Volta Finance Share Discussion Threads

[davebowler] 14/10/2021 08:38

Liberum on FAIR _
Fair Oaks Income

Enduring arbitrage opportunity

Mkt Cap £200m | Share price $0.675 | Prem/(disc) -1.2% | Div yield 14.8%

Event

Fair Oaks Income's NAV per share as at 30 September 2021 was $0.683, representing a 1.5% NAV total return in the month (+20.5% YTD). US and European loan markets delivered positive returns of 0.7% and 0.4% during the month. The trailing 12-month default rate in the US loan market has fallen to 0.4%, the lowest level since August 2011.

US CLO issuance reached a record in September ($130bn YTD). Importantly, primary AAA spreads have remained stable at Libor +1.19% in the US and have fallen slightly to Euribor +1.01% in Europe. The manager reset the CLO liabilities of Fair Oaks Loan Funding III, reducing the weighted average coupon from Euribor +2.01% to Euribor +1.79%. The investment period has also been extended by almost three years. The expected return on the investment has increased by 4.8% pa.

The current valuation of the CLO equity positions implies relatively low cash flow multiples. The average cash flow multiple of the CLO equity tranches is 3.5x, compared to 4.8x in January 2020.

Liberum view

FAIR's portfolio has generated strong cash flows in 2021 and we see this as a compelling entry point for a fund offering a 15% dividend yield and double-digit prospective NAV returns. The maturity profile of the market continues to be pushed out, reducing the probability of default in the near term. The arbitrage spread of the portfolio over the cost of financing has increased steadily since mid-2020 to 1.91%, the highest level since August 2016. The benign default environment and tightening in CLO spreads has created a favourable environment for CLO equity performance. We also note the pricing on the reset of Fair Oaks Loan Funding III was narrower than Blackstone's Deer Park CLO (which priced on the same day). The fund has three investments in CLOs run by the investment manager. These have demonstrated strong credit performance and achieved attractive funding costs.

[cerrito] 12/10/2021 16:24

With everything that is going on in the markets, I found it uplifting to read such a positive monthly update

[cwa1] 23/9/2021 07:36

XD today for a healthy 14c, pay day being a very swift 30/9

[hpcg] 21/9/2021 15:30

I use Amsterdam, plenty of liquidity there.

[skyship] 21/9/2021 15:00

hpcg - small spread! Not a comment usually made of VTA...

[hpcg] 21/9/2021 10:25

I sold yesterday. Concerned about high European energy prices and any Evergrande fallout. I figure it will drop by the dividend amount when it trades ex anyway, and the spread is small so buying back in not a big deal.

[davebowler] 16/9/2021 12:24

Liberum on FAIR;
Fair Oaks Income

High cash generation

Mkt Cap £198m | Share price $0.67 | Prem/(disc) 0.3% | Div yield 14.8%

Event

Fair Oaks Income's NAV per share as at 31 August 2021 was $0.673, representing a 0.3% NAV total return in the month (+18.7% YTD). US and European loan markets rose by 0.5% and 0.4% respectively during the month. The trailing 12-month default rate in the US loan market has fallen to its lowest level since August 2011. European default rates also remain low at 1.1%.


The CLO equity positions have continued to generate strong cash flows in recent quarters. The current valuation of the CLO equity positions implies relatively low cash flow multiples. The average cash flow multiple of the CLO equity tranches is 3.4x based on the latest distribution, compared to 4.8x in January 2020.


Liberum view

FAIR's portfolio has generated strong cash flows in H1 2021 and we see this as a compelling entry point for a fund offering a 15% dividend yield and double-digit prospective NAV returns. The benign default environment and tightening in CLO spreads has created a favourable environment for CLO equity performance. Based on current rolling default rates, the modelled return for FAIR's portfolio is 17%. The medium-term outlook for defaults is favourable with only 5% of the US loan market maturing between now and the end of 2023. Fair Oaks is particularly well-placed to capitalise on these conditions as a control CLO equity investor.

[cwa1] 15/9/2021 06:22

Guernsey, 15 September 2021

Volta Finance Limited ("the Company") hereby announces a third 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 30 September 2021 amounting to approximately EUR5.12 million, equating approximately to an annualised 8% of net asset value. The ex-dividend date is 23 September 2021 with a record date of 24 September 2021.

[skyship] 17/8/2021 14:45

Likewise...

