Volta Finance Share Discussion Threads

[stemis] 17/3/2021 17:39

That's why I said 'test'...

[hpcg] 17/3/2021 17:19

CWA1 - the tests are a bit risible really. Not, "Explain in 500 words CLO tranches and the relative risk?", more "Do you understand these are high risk instruments and you might lose more than you invest yes / no?".

Anyhoo, today's dividend announcement demonstrating the value on offer in the Autumn. Still good value.

[cwa1] 17/3/2021 16:50

Must confess I found Barclays the worst broker ever when I used them. Loads of stocks I couldn't buy, late dividends, clunky website. However it was aeons ago but it doesn't sound if they are much better

[cerrito] 17/3/2021 16:24

I cannot buy VTA on Barclays and I have to use my full service broker, Canaccord

[cwa1] 17/3/2021 16:09

Oh. There's a test. No wonder I'm not allowed to trade :-)

[stemis] 17/3/2021 15:50

Indeed. It's possible to deal with EQI and I've also passed Youinvest's little 'test' for dealing with complex instruments...

[skyship] 17/3/2021 15:36

Ahh - could be that. But why the hell are they deciding whether or not someone is professional enough to know what they are doing?

Surely it is not up to AJBell; it is up to the individual concerned to state that they have the knowledge to make their own investment decisions. I'm pretty sure all of us here on this thread would qualify to buy/hold VTA.

[cwa1] 17/3/2021 15:31

FWIW, I can't deal in VTA in my YouInvest SIPP account, I get this message when I go to get a quote:-

This security is restricted from dealing

...I think that anyone that is already a holder can buy or sell but you can't take a new position out with them I suspect

[skyship] 17/3/2021 15:04

SteMis - Bizarre - as I topped up my VTA holding this morning - dealt in my YouInvest SIPP.

[hpcg] 17/3/2021 14:37

SteMis - does Youinvest deal on Amsterdam? The advantage of that listing is it is much more liquid. The only account that I have that deals is IG. In London not only does it trade on the specialist funds market, but there is also the requirement to demonstrate you understand CLOs if not a professional.

[stemis] 17/3/2021 12:37

Youinvest won't deal VTA. I've emailed to ask why...

[skyship] 17/3/2021 08:32

More excellent, if predictable, news. The Qtly divi increased from 12c to 14c.

At 610c the discount is currently 12.9% and the yield back up to 9.2%

I've today bought back the 2000 I top-sliced lower down!

=======================================================

Volta Finance Limited ("the Company") hereby announces a first interim
dividend for the financial year commencing 1 August 2020.

The Company announces that it has declared a quarterly interim dividend
of EUR0.14 per share payable on 29 April 2021 amounting to approximately
EUR5.12 million, equating approximately to an annualised 8% of net asset
value. The ex-dividend date is 1 April 2021 with a record date of 6
April 2021.

[skyship] 16/3/2021 09:13

Extract from last Wednesday's monthly Update:

This combination of advantageous factors for our CLO Equity positions,
which account now for a total of 65% of the NAV means that the outlook
for 2021 and beyond is favorable for Volta. We are still optimistic
that the NAV can reach EUR7.50 per share in the medium term. This,
combined with an estimated dividend close to 8% of NAV represents an
attractive return stream, especially when considering the discount to
NAV at which the shares are still trading.

As at the end of February 2021, Volta's NAV was EUR256.1m or EUR7.00 per
share.

[yieldsearch] 16/3/2021 07:29

https://www.bloomberg.com/news/articles/2021-03-12/structured-weekly-clo-spreads-nearing-post-crisis-tightsImproved credit market and also increased demand for floating rate bonds: Good technicals for clo

[cerrito] 11/3/2021 18:44

Thanks for that davebowler and all very reassuring and I liked the quiet confidence in the VTA update that we had today.
Floating rate assets are in demand- indeed as we haver seen in the price of little old CEBB.

[davebowler] 11/3/2021 10:18

Liberum on FAIR OAK INCOME-
Equity returns to benefit from favourable CLO financing environment

Mkt Cap £210m | Prem/(disc) -4.6% | Div yield 14.1%

Event

Fair Oaks Income Fund's NAV per share at 28 February 2021 was $0.655, representing a 2.4% NAV total return in the month. NAV performance continues to benefit from the supportive credit environment.

