Volta Finance Share Discussion Threads

[yieldsearch] 12/8/2016 01:19

Skyship re your 137, pls see below. Since i posted this, Fair nav went up like 10pc! so may be an article to scare ppl like me..

Rising benchmark raises borrowing costs for companies

Higher three-month dollar Libor also affects vast universe of collateralised loan obligations
by: Joe Rennison in London and Eric Platt in New York

Companies face their first increase in borrowing costs since the financial crisis as incoming rules for prime money market funds spur higher short- term interest rates.
Payments on floating rate loans issued by dozens of companies are set to increase asUS dollar Libor for a period of three months has risen above 0.75 per cent.
This level, alongside interest rate floors set at 1 per cent, is used on more than nine-in-ten of the loans that comprise the $880bn S&P/LSTA Leveraged Loan Index.
Analysts and investors expect Libor to continue climbing as new rules governingprime money market funds are fully implemented in October. That has reduced participation in commercial paper, pushing up short-term borrowing rates including Libor.
“As Libor crosses these floors, the amount of interest the companies have to pay is going to creep up,” said Meredith Coffey at the industry association LSTA.
The increase in Libor past 0.75 per cent will affect loans issued by Valeant Pharmaceuticals, office supply retailer Staples and fragrance and cosmetics groupCoty, which will reset higher when quarterly interest payments are due in the coming months. The loans include a floating rate component — in this case Libor — and a spread to compensate investors for the underlying credit risk.
“[Rates] will start floating after a very long time and it will be interesting to see how it shakes out,” said Neha Khoda, a credit strategist with Bank of America Merrill Lynch. “For some companies it won’t matter, it will be a drop in the ocean. But for some with limited cash flows, it will be significant.”
The rise will also affect the vast universe of collateralised loan obligations — bonds backed by leveraged loans. For CLO investors in the lowest tranches, known as the “equity” slice of such deals, the impact can be significant.
Equity investors typically receive all income left over after other, more senior, holders in the CLO have been paid. In exchange for the potential upside, these holders must tolerate the greatest risk of loss should the underlying loans default.
As Libor has slowly crept higher, the income that CLO portfolios have collected on corporate loans with floors has stagnated. As the Libor rate paid to senior tranche holders has increased, that has left less to pass on to equity holders.
“The increase in Libor is a net negative for equity holders because it erodes the yield pick-up,” said Oliver Wriedt at CIFC. “The rate has to get above 1 per cent before that negative effect is neutralised.”

[davebowler] 10/8/2016 15:52

There were two defaults in the US CLO Index during the month although none of Fair Oaks' CLO equity positions had exposure to these names. Cumulative default rates in the portfolio are just 0.09% and have materially outperformed projected defaults since inception

Liberum view
The manager’s timing has proven to be opportune in relation to the secondary mezzanine investments which were mostly completed during March and April. These positions have re-rated significantly and still offer considerable upside. The JPM CLO B-rated Index is up 28% from its 2016 lows although it is still only flat YTD. Fair Oak's 12.9% NAV return in 2016 to date compares to a 0.1% return for the CLO B-rated Index.


July's substantial return and the ongoing credit performance of the portfolio should help to cement Fair Oak's premium relative rating to the sector. The shares currently trade on a 4.4% discount to NAV and offer an 11.4% dividend yield.

[skyship] 10/8/2016 11:04

YS - thnx for that, but is it possible to post the Summary para or a few salient individual paras - unable to access as the FT is a sub site these days...

[davebowler] 10/8/2016 11:02

FAIR commentary by Liberum;
Specialist Finance

Fair Oaks Income Fund
Stellar 13% NAV return in July

Event
Fair Oaks Income Fund has announced a stellar NAV uplift of 13.2% to $0.929 for the month of July. The NAV uplift was due to a combination of an improvement in pricing and strong cash flow receipts during the month.

The junior CLO markets had one of the strongest months on record with the JP Morgan CLO B-rated Index up 8.4%. The company's equity positions also repriced significantly and generated substantial cash distributions in the month. All CLO equity positions except one distributed cash-flows in July which were ahead of expectations ($18.1m actual vs. $17.0m expected).

[yieldsearch] 10/8/2016 01:42

FT article:

Rising benchmark raises borrowing costs for companies
Higher three-month dollar Libor also affects vast universe of collateralised loan obligations

Interesting article highlighting that CLO have benefited from libor floor on loans and with interest rate increase in the US, the benefit of this libor floor is reducing.
My understanding below, however may be completely wrong: CLO are libor based vehicle, asset (loans) are paying libor and a spread, and the clo notes are all libor based except the most junior piece, the equity, taking all excess cash
It seems that the loans have libor floor (at 1%), therefore when the libor rate were lower than 1pc, the assets were paying 1pc but the liabilities (clo notes) were using a lower libor, hence creating more excess cash for the most junior tranche, the equity. With the gearing in place, this may be material. With USD libor increasing it seems that this extra cash will potentially not available anymore.

