Volta Finance Share Discussion Threads

[cerrito] 28/1/2023 17:23

Directors Talk has an interview with the Hardman analyst going through his latest report itself based on the Volta AR which it appears I should read. Anyone here had a good look at it??

[rambutan2] 14/1/2023 04:21

Cerrito, I'm not sure what you're saying. The para you quote is, like my two, bullish rather than bearish for the sector. While not currently a holder of VTA, having sold out higher up, I am a holder of FAIR and pondering on adding. I also hold TORO, which plays in the same postcode, if not the same street.

The default figs do matter, because as we have seen in previous times, if they get bad enough for long enough, there is no escape and a nasty geared plunge ensues for all vehicles.

[hpcg] 13/1/2023 21:49

I dipped my toe back in today having sold out at 6 euros and change in September 2021. A lot has happened to equity values and that provides some protection I think. The prospects for gain also balance out the risks IMO. If I already owned I don't think I would be increasing, there might be better opportunities, but I am low on debt instruments.

[cerrito] 13/1/2023 18:29

OK rambutan2 but remember they go on to say the following#
quote
Since the vast majority of loans are covenant lite, the deterioration of interest coverage ratios - while being a source of stress - do not mechanically lead to a default. It is the level of EBITDA and where rates will be when companies need to refinance their debt that will really matter. We do not see many companies that have to refinance in 2023.
unquote.
For me this shows that there is something mickey mouse about the whole discussion of defaults and explains why I am OK with my current holdings in both FAIR and VTA I am not looking to buy more.

[rambutan2] 12/1/2023 21:15

Dec nav, down 1% at 5.84:

"In terms of default rates, we now have the full list of defaults for 2022. Default rates were still very low, at 0.4% for European Loans and 0.7% for US loans. After the invasion of Ukraine, rating agencies were forecasting 2022 default rates to reach between 2% and 2.5% for the US and European loan markets... We closed the year far from those levels.

As we regularly highlight in this report, the main reason for such low default rates is the benefit of inflation, despite the economic slowdown. When companies' revenues are growing fast, even if said companies suffer from margins pressure, profits and EBITDA still manage to grow (at a lower pace than revenues but they still do grow on average)."

[davebowler] 20/12/2022 10:28

Liberum on FAIR -
Fair Oaks Income

Strong NAV performance in November

Mkt Cap £164m | Share price $0.49 | Prem/(disc) -13.3% | Div yield 16.3%

Event

Fair Oaks Income's NAV per share at 30 November 2022 was $0.565, representing a total return of 3.1% in the month (-2.0% YTD). NAV performance in November was driven by significant tightening in credit markets in the US and Europe. US and European high yield indices generated returns of +1.6% and +3.9% in the month. Loan markets were also positive in November (+1.2% in the US and +2.2% in Europe).

Trailing 12-month loan default rates remain low at 0.43% in Europe and 0.73% in the US. Market forecasts suggest default rates could reach 3%+ in 2023, although the manager is confident the portfolio can continue to generate attractive returns under these conditions. The portfolio is well-diversified and offers attractive downside protection given current valuations. Exposure is predominantly to senior secured loans and there is plenty of headroom on overcollateralisation tests.


Liberum view

Fair Oak's portfolio continues to perform resiliently, despite more challenging market conditions. Annualised default rates and the proportion of CCC-rated assets is considerably lower than market averages, leaving it well placed to weather market volatility. The headroom on the overcollateralisation test provides comfort on the ability to maintain high cash distributions. Stress testing suggests that the portfolio can continue to perform well, even if default rates exceed the most recent forecasts of 3%+. The company has an attractive discount control policy in place and has consistently bought back shares over recent months. We view the current 13% discount to NAV as overly punitive, given the downside protection and highly attractive 16% dividend yield

[cerrito] 13/12/2022 22:50

Yes pleasantly surprised by good performance on November and interested in the hedging they have done. I need to say I can understand why the market went back to sleep as I was not minded to buy more.

[cwa1] 13/12/2022 09:41

NAV update:-

[cwa1] 09/12/2022 07:23

Guernsey, 8 December 2022

Volta Finance Limited ("the Company") hereby announces a fourth interim dividend for the financial year commencing 1 August 2021.

The Company announces that it has declared a quarterly interim dividend of EUR0.12 per share payable on 26 January 2023 amounting to approximately EUR4.42 million, equating approximately to an annualised 8% of net asset value. The ex-dividend date is 29 December 2022 with a record date of 30 December 2022.

[rambutan2] 15/11/2022 20:50

Yes, always an upbeat message as the share price and nav say otherwise. Although the same goes right across the sector.

