Volta Finance Share Discussion Threads

[davebowler] 21/7/2022 08:08

Liberum on FAIR-
Fair Oaks Income

Resilient credit performance despite wider volatility

Mkt Cap £167m | Share price $0.495 | Prem/(disc) -15.8% | Div yield 20.2%

Event

Fair Oaks Income's NAV total return in June 2022 was -4.8%, largely due mark-to-market movements as a result of volatile credit markets. US and European loan markets delivered returns of -2.2% and -4.5% respectively in June.

The manager reports that the performance of the Master Fund remains robust with an annualised default rate of 0.34% since its first investment in 2017, compared to 1.63% for the loan market over the same period. The underlying loan portfolios also have low exposure to CCC assets at 2.6% (vs a 4.1% average for US CLOs and 3.2% for European CLOs).

All of the positions in the portfolio are in compliance with their overcollateralisation tests (the average test value is 4.5% above the threshold). The test compares the par value of the CLO portfolio (adjusted for defaults) with the par value of the CLO notes. This ratio must be above a predetermined threshold for the CLO to pass. The company expects the next dividend to be unchanged at 2.5c per share and it is expected to be well covered. Assuming 70% loan recovery rate, the loan portfolios would require 15% cumulative defaults in order to generate the loss required to breach the limit.


Liberum view

FAIR's CLO portfolios continue to perform resiliently, maintaining the track record since IPO. Annualised default rates and the proportion of CCC-rated assets is considerably lower than market averages. The headroom on the overcollateralisation test provides comfort on the ability to maintain high cash distributions. The reduction in loan prices will also provide opportunities for the underlying CLO managers to build par by acquiring strong credits at discounts. Stress testing scenarios are useful in assessing downside risks for CLO portfolios. The manager has stressed return expectation for a significant increase in default rates. Under stress scenarios based on 2000 and 2008, the estimated gross returns would still be positive at 4.4% and 9.3%. The shares currently trade on a 15.8% discount to NAV (20.2% prospective dividend yield), compared to a long-run average discount of 0.5%.



Specialist Finan

[ga_dti] 15/7/2022 11:36

Hardman & Co analyst interview discussing their report 'Hardman presentation: carpe diem'

[yieldsearch] 15/7/2022 10:04

re 597: yes agree it seems that the asset manager is confident that cash collection will be maintained. given the structure of the CLOs, you need first a number of default or number of rating downgrade, then a test, then this will trigger bifurcation of cash away from volta. there is always a lag hence why the asset manager can have some confidence that the cash collection is maintained in near term. noone (myself first) can forecast cash amount in medium term, way too many optionalities in the product and macro volality.

the asset manager cannot control market prices: if clo bonds prices and in general high yield market are weakening further, it should have an impact on NAV and volta price, so probably too early to get back in, i dont think the quarterly dvd is covering the potential further decline in share price.


Some links to monitor markets:

US CCC high yield
hxxps://fred.stlouisfed.org/series/BAMLH0A3HYC


Euro high yield
hxxps://fred.stlouisfed.org/series/BAMLHE00EHYIOAS

[cwa1] 14/7/2022 07:29

XD this morning FWIW

[bluemango] 13/7/2022 23:44

It reads like this could turn out to be an opportunistic moment. Particularly reassuring also, is this section:

'Looking ahead to the next few quarters, we do not believe that there are any signs that Volta is likely to suffer from a diversion of cash flows from its CLO Equity positions. Indeed, Volta's cashflows have been increasing every month for the last 4 months (measured as the rolling 6-month cashflows to avoid seasonality). Receiving a continuing high level of cash flows should allow us to take advantage of opportunities arising from the current market environment while maintaining the payment of a steady quarterly dividend'

[yieldsearch] 13/7/2022 21:59

Nav posted, down 4.6%. Asset manager still bullish on the market, seems ready to open new clo warehouse when others may have liquidateNo cash diversion anticipated so, according to them, dividend is secured...

[hpcg] 08/7/2022 06:57

Defaults in Europe are going to go crazy this winter with high energy prices and gas rationing. In addition I think, and of course just my opinion, that Sterling will be a lot stronger than the Euro this time next year, so that is a double whammy.

[bluemango] 07/7/2022 21:00

Even if next three quarters stayed at this level that still equates to around 7.8% at current share price Not too much of an issue. And yes the market was aware of that drop in NAV.

[cerrito] 07/7/2022 20:35

Rather taken aback when I saw the dividend will be 13c having got used to the 15c of the last 2 dividend payments. This is especially given their bullish comments on the strength of their cash flows.
Then reminded myself that their dividend policy is 8% of NAV and further reminded myself of the big drop of NAV during May from e7.22 to e6.37. Let us hope that their comments in the May report that pricing in June had picked up turn out to be true.
Somewhat counter intuitive to cut dividends with strengthening cash flow but we had been warned.