Not sure what is/will be the impact on clo funds like Vta, Cifu, Fair, fair to say that it is most likely negative. Really based on their exposure to clo equity piece, and if this increasing interest rate environment was priced in the valuation of those assets.

[skyship] 01/8/2016 13:57

As ever - many thnx for yr post on the NBDG thread.

[skyship] 01/8/2016 11:16

DB - a favour - could you take a look and see if Liberum have issued a view post the Qtly Portfolio Update by NBDD, NBDX, NBDG - actually only interested in the last - NBDG. If so, could I ask you to post it on the NBDG thread...

[davebowler] 01/8/2016 10:31

Liberum;
Alternative Funds - Weekly Data and Trends

We will be publishing data on a weekly basis to help identify sector trends. We welcome feedback at [e-mail]

CLO funds dominate the list of the top 10 high-yielding funds. This is partly due to the inherent gearing within the investments but also reflects NAV (and share price) declines over the past year as CLO equity and mezzanine tranches were marked down. The underlying cash return from CLOs has been strong as defaults remain below historic levels and this is the ultimate driver of returns as CLOs benefit from a term leverage structure. We regard the CLO sector as one of the most attractive on a relative basis.

[davebowler] 21/7/2016 11:59

Liberum view
The CLO funds trade on an average 5.4% discount to NAV and offer a 10.4% prospective dividend yield. We believe this represents one of the more attractive sub-sectors in the alternative funds universe given relatively low default outlook for the market. Asset prices have continued to recover into July which should lead to further NAV growth in the short-term. Our favoured plays in the sector are Fair Oaks Income Fund and Volta Finance.

[davebowler] 24/6/2016 13:54

About 2/3 of its assets are in Euros and 1/3 in Dollars.

[davebowler] 22/6/2016 08:59

Liberum;
CLO Funds
Market recovery continues in May

Event
Three of the CLO funds (Carador, Volta Finance and Blackstone/GSO Loan Financing) released positive NAV updates this morning for May with Blackstone/GSO Loan Financing producing the highest return at +2.3%.

Figure 1: CLO NAV total return performance*


May-16
2016 YTD
12 months
Carador Income Fund
1.6%
0.6%
-12.9%
Fair Oaks Income Fund
-0.2%
0.5%
-3.7%
Volta Finance
1.3%
0.3%
-1.3%
Blackstone/GSO Loan Financing
2.3%
6.5%
9.5%


Source: Company data, Liberum *Assumes dividends are not reinvested



In the US loan market, the default rate moved up slightly to 2.26% although much of this is due to the energy and mining sectors. The default rate excluding these sectors was 0.94%. European loan spreads tightened in the month and there was a slight divergence in the US between the senior and junior tranches, as spreads tightened for the higher rated tranches but widened for the junior tranches.

Liberum view
On a headline level, Blackstone/GSO Loan Financing has delivered the strongest NAV performance over the past year. This is partly due to the company's valuation policy. The majority of the company's peers value their portfolios on the basis of independent broker quotes or independent pricing providers. BGLF's CLO securities are valued using an intrinsic valuation model (performed by a third party) based on future cash flows and do not use secondary market information such as third party broker quotes. In volatile markets with significant mark-to-market declines such as in Q4 2015 and Q1 2015, BGLF will outperform peers because of the smoothing effect the valuation policy will have on NAV.

The CLO funds trade on an average 4.7% discount to NAV (range is -10.4% discount for Volta to 1.4% premium for Fair Oaks). We attribute Fair Oaks' premium rating to the company's shareholder-friendly structure and strong underlying credit performance of the portfolio to date.

[skyship] 25/5/2016 09:49

Agreed - DB - thnx for the continued Liberum posts.

Here at VTA the rise from 650c bid to 680c bid is entirely currency related reflecting the move from EUR/GBP of 1.25 to the current 1.31.

Nevertheless, good to see the NAV recovery.

Seeing the same with the other debt funds, finally including NBDG - the one I believe to be the best value - offered at 65p v. the 74p NAV. They enter their redemption period after Mar'17. A comparison with the two earlier capital class payouts (NBDD & NBDX) suggests payouts will start quite quickly. A read through the Update of c10days ago suggests we could well be looking at a Gross Redemption Yield for NBDG of in excess of 12%pa.

Sp appears to be underwritten by the buybacks, as they are currently on a 12% NAV discount, compared to the target of 5%. They held off from aggressive buybacks during the Nov-Feb Mark-to-Market pricing slump across the sector.