Loan markets maintained their positive streak, with returns of 0.6% in the US and 0.9% in Europe. 12-month trailing default rates have continued to decline and are now 3.2% in the US (December 2020: 3.8%) and 2.1% in Europe (December 2020: 2.6%).

Floating rate assets are experiencing significant demand, resulting in spread compression for AAA CLO debt tranches. AAA US and EU new issue spreads fell to 1.02% and 0.82% at the end of February compared to 1.53% and 1.05% at the end of 2020. The positive environment should create opportunities for CLO equity holders to refinance or reset the CLO liabilities at more attractive levels, enabling higher distributions over a longer time period for equity holders.


Liberum view

The demand for CLOs is demonstrated by the high level of new issue volume in 2021. According to S&P Global, $33.4bn of new deals have completed to date in 2021, 48% higher than the same period in 2020. AAA CLO liability spreads have compressed due to strong demand from investors for investment grade floating rate assets. In combination with improving fundamentals (lower default rates, rising OC test cushions), the environment for CLO equity and mezzanine returns remains very favourable. Equity tranches should benefit from a lower cost of capital, resulting in higher expected IRRs. We note that one of FAIR's CLO control equity investments reset its CLO liabilities in early-March. The portfolio cash distributions have been resilient throughout 2020 and should increase as a result of refi/reset activity.

[davebowler] 18/2/2021 10:24

Liberum on FAIR;
Event

Fair Oaks Income Fund's NAV per share at 31 January 2021 was $0.664, representing a 5.3% NAV total return in the month. January's NAV performance benefited from upward revaluations in certain investments with short reinvestment periods. Rising loan prices have increased the liquidation NAV for the equity tranche holders. There is further potential upside for these positions from refi/reset activity.

Loan markets were broadly positive in January, with returns of 1.2% in the US and 1.0% in Europe. Loan prices have benefited from rising demand from retail inflows into US loans funds as investors seek floating rate exposure due to a steepening yield curve. 12-month trailing default rates have continued to decline and are now 3.4% in the US (previously 3.8%) and 2.1% in Europe (previously 2.6%).


CLO spreads on new issues have compressed further in January. AAA US and EU new issue spreads fell to 1.15% and 0.87% at the end of January compared to 1.32% and 1.06% in the prior month. The positive environment should create opportunities for CLO equity holders to refinance or reset the CLO liabilities at more attractive levels.

Master Fund II is nearing the end of its investment period. As previously indicated, FAIR will offer shareholders the opportunity to participate in a new share class that will invest in a new Master Fund, similar to the approach taken by the fund in 2017. The new Master Fund will reinvest principal receipts received from the current Master Fund in a new pool of assets, with a fixed investment period and maturity.

Liberum view

The tightening of CLO liability spreads is set to continue as investment demand strengthens. In combination with improving fundamentals (lower default rates, rising OC test cushions), the environment for CLO equity and mezzanine returns remains very favourable. Significant refinancing activity is expected in 2021. Equity tranches should benefit from a lower cost of capital, resulting in higher expected IRRs. Debt tranches also offer upside through repayment at par and we note several of FAIR's CLO debt tranches experienced large price increases during January. FAIR's flexible mandate leaves it well-placed to capitalise on relative value opportunities across CLO structures.

[davebowler] 10/2/2021 11:15

Liberum;
Improving CLO outlook driving returns

Mkt Cap £190m | Prem/(disc) -14.6% | Div yield 9.4%

Event

Volta Finance's NAV total return in January was 3.9%. Mark-to-market performance across the company's asset classes was +5.9% for CLO equity, +4.1% for CLO debt, +0.7% for cash corporate credit (one-month lag in valuations) and +0.8% for ABS.

Trailing 12-month default rates declined for the third consecutive month in the US. Healthier fundamentals have also led to upgrades for CLO debt tranches. In December, Moody’s upgraded 38 US CLO debt tranches and put on watch for potential upgrade 188 more.

The manager had previously outlined the potential for opportunities to call CLO equity investments this year and to refinance or reset some of the more recent CLO equity investments. This has begun as refi/reset activity was high in January in the US and Europe and this is likely to continue for some time. The arbitrage spread for CLO equity positions is benefiting from an increasing spread on the loan pools and tightening spreads on CLO debt liabilities.