[cerrito] 14/11/2022 18:22

I see that the October NAV is out and it is back down to levels last seen in the Covid times of May 2020. Not surprising given a 3.9% decline in CLO equity tranches.
I saw the October cash flow of E9.1m which seemed low and so compared it with October 2021 and saw in fact it had gone up from E8.5m last year. I do note that 6 month interest to October 22 is at E23.4m down from the same figure of E26.4m last year. Despite this I see that the annualized cash flow yield this year at 22.1% is higher than last year's 19.7% and need to work that out.
I see in the statement today they talk about 2023 US default rates in the 2% region and Euro ones 3% broadly in lime with comments over the last 4 months.

[rambutan2] 21/10/2022 14:33

Cerrito, I was listening to the Blackstone quarterly yesterday and in reply to a question they said that their credit division had picked up some CLO paper dumped during the LDI melt down. So, surprising but true!

[wolstencroft] 21/10/2022 10:06

He says
"AAA CLOs are backed by loans that have a default expectation around 30%"

Pimco say
"The eight-year average default rate for loan issuers rated single-B is 2.33%, compared with just 0.77% for BB rated loans"

He says

"It takes pretty heroic assumptions to transform 30% defaulting collateral to zero risk bonds"

But the AAA tranch of a CLO is protected by the equity position, buffer and all the tranches below it

He says
"DS score greatly oversimplifies real-world correlation"
Well, I think we would probably agree there

Reading later in the artcile he mentions that single-B has a 10 year default rate of around 30%. This implies a single year default rate of around 3 percent so perhaps when he says the AAA are backed by bonds with a default rate of 30% OVER 10 YEARS.

I think CLOs have help up well in recent years but right now the market is frozen, and if we get a systemic crash will no doubt crash further.

This is meaningful but unfair I think. Volta is getting underlying cash flows yielding 22% plus and so even with a disasterous default rate of say 10% you'll still get a decent 10% underlying return.

Of course sentiment is poor at the moment hence the low SP

[cerrito] 20/10/2022 14:18

some of you may find this article interesting.
I have yet to get to grips with it
hxxps://www.linkedin.com/pulse/clo-alchemy-endangers-broader-economy-rod-dubitsky/

[cerrito] 16/10/2022 20:58

I was interested to read their explanationfor NAV decreasing in september was forced selling either because of margin calls for FX hedging or LDI margin calls.
Would have thought you would have had to be desperate to sell something as illiquid as CLO's but I guess that the spike in BWIC's with a swift response required suggests that something odd was afoot.
I see almost no trades in CLO equity.

[hpcg] 12/10/2022 10:07

trailing 12-month basis - will not be representative of a forward 12-24 month basis. Europe needs a new level on energy prices and US interest rates need to have topped out. Not only that but we don't know the forward course on inflation. If it is high and ongoing then the interest rates on CLOs are no compensation. 8% doesn't seem that generous; I'd rather see the portfolio considerably rotated first. I note also that the dividend is decreasing which I presume is a function of the prior moves down in rates.

[davebowler] 12/10/2022 09:39

Liberum on FAIR-
Fair Oaks Income

UK mini-budget hits September NAV

Mkt Cap £181m | Share price $0.49 | Prem/(disc) -13.9% | Div yield 16.3%

Event

Fair Oaks Income reported NAV for 30 September 2022 for the 2021 shares (FAIR LN) of $0.5693, down 4.74% for the month and for the realisation shares (FA17 LN) of $0.5684, down 4.79% for the month. Share price performance for the 2021 shares in September was +5.05% as the discount to NAV narrowed from 17.1% at the end of August to 8.7% on 30 September.

Liberum view

Overall, the NAV performance was severely impacted by the stress in the UK LDI market that forced pension funds to sell safe assets in order to raise cash for margin calls. This impacted not only the Gilt market but also the CLO market and led to dislocations in CLOs that originated in Europe and now spreads to the US as the Wall Street Journal reports. This means that both the USD and the EUR CLOs in the portfolio suffered. The US and European leveraged loan indices declined 2.3% and 3.6% in September, respectively. The JP Morgan High Yield Indices declined 3.9% and 4.1%, respectively.


As long as the Gilt market is in its current precarious condition, we and the investment manager of FAIR expect current high yields on CLOs to persist. Given these market turbulences, we think the performance of FAIR, which has been pretty much in line with the B/BB-rated CLO index globally, is solid and speaks for the quality of the manager.