[cerrito] 24/5/2016 19:37

davebowler: Thanks for these posts..appreciated by me

[davebowler] 24/5/2016 10:04

Liberum;
Volta Finance Limited (BUY)
2% performance in April

Event
Volta’s estimated NAV at the end of April 2016 was €7.43 per share, 2% growth for the month taking into account the €0.31 per share dividend paid on 19 April 2016. The performance is in line with the credit markets’ improvement and mark-to-market gains from the CLO Equity tranches by 4.7%, the CLO Debt tranches by 2.1%, the Cash Corporate Credit deals by 1.2%, partially offset by loss from the Synthetic Corporate Credit deals by -1.7% and flat ABS.

During the month, Volta acquired one USD BB rated tranche of CLO for $4.5m with a projected yield of 10.2% and received €2.7m of principal proceeds from the maturity of a CHF denominated Bank Balance Sheet transaction. The company generated €4.5m in interest and coupons in April bringing the six month total cash generated to €18.9m.

Liberum view
Volta's portfolio cash flow is improving especially as the company continues to invest in high yield products such as the latest BB rated tranche of CLO. Volta is an attractive proposition on a 8.1% discount to its April NAV and a dividend yield of 8.9%.

[davebowler] 29/4/2016 15:52

The price is strangely a bit higher in Amsterdam-

[davebowler] 21/4/2016 10:06

Liberum;
Strong NAV rebound in March

Event
Volta's NAV rose 4.2% in March to €7.59 per share as credit markets recovered losses from earlier in the year. The mark-to-market movement across portfolio sub-sectors was CLO equity +8.0%, CLO debt +6.5%, Cash corporate credit +4.3%, synthetic corporate credit +1.2% and ABS +0.3%.

The sole warehouse position held by Volta was closed which led to a pricing of a new CLO and Volta re-invested €8m into the equity of the new CLO. In addition, Volta acquired two CLO debt positions in March. €16.6m was invested in total in March with an average projected yield of 11.6%.

Liberum view
The NAV uplift in March was achieved despite adverse FX movements in the month which we estimate would have had a negative impact of -1.2%. The underlying NAV increase was therefore in excess of 5% (of which 1.4% came from the warehouse transaction).

Volta has been reinvesting capital in recent months mainly in CLO debt tranches which 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 13.7% discount to NAV (vs. 2.0% 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).

[davebowler] 20/4/2016 10:57

Liberum mention;
re. Toro Limited
Positive read-across for CLO funds

Event
Toro's NAV rose 0.69% in March, driven by markups (0.85%) and cash flow realisations (0.59%), but partially offset by hedging costs (-0.75%). NAV total return in 2016 to date is -2.1%.

Synthetic credit markets experienced a very strong end to the quarter as a result of supportive central bank actions and statements. Spreads tightened considerably in both the US and Europe in March as evidenced by the movement in the iTraxx 5 year Crossover Index from 408 bps at 29 February to 304 bps at 31 March.



The European ABS market recovered some of the losses of the early part of the year. BB and B rated post-crisis CLO tranches tightened by 100bps and 150bps respectively.

Liberum view
The positive ABS market update highlighted by Toro should be helpful for CLO funds as the spread tightening should be reflected in CLO valuations in the near-term. The majority of these funds (Volta, Fair Oaks and Carador) have suffered significant mark-to-market writedowns in recent months and we believe the sector offers the strongest near-term recovery play in the alternative funds space.

[davebowler] 15/4/2016 14:23

Liberum;
AXA Investment Managers, the manager of Volta Finance, will be conducting meetings with investors and those unfamiliar with the investment case on 27th and 28th April.

Volta is a specialist structured credit fund. Volta has an impressive track record and an ability to access attractive returns in all asset classes (e.g. CLO’s bank balance sheet transactions and warehouse transactions). These returns underpin the current c.10% dividend yield.

The last couple of months have seen credit markets rebound after several months of negative performance, and this is yet to be fully reflected in the pricing of CLOs.

Market dislocation can 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.



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).

[langland] 07/4/2016 08:12

ex the 31 cent div

[tiltonboy] 04/4/2016 14:37

Nothing wrong with taking a profit. Had I bought some more, I would probably looking to do the same.

Only got a half holding so staying put.

[skyship] 04/4/2016 14:24

Sadly decided to take the turn of a tad over 13% in just over 2months. 8% from the share price gain, topped up with 5% from the currency. This latter is my reason for exiting ahead of my E6.50 target. I'm expecting Euro weakness; at least a reversal of the recent strength.

[skyship] 31/3/2016 13:01

...and not forgetting that 10% yield - COVERED!