Volta Finance Share Discussion Threads

[davebowler] 31/3/2016 10:38

Liberum;
Relative outperformance continues

Event
Volta's NAV at 29 February 2016 was €7.29 per share which represents a 2.9% decline in the month. The NAV performance is due to mark-to-market losses mainly on the portfolio's CLO equity and debt tranches. The mark-to-market movement across portfolio sub-sectors was CLO equity -3.3%, CLO debt -4.0%, Cash corporate credit -0.6%, synthetic corporate credit +0.0% and ABS -0.1%.

Volta had one CLO warehouse position at the end of February and the month-end valuation was negatively impacted by the drop in European loan prices. The CLO subsequently priced successfully and will close at the end of March 2016 with the warehoused loan portfolio transferred to the CLO at acquisition cost. The estimated impact on the March NAV is +1.4%.

In terms of portfolio activity, one European CLO debt tranche was sold for €1.8m and four US CLO BB debt tranches were acquired with an average projected yield of 12.0%.

Liberum view
Volta's relative outperformance against peers continues and this is predominantly due to the company's defensive portfolio positioning ahead of the market correction in H2 2015. Volta's NAV total return since 30 June 2015 is -7.6% which compares to -22.2% for Carador.

The newly acquired BB CLO debt tranches are extremely attractive given the available yields and protection from default through the subordinated tranches. These should also lead to further improvements in the portfolio cash flow as capital has been rotated out of lower yielding debt assets to fund these investments.

Volta currently trades on a 14.4% discount to NAV (vs. 1.8% average discount for peers) and we believe it offers compelling value given the manager's track record of outperformance and ability to access attractive returns in other asset classes (e.g. bank balance sheet transactions and warehouse transactions).

[skyship] 29/3/2016 16:01

OK - thnx Tilts...

Fondul - what the hell is that?

[tiltonboy] 29/3/2016 14:09

SKYSHIP,

It was their comments on JPEL and Fondul.

[skyship] 29/3/2016 13:15

Thnx for that DB - reassures me that there really is very good value here. Hopefully the end Feb'16 NAV won't disappoint. May have to increase my allocation.

I see the last line of your post was the Header for Private Equity. Could I prevail upon you to post that content to the PE thread - especially interested if they are commenting upon last week's SEP Interims, or the imminent MTH Tender.

[davebowler] 29/3/2016 11:09

Liberum;
Volta Finance (BUY)
Conservative portfolio positioning protects against market weakness

Event
Volta's interim report has highlighted a NAV return of -5% for the six months to 31 January 2016. The negative performance in the period was due to mark-to-market losses caused by a widening of the discount rate by 170bps since July 2015. NAV return in 2015 as a whole was +10.0%.

Cash flows received in the six months equate to 11.5% of NAV on an annualised basis. Cash flows were rising towards the end of the period as capital has been recycled into higher coupon debt instruments. €50.6m was invested in 13 assets with an average projected yield of 11.4%. Five assets were sold for €11.3m (projected yield of 5.3%) and five assets were called (€15.9m).

Only 2.5% of the portfolio is exposed to the oil and gas industry and most of this comes from US CLOs as European CLOs have minimal exposure to oil and gas. Volta has illustrated the relatively minor impact this sector could have on the projected returns for the company's US CLO debt and equity tranches under base and stressed scenarios.

The stressed scenario assumes:

50% default rate in oil and gas and metals and mining (base assumes defaults in line with long-term averages)
50% recovery rate (base case assumes 70% recovery)
25% loan prepayment (30% for base case)


Separately, Volta has also announced an unchanged semi-annual dividend of €0.31 per share (10.2% prospective dividend yield).

Liberum view
The company's outperformance versus peers is mainly due to the more conservative portfolio positioning with only 21% of the portfolio in CLO equity at the start of the period. Carador, which has a much higher weighting to US CLO equity, experienced a NAV decline of 17% over the same six-month period.

The market dislocation can also be seen from the movement in Volta's projected portfolio IRR from 8.7% at 31 July 2015 to 10.4% (11.4% geared) at 31 January 2016. These projections from the manager have typically been quite conservative as Volta has generally exceeded expectations. There is upside potential to the projected IRRs as 25% of the portfolio could be called prior to maturity. We note reassuring comments regarding the sustainability of the dividend and this is helped by the increased weight of cash flows coming from CLO debt assets which should provide a relatively stable source of income.

