited from the ability of companies to refinance debt and extend maturity dates. Less than 5% of outstanding loans now mature before 2023.


Across the listed CLO funds, cash distributions from the October quarterly payments were strong as none of the CLO equity or debt positions suffered from a diversion of payments to senior debt holders. Returns in October ranged from 1.6% for Volta Finance to +4.7% for Fair Oaks Income. Further loan market gains in November (US +1.7%, Europe +2.1%) indicates continued strong NAV performance ahead for the funds with mark to market valuation policies.

[horndean eagle] 19/11/2020 20:55

VTA had investor call today. They were unsurprisingly bullish. Still a huge disconnect between NAV and equity markets. My guess is that VTA will see a period of pretty strong NAV growth.

[yieldsearch] 19/11/2020 19:16

Seems to be catching up on the recent rally experienced by FAIR.
Toro still lagging
BBB/BB bond yield tightening causing increase in clo price.
Should expect decent increase in NAV

[cwa1] 19/11/2020 17:05

Onwards and upwards it is then! Glad I bit the bullet the other day now after thinking I had probably paid too much...

[cwa1] 17/11/2020 14:15

Actually, scrub that, I've googled about and found it, Thanks again!

[cwa1] 17/11/2020 14:12

Much obliged, would it be rude to ask if you could post a link to that page?

[hpcg] 17/11/2020 13:20

CWA1 - the Amsterdam Stock Exchange page has the book on it. So for example I or anyone can see a line of 2500 has just appeared at 4.97. Unlike on LSE where one has to pay to get that.

[cwa1] 17/11/2020 12:52

Lo hcpg. Sorry, what do you mean by "Level 2 available to all"? Cheers