Vpc Specialty Lending In... Dividends - VSL

Vpc Specialty Lending In... Dividends - VSL

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Stock Name Stock Symbol Market Stock Type Stock ISIN Stock Description
Vpc Specialty Lending Investments Plc VSL London Ordinary Share GB00BVG6X439 ORD GBP0.01
  Price Change Price Change % Stock Price Last Trade
0.00 0.0% 64.00 16:35:20
Close Price Low Price High Price Open Price Previous Close
64.00 63.80 65.00 65.00 64.00
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Industry Sector

Vpc Specialty Lending In... VSL Dividends History

Announcement Date Type Currency Dividend Amount Period Start Period End Ex Date Record Date Payment Date Total Dividend Amount

Top Dividend Posts

davebowler: Stifel; It is now over six months since the virus was unleashed, and while the fund has weathered the challenging period well, the discount remains at a historically wide level of 28% and still offers a covered dividend yield of 13%. The underlying loans have a short duration of c.1 year and so the portfolio has also been significantly de-risked with c.50% of the pre-March portfolio rolled-over. With many income funds suffering from dividend cuts, the pricing of VPC looks an anomaly. Although concerns regarding a fragile US consumer are valid, we think the portfolio should now be in a better position as new originations have tighter underwriting standards and are also to higher quality borrowers. We upgrade to Positive. Key Points Concerns over US consumer. We downgraded VPC in April to Neutral on the back of concerns for the US consumer. Since then the manager and underlying borrowers have limited new originations which essentially means the portfolio has been de-risking. The average duration of loans made to consumers is approximately one year, which means that c.50% of the March portfolio has now been amortised, which is a significant reduction in risk. As with all lending funds, new originations will take into consideration the higher risk environment today by tightening lending standards. Hence, we view portfolio churn as positive as the investment process does not stand still. Historically, loans made today should be the most profitable as the interest rate charged can be increased while borrower quality should also improve. Provisions released. In August, the manager noted that provisions had begun to be released as the portfolio has weathered this period well. We think there is scope for this to continue as the underlying portfolio continues to amortise and so should benefit from a pull to par effect. As at 30/06/20 the IFRS 9 reserve was £15.6m with 37% designated as stage 1 and 60% stage 2. In total this represents 6% of NAV. Increasing international exposure. The fund has also increased its international footprint with a new investment in Laybuy which provides consumers with a buy now pay later option in UK, Australia and New Zealand. We have our reservations around expanding the portfolio's international reach but also recognise that some diversification away from the US consumer can also be positive. How this segment performs will be an area to watch going forward. The manager has also broadened the funds profile by investing in the sponsor economics of its own SPAC which raised $200m (ticker: VIH). Sponsor economics in a SPAC can be quite accretive as it receives an outsized share of the vehicle for sponsoring it during its pre-IPO stage. The SPAC is targeting a high growth fintech company with an enterprise value of between $800m - $2bn. Unlisted equity. The manager is also increasingly confident in the prospects of some of its unlisted equity positions, which took markdowns in Q1 but have not yet reflected the rebound seen in equity markets. As online purchasing and 'buy now pay later' has grown through the pandemic, there is the potential for markdowns to be reversed and even marked up. There are 26 unlisted portfolio company investments that represent 10% of NAV, so exposure is diversified. Unlisted equity investments are valued based on the last funding round or comparable public company multiples. Key positives. The demise of Pollen Street Secured Lending through an eventual run-off or sale of the company may well provide a technical tailwind to the fund as investors have limited options for a high yielding lending fund. This along with continued large share buybacks, a large discount to NAV (with a long term plan to narrow the discount) and high dividend yield should support the share price. Key negatives. The manager has done a good job in protecting the portfolio from the economic problems caused by COVID-19 and has also benefited from the large stimulus measures introduced by the US government. However, there is no hiding from the risk of further restrictions due to a surge in infections and the knock on impact to the economy. In theory, the portfolio should be better protected given the portfolio churn that has taken place. Negative sentiment surrounding the lending sector also persists as some bad apples have tainted the sector but we think this is unfair.