VTA currently trades on a 19% discount to NAV and we believe it offers compelling value given the manager's track record of outperformance and ability to access attractive returns in other asset classes (e.g. bank balance sheet transactions).

Private Equity

[skyship] 25/3/2016 14:34

Pretty encouraging Interim Report - both the Chairman & Investment Manager's Report sound pretty positive and underwrite the VALUE here. 10.3% yield and 20% NAV discount as at Jan'16. Should have the end Feb'16 NAV this coming week.

[skyship] 25/3/2016 14:34

Pretty encouraging Interim Report - both the Chairman & Investment Manager's Report sound pretty positive and underwrite the VALUE here. 10.3% yield and 20% NAV discount as at Jan'16. Should have the end Feb'16 NAV this coming week.

[wolstencroft] 18/3/2016 17:11

Roughly same price as on the UK market - about 6 EUR

[skyship] 18/3/2016 12:51

Price here looks to be on the turn - if you're a potential buyer, get them in soonest! I tried for an online top-up just now - nothing doing!

[skyship] 18/3/2016 12:48

Are they still trading at a discount over there/

[wolstencroft] 18/3/2016 12:40

buy on the Amsterdam exchange it is much more liquid and you can bid within the spread. But you have to deal in Euros...

[skyship] 15/3/2016 13:19

CIFU have risen 12% over the past week!

[yeild hunter] 15/3/2016 12:53

Tried to buy some through Halifax and was told there was no liquidity and you could only sell! I've not come across this before

[skyship] 04/3/2016 09:25

Ahh - OK, thnx - interesting analogy.....

[joan of arc] 03/3/2016 18:52

Based on last year's report it would seem that VTA do have a large exposure to US equity and BB/BBB CLO debt.

[skyship] 03/3/2016 15:26

RECI is totally unaffected; their's is a portfolio of individual asset backed loans - not pooled obligations.



EDIT:
Good performance from RECI last month:

[yieldsearch] 03/3/2016 14:54

Reci is now mainly real estate loans..not sure if the manager is doing mark to market on this.Cifu vta and others are more in equity piece of clo, ie much more leveraged positions, more volatile and also more price visibility in the secondary market. Recp really no concern for me given the asset coverage and the fact ggat tge manager has declared that they would invest in short duration position to match the near recp maturityWell thats my view

[skyship] 03/3/2016 13:53

Hi eeza - yes read that - that CLO problem more of a hit for CIFU & FAIR than VTA, or NBDG for that matter.

Further downside risk is already in the price here; and it should perhaps be noted that the NBDG NAV has risen over 4% over the past two weeks as the debt market has bounced off the bottom. Many commentators such as Goldman Sachs saying we've seen the worst of it - a good market for bottom-fishing.

"The view of AXA IM, is that the current stress in the US loan and other
credit markets reflects the expectation of an increase in default rates
in the US loan market from prevailing levels, which are far below the
historical average, to be closer to historical average levels by end
2016 - mid 2017. This potential turn in the credit markets seems to have
taken some participants by surprise. However, this has been AXA's
central scenario for some time. Accordingly the portfolio has been
orientated to retain a significant portion of 1.0 CLO tranches (which
have less sensitivity to episodes of stress such as that currently being
experienced), to be very selective in our exposure to CLO Equity
tranches and to increase the exposure to European assets."

[eeza] 03/3/2016 12:27

CLO 2 article from ZeroHedge - doesn't paint a pretty picture.

[yieldsearch] 03/3/2016 11:20

hm i guess for the broker limited upside of offering this (5pounds), vs potential litigation with client re limited disclosure of risk etc..
Historical PPI issues caused the financial markets providers to tighten their offering across all financial products.
welcome to a new world of boring stuff!

[yieldsearch] 02/3/2016 11:58

Seems that these are not available to purchase through iweb..not sure why

[yieldsearch] 01/3/2016 17:28

Skyship: re post 87: I dont think there is a defined date or continuation vote for this company, my understanding is that it a permanent fund. Last time i looked i couldnt find any details in the offering memorandum.