The upside of the September turbulences is of course that going forward, capital can be invested at significantly higher yields, surpassing 8% for B/BB-rated CLOs or more than double the yield that was available at the beginning of the year. The investment manager of FAIR reports that even though markets are under technical pressure, the underlying fundamentals remain solid with the default rate in the European CLO space dropping from 0.72% to 0.43% in September on a trailing 12-month basis. In the US, the trailing 12-month default rate increased slightly from 0.70% to 0.85% but remains low overall. And while technical selling pressure increased the share of CLOs trading below 80c on the dollar to 6.4% in the dollar space and 6.2% in Europe, the share of loans rated CCC+ or below remains low at 4.6% in the US and 3.5% in Europe.

[skyship] 12/10/2022 07:54

Given market conditions, esp. in the debt markets, truly amazing that these have held up so well. No longer hold here; but had assumed they would be down nearer 400c by now.

[cwa1] 20/9/2022 10:31

Volta Finance Limited ("the Company") hereby announces a third interim dividend for the financial year commencing 1 August 2021.

The Company announces that it has declared a quarterly interim dividend of EUR0.13 per share payable on 20 October 2022 amounting to approximately EUR4.75 million, equating approximately to an annualised 8% of net asset value. The ex-dividend date is 29 September 2022 with a record date of 30 September 2022.

[cerrito] 13/9/2022 16:53

Encouraging August report and useful increase in NAV.
Interesting comment that even with default rates on US$ loans going from 0.6% at end August to 2% in 2023 that the projected CLO yield based on the current share price is 30%+.
Good to read that they continue not to expect cash diversions for the rest of this year and next year.
Based on today's midprice of the share at E5.07 this is a discount to end of month NAV high by VTA standards. I have no desire to sell but do not see myself buying even at this current price and discount.

[davebowler] 25/8/2022 09:26

Liberum on FAIR-note the last sentence.

Fair Oaks Income Realisation Shares

First capital distribution for realisation share class

Mkt Cap £30m | Share price | Prem/(disc) -1.3% | Div yield 17.7%

Event

Fair Oaks Income will return $4m to shareholders in its realisation share class. The distribution will represent 6.4 cents per share and will be effected by way of a compulsory redemption (11.2% of the shares will be redeemed).

Liberum view

This is the first capital distribution for the realisation share class. Dividends will continue to be paid alongside regular capital distributions. The full redemption of the previous realisation share class (2014 shares) took approximately two years. The 2014 shares fully redeemed in March 2019, resulting in a 9.8% IRR from inception. Alongside strong credit performance, we believe the option of a realisation share class is one of the reasons why Fair Oaks has commanded a much stronger share rating than peers in the CLO sector.

[davebowler] 18/8/2022 07:48

Liberum on FAIR-
FAIR’s CLO portfolios have demonstrated considerably stronger credit performance since inception than loan markets. Q2’s loan market sell-off prices in a high default rate scenario. FAIR’s NAV has predictably weakened in this environment but offers near-term upside from recent loan price strength. Despite market volatility, we expect strong cash generation to drive an 8% NAV TR in 2022. We estimate a pro-forma discount of c.20% (vs a long-term average of 0.7%).

Download Fair Oaks Income* (BUY, TP $0.60 from $0.73) – Downside risk priced in (9 pgs)

[yieldsearch] 17/8/2022 08:10

Cerrito your 603 (Help please as they say that $ interest/coupon payments hit by loss of Libor floor:)

In low interest environment, the asset side of the clo (ie the corporate loans) are benefiting from a libor floor (ie if libor is say at 0.10%, the corporate loans are paying a predefined floor, ex 0.5%).
The liabity side of the clo typically would not have a floor, and therefore income is stable in reduced rate environment (the floor above) and the interest the clos are paying are reducing. so net yield/net interest margin is actually improving

when interest rate are reaching or going above the floor, that benefit is disappearing. as floor are set at different level for each corporate loans, you need a number of interest rate increase from a low level to fully remove that benefit of libor floor



hxxps://www.pennmutualam.com/market-insights-news/blogs/chart-of-the-week/2021-03-11-importance-of-libor-floors-in-the-short-term

[cerrito] 12/8/2022 17:02

My heart rather sunk when I saw they had put out the July NAV after hours on a Friday afternoon which is normal harbinger of bad news but all good as they followed FAIR in having a better July.
Help please as they say that $ interest/coupon payments hit by loss of Libor floor. This rings a very vague bell but if anyone can enlighten much appreciated.
I see that interest coupon payments this July equal to those of April but down on the E10.6m of July 21.
Also note that the end of July 22 NAV of E6.22 way down from the E7.32 of July 21.