davebowler: Liberum; Event VPC Specialty Lending Investments' NAV per share at 30 June 2020 was 89.8p (previously reported), representing a 0.5% NAV return in H1 2020. The July monthly report has since been published and the NAV total return for the seven months to July is 1.8%. During H1 2020, the overall performance comprised 6.3% of revenue returns and a capital loss of -5.9%. The capital loss was primarily a result of writedowns on equity investments (-3.1%) and an increase in Expected Credit Loss provisions (-2.7%). The ECL provisions which now represent 4.6% of portfolio acquisition cost. The portfolio comprises 19 balance sheet investments (83% of NAV) with a weighted average coupon of 11.3%. The remainder of the company's assets comprise equity investments in 26 companies (11% of NAV) and cash (6% of NAV). The manager continues to report robust credit performance from the balance sheet investments. Collection performance has exceeded the downside expectations on almost all of the balance sheet loans. Cash levels are also high within the SPV structures due to reduced origination and the short duration profile of the loan portfolios. The portfolio companies are taking a cautious approach to new origination given the underwriting challenges in the current market. In the US consumer portfolio, payment performance is ahead of expectations and the proportion of deferred loans is declining. After completing a deferment, 65-75% of borrowers are agreeing regular repayment schedules, with less than 10% defaulting on loans. Liberum view During a turbulent period, portfolio performance has remained relatively robust with all contracted balance sheet loan payments received to date. The portfolio companies have made a number of prepayments, enabling a reduction in gearing from 0.59x at 31 March to 0.43x at 31 July. Cash levels have also built up within the SPV structures. Government support schemes have resulted in significantly better credit performance than would have been expected at the onset of the crisis. We expect the underlying loan pools will experience further stresses as support schemes are withdrawn but VSL does have a layer of protection through first loss equity positions. 93% of the loans also benefit from a guarantee from the portfolio company in addition to the loan collateral. The current 29% discount is one of the widest of the performing direct lending funds and appears relatively attractive given the structural protection within the loans. The board has attributed the recent share price weakness to selling pressure from some shareholders who voted against continuation. We note the consistent level of buyback activity by the company in recent months to attempt to address the situation. In total, VSL has acquired 9.1% of the shares in issue at 31 December 2019.
redhill9: Good post chucko1, as always. The key words that jumped out to me in the announcement were regarding the current 2p per quarter dividend: "This continues to represent the long-term dividend target for the Company. A very confident statement for a company whose yield on that dividend is c.12.8% at the current share price Regarding the discount to NAV it has always struck me since I first invested in VPC that this discount isn't compatible with that of,say, a propco where the NAV itself may be suspect due to valuation distortions or time lag. With VPC the NAV is much more "current" due to the nature of it's assets being mostly cash based, and consequently much more easily realisable at that value (as I think you intimate with your IRR comment if the company stopped investing.) With the prospect of a continuing 8p annual dividend and the NAV seemingly resilient, the current share price looks, to me, a bit silly.
chucko1: So, now a 31 month average life and better than expected collections. Crucial stuff, because they have a meaningful degree of first loss protection and in March/April, any sensible-minded investor would have been concerned as to whether or not this degree of protection was sufficient. But the folk running this company are well schooled in credit structuring. They knew straight away that the risk was sudden and considerable and moved to a position of maximum defence. Nothing was reinvested - in normal times, unacceptable as generating a covered 8p dividend requires constant redeployment, especially in (what was) a 2% yield environment. In the meantime, there was the confounding issue of the continuation - I have to say that I cannot for the life of me understand why 13.4% of the votes were against the motion, but it is what it is. And the Chairman made it really clear in his statement that some of the votes against were now constantly selling their shares, and VSL are constantly buying them. And that this contributes to the weak share price. But this is brilliant. Because, as time goes by (and a kiss is just a kiss), the ratio of cash (or reduction in leverage - take your pick) that forms part of the discount increases, and so the discount, which should compensate for additional risk, does no such thing. It far exceeds the level of risk and so were the company to never invest another penny, I calculate that there is an IRR of 18% to be earned by continuing shareholders. So I have added recently, and may do so a fair bit more. This is an irony, as the continuation means that such an IRR cannot be a certainty. Perhaps this is what the 13.4% wanted - a runoff and a certainty for their own portfolio reasons (one can only speculate). However, although continuation indicates a lower IRR, it will be for longer and that is the point of a good investment in most peoples' minds. Do you want a low-risk 18% 31 month bond or a 12-13% 10 year bond. Well, if you thought you could reinvest at the end of 31 months at a further high rate, good luck to you. But as I have written here before, I expect that a narrowing of the discount to 10% over a couple of years will result in an annual return of circa 15% and then around 10-11% thereafter. Good enough for me, especially with the people and structure they appear to have in place. There were some other interesting bits in there, such as the undue markdown of the equity investments as a result of using proxy pricing. Also, the constant reference to the share price and discount by the Chairman. Anyone would think it mattered to him! No mention of a release of credit reserve - this is normal. Once you have taken it, you leave it for a lot longer than it might be needed as flip-flopping on credit reserves looks awful. You release it when you most do not need it, as otherwise it raises questions. Sometimes, you have to release it as the specific underlying credit gets repaid. But in this case, it is of a general nature across multiple assets.