The manager has again reiterated its expectation that the NAV will reach €7.00 per share in 2021 (€6.93 at 31 January 2021) and €7.50 over the medium term.

Liberum view

Volta's manager, AXA IM, remains notably bullish on the prospects for cash flow generation and CLO equity returns in 2021. 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% in 2021 based on the current distribution of 8% of NAV. The projections reflect confidence in mark-to-market gains for both CLO equity and debt positions as CLO fundamentals improve. Investor demand for CLOs has led to considerable spread tightening. AAA CLO tranches now trade close to pre-Covid levels, providing opportunities for CLO managers to lock in cheaper financing.

[hpcg] 09/2/2021 23:28

There was a good chart on today's (or was it yesterday?) Saxo Market Call podcast slide deck about high yield debt pricing at its lowest ever. High yield seen as an inflation guard where government bonds aren't. Anything LIBOR based will have some form of protection I guess. I'm certainly pondering buying more.

[skyship] 09/2/2021 18:09

Jan'21 NAV up 3.9% to 693c

[davebowler] 02/2/2021 12:12

Liberum on FAIR;


Fair Oaks Income Fund's NAV per share at 31 December 2020 was $0.631, representing a 7.3% NAV total return in the month. The company's NAV total return since 31 March is now +85%.

All of Master Fund II's CLO equity investments made their scheduled distributions in January. Total distributions received by Master Fund II from the January quarterly payments was $15.1m. This included $12.8m of distributions from CLO equity investments (vs. $10.7m in January 2020). Strong cash flow generation has enabled a further 14% increase in the quarterly dividend to 2.5 cents for Q4 2020 (Q3: 2.2 cents). Master Fund II is nearing the end of its investment period and the manager has indicated it expects to offer shareholders the opportunity to participate in a new share class that will invest in a new Master Fund, similar to the approach taken by the fund in 2017.

Loan markets generated returns of 1.3% in the US and 0.5% in Europe in December. 12-month trailing default rates fell marginally in the US to 3.8% and increased from 2.4% to 2.6% in Europe. The annualised average default rate across loan portfolios in FAIR's CLO equity investments was 0.3% at the end of 2020.

Liberum view

Cash flow receipts for the January quarterly payments illustrate the strong credit performance of FAIR's CLO portfolios and the improved outlook for the sector. We also note the steady increase in the overcollateralisation test cushion across FAIR's CLO equity investments from 3.1% to 3.5% over Q4 2020, providing reassurance on the sustainability of the quarterly dividend. The underlying loan portfolios in FAIR's CLO investments have experienced low default rates, in part due to the low exposure to Covid risk sectors. FAIR's NAV performance has also benefited from its flexible mandate, which enabled a material investment in CLO mezzanine tranches at depressed pricing in H1 2020.


The outlook for NAV returns remains positive as two of the key variables in CLO equity performance are demonstrating incremental improvements (defaults and interest spread). The interest spread (loan portfolio yield less cost of the CLO liabilities) has risen by 23 bps across FAIR's portfolio since June and should continue to increase in 2021. CLO AAA tranche spreads have tightened considerably are now narrower than at the end of 2019. CLO equity returns should benefit this year from the opportunity to refinance and reset CLO liabilities.

These factors should lead to favourable environment for CLO equity and mezzanine returns over the medium term. We forecast 26% NAV total return in 2021 due to a combination of income returns and an increase in portfolio valuations. CLO equity prices have lagged the recovery in other credit markets and are still trading well below pre-Covid levels (the average price across FAIR's CLO equity investments is 57.4% compared to 67.7% at 31 December 2019).

[cwa1] 25/1/2021 14:19

In case anyone wants a look at said Edison report:-

[cerrito] 22/1/2021 18:05

I see that Edison has come out with a report that is to me well balanced.
I do not see myself as buying or selling in the immediate future.
I see that on a NAV TR basis they outperformed the peer average over 1 and 5 years and underperformed over 3 years...and Edison repeats what they have said before about peer comparisons that there is quite a bit of apples and oranges.

[hpcg] 14/1/2021 12:08

Nice moves in CLO equity. From VTA press release:

On a 6-month rolling basis, Volta received the equivalent of €18.1m as at the end of December, representing a 14.8% annualised cash flow yield, based on the end December NAV (even taking into account the strong increase in NAV). We expect this amount to increase in the coming months.