[hpcg] 17/8/2021 13:37

SteMiS - I only have VTA. I think it was a bigger discount when I bought in, or perhaps it was a bigger yield, or both? In any case I thought owning more than one would be additional monitoring with no benefit

[skyship] 17/8/2021 13:18

DB - thnx for that...useful to have it there for instant access.

[stemis] 17/8/2021 12:58

Any views of Fair v VTA ? Fair seems to have the highest yield but possibly higher risk. Or do people hold both ?

[davebowler] 17/8/2021 12:39

OK Skyship -I've added it as you asked.

[cwa1] 17/8/2021 09:35

FWIW I picked up some at the tail end of last week at E6.02 by leaving them on the Euronext book for a couple of days and they were eventually taken

[skyship] 17/8/2021 08:53

db - as per my 529 above, could you possibly add the Euronext Quote link to the Header.

On offer at E6.12 over there; but I would have to pay a much larger commission and a currency charge of 1% both in and out. Would still be cheaper there than here however...

[skyship] 17/8/2021 07:47

All sounds good. Decided too small an allocation at 5%; so wnated to increase.

Problem as ever is the spread; also they are firmer than shown - actually 508p-533p.

[cwa1] 17/8/2021 07:11

Short interview with Mark Thomas of Hardman on Volta:-

[hpcg] 16/8/2021 08:27

Thanks as ever Dave, always good to read about the sector.

[davebowler] 16/8/2021 08:05

Liberum on FAIR-

Loan default rates continue to fall

Mkt Cap £198m | Share price $0.68 | Prem/(disc) -3.0% | Div yield 13.3%

Event

Fair Oaks Income's NAV per share as at 31 July 2021 was $0.696, representing a 1.4% NAV total return in the month (+18.3% YTD). CLO and loan markets were broadly unchanged in July. US and European loan markets rose by 0.0% and 0.1% respectively during the month.

In terms of fundamentals, trailing 12-month loan default rates fell from 1.2% to 0.6% in the US and increased marginally from 1.1% to 1.2% in Europe. The default outlook for bank loans also remains encouraging, with the distressed ratio (loans trading below 80c) at 1.1% in the US and 1.2% in Europe. CLO issuance remains at elevated levels, with YTD 2021 volumes tracking well ahead of prior year.

The Fair Oaks Master Fund received $18.7m of distributions in July, significantly ahead of the $11.1m received in the same month last year. Distributions have benefitted from the reduced exposure to lower coupon CLO mezzanine notes and the strong cash-flows from CLO subordinated investments. Based on current default rates, Master Fund cash flows for Q2 2022, when the first distributions for the new CLO subordinated note investments are expected, are projected to be $24m. The weighted average over-collateralisation test headroom for Master Fund’s CLO subordinated investments has increased from 3.5% in December 2020 to 4.0% at the end of July.


Liberum view

July was another favourable month for CLO funds, with loan default rates continuing to trend downwards and compressing AAA spreads present opportunities to significantly reduce the cost of funding. Fair Oaks is particularly well-placed to capitalise on these conditions as a control CLO equity investor. Over recent months, Fair Oaks has realised significant gains on CLO mezzanine positions and has recycled capital into a number of new CLO equity investments. The flexible investment strategy enables the company to invest across the various different parts of the CLO structure to take advantage of relative value opportunities. Several positions have been sold to date, realising returns of 31%-52%. The upside on many of the remaining positions is capped from refi/reset activity in the market and the proceeds can be recycled into primary CLO equity positions, offering attractive returns in a benign default environment. Importantly, all of FAIR's CLO equity investments are control investments, enabling the manager to generate additional returns through cost reductions, portfolio selection and optimal call timing. We see this as a compelling entry point for a fund offering a 13% dividend yield and strong prospective NAV returns.

[cerrito] 15/8/2021 12:58

Congrats to them for a good July and I note increase in cash despite paying a dividend. Thinking in rather a vague way of buying more...as a £ based investor do I want more Euro denominated assets??

[skyship] 02/8/2021 11:34

davebowler - might you please add to the Header yieldsearch's link to the Euronext quote (P.No.502):

[holts] 28/7/2021 18:52

Thanks , be good if it could raise some interest .

[cwa1] 15/7/2021 07:28

XD day today. The nice payment should hit the electronic doormat on or around 29/7

[skyship] 13/7/2021 19:47

Hardly likely surely - At 610c the discount is 16.21% and the yield on a 56c dividend = 9.18%. But that dividend is based upon the NAV - so will be rising further.

Unknown and unloved; but heck, I'm being paid a good whack whilst waiting for new investors to discover VTA!