[cerrito] 15/6/2022 09:31

at least for a sterling based investor like me I am benefiting from the weakness of sterling against both the dollar and the euro

[hpcg] 15/6/2022 08:56

I can´t emphasise enough, if at all possible trade this in Amsterdam not London. I know IG allow this. Some providers, even if they offer Euronext, will not deal dual listings on the foreign exchange.

[yieldsearch] 15/6/2022 07:51

Eur 5.56/5.58 on Euronext. the LSE version is always wider and less liquid, even in normal times.
Agree with Skyship, crossover, clo prices have gapped out. Credit spread repricing across corporate/ sovereign. I am expecting further nav decline, sold in may all toro/bglf/fair (all similar, leverage on loan / CLO equity piece) and kept a small allocation here

[skyship] 15/6/2022 06:54

Well, if I were still in I would be exiting pretty smartish on that major NAV reversal - regardless of the spread.

[bluemango] 15/6/2022 06:32

And as mentioned, the spread here is horrendously wide.

[bluemango] 14/6/2022 22:45

#584 Same here; neither buying but nor selling either. I'm here for income and the crucial aspect is surely whether there's anything likely to materially impact the yield here. So I suspect like other holders, I'll be sticking with it for the foreseeable.

Worth reading and digesting the comment/analysis accompanying today's info.

[hpcg] 14/6/2022 21:23

I suspect the NAV will keep heading down. I want to be buying this up the other side. I would expect it to overshoot fair value.

[cerrito] 14/6/2022 19:56

NAV down to E6.37 the lowest since October 20209 but in contrast to 2020 the cash flow is such that we should be receiving our 15c dividend but no doubt the price will drift down.
I was bracing for a fall in NAV but perhaps not of this magnitude.
Do not see myself as buying or selling.

[cerrito] 09/6/2022 16:53

To those who could not make the call today which was recorded as and when the recording is up I suggest you listen to it.
A very competent exposition.
I am not buying as I foresee we are going to have a turbulent period when there will be bargains. If the trading spreads were narrower than they are, I would sell probably.

[hpcg] 05/6/2022 10:48

John Authers has reported some fraying at the edges of the high yield market in the US, though I have not read his article. VTA is primarily exposed to Europe, but markets are all linked. I still think the risk here is that capital loss exceeds income for a period of time. The share price has held up much better than I thought it would.

[cerrito] 04/6/2022 18:03

Just found out that there will be a zoom investor call with the VTA manager organized by Hardman this Thursday at 3 which should be interesting.
hxxps://www.research-tree.com/events/hardman-co/hardman-talks-volta-finance-manager-s-presentation-and-q-a/964

[davebowler] 14/4/2022 09:18

Liberum on Fair Oaks Income

1.7%% NAV TR YTD

Mkt Cap £194m | Share price $0.63 | Prem/(disc) -4.6% | Div yield 16.0%

Event

Fair Oaks Income has released its annual results to 31 December 2021, with the previously reported NAV per share of $0.67 representing a NAV total return of +22.7% in 2021. FAIR has also published its monthly NAV to 31 March 2022, with the $0.65 per share value representing a +0.3% NAV total return in March (+1.7% YTD).


Liberum view

Despite ongoing potential for NAV volatility in the near-term, we regard the 16% dividend yield as attractive. We note that the credit performance of the portfolio has been strong and there is significant headroom on overcollateralisation tests. Distributions to the portfolio from debt investments remain healthy and CLO equity can potentially benefit from a widening in loan spreads as the CLOs financing cost is fixed and any increase in portfolio spread will benefit CLO equity investors.

[hpcg] 07/4/2022 14:52

I'm still digesting the Chairman and Investment Manager reports'. While inflation is addressed the risk of company failures is not, just in passing. I guess that is some way off though.

[cwa1] 07/4/2022 13:22

Half yearly financial report:-



VOLTA AT A GLANCE
Volta Finance Limited Half-Yearly Financial Report 2022 1
The investment objectives of the Company are to preserve its capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis. Volta currently seeks to achieve its investment objectives by pursuing exposure predominantly to CLO’s and similar asset classes. A more diversified investment strategy across structured finance assets may be pursued opportunistically. Volta measures and reports its performance in Euro.
 NAV per share as at 31 January 2022: € 7.3918
 Dividend per share for the six months to 31 January 2022: €0.29
 Share price as at 31 January 2022: €6.20