chucko1: Strangely, there are many AT trades which hammer away at the share price during the day - VSL sit on the bid and take up the whole lot. Today, they bought a few at 64p which makes one wonder who programs these computers as I am sure VSL would equally have paid 64.6p. Of course they would - the average today was 64.7p or so. Just as in the case of the REITs, I am glad to say there are some buffoons trading this.
davebowler: Stifel; ICG Longbow – Manager on track to be fastest in de-risking legacy portfolio VPC Specialty Lending – New loans extend international reach Blackstone GSO – Webinar highlights Key Points ICG Longbow – Manager on track to be fastest in de-risking legacy portfolio Since the Covid lockdown, all of the property debt funds (ICG Longbow, Real Estate Credit and Starwood European Real Estate) have been trading at double digit discounts. In this new environment, it is clear that all three managers will become more discerning in their underwriting standards and loan selection given the wide-ranging impact of the virus on businesses. We view new loans that have been committed post-February as potentially being more robust than the pre-Covid portfolio, as these new standards are incorporated into the investment process. ICG Longbow as the smallest and most concentrated of the three funds (typically this would be viewed as a negative) has committed just under 20% of the portfolio post-February which is materially higher than its larger diversified peers. This is a significant positive in our view, and at least on a fundamental basis should mean ICG Longbow trades closer to NAV than its peer, whereas currently it has the widest discount of -24% and a historic dividend yield of 8%. With regards to new loans, the manager states that declining LIBOR has relatively little impact on their potential return profile as they are guided by underlying project returns and an equitable split between debt and equity. While return potential has certainly gone up following lockdown, the manager will continue to target between 8-10%, but will also look to reduce risk (i.e. upgrade quality of portfolio). We think both points are valid and sensible. We reiterate our Positive recommendation. (Analyst: Sachin Saggar). VPC Specialty Lending – New loans extend International reach This week VPC released the Q2 letter. We were looking for two key elements. The first was the extent of de-leveraging that has taken place. While there is no clear metric disclosed we note the gross portfolio has fallen from c.£430m at 31/03/20 to c.£380m at 30/06/20, largely through the fund repaying company level debt. The second element was new investments and whether capital has been deployed into securities versus private loans (previously flagged). We have mixed feelings on the announcement of one new UK loan, one Asian and a potential third in Australia. While we can understand the desire to expand outside of the US, the fund’s track record abroad has been mixed with a UK loan to Borro encountering difficulties and the recent announcement of the UK subsidiary of Elevate being placed into administration (although no NAV impact is expected). The expansion into Asia and potentially Australia is another matter, as culture, time differences and logistics are clearly more complex. In our experience, rapid expansions outside your home market are fraught with issues and many funds have tended to stumble. (Analyst: Sachin Saggar).
cwa1: For the record:- DIVIDEND DECLARATION The Board of Directors of the Company has declared an interim dividend of 2.00 pence per share for the three-month period to 30 June 2020. The dividend will be paid on 17 September 2020 to shareholders on the register as at 28 August 2020. The ex-dividend date is 27 August 2020. The Company has elected to designate all of the interim dividend for the three-month period to 30 June 2020 as an interest distribution to its shareholders, thereby "streaming" income from interest-bearing investments into dividends that will be taxed in the hands of shareholders as interest income. No income tax will therefore be deducted at source from this, or from future interest distributions.
redhill9: That resignation may have been necessary as the one thing that Staude wouldn't budge on following VPC's significantly improved continuation "conditions" announced on 10 June. I'm expecting the vote to be comfortably in favour, but I know nothing of what has been going on behind the scenes. I hope the vote goes in favour of continuation as the future dividend yield is so high but post #501 by chucko1 also sets out the potential very well if VPC is wound up. Incidentally Nil of, you've been talking of VPC buying votes with the recent buybacks - I've no idea how you think that works? How would buying back shares affect the votes of remaining shareholders, other than slightly increasing their % holdings but that would apply also to Staude's shareholding and anyone else inclined to vote against.... Also, if VPC were only buying back shares ahead of the vote then why have they continued in recent days when the votes have already been cast? And why do you think winning the continuation vote would lead to VPC cutting the dividend?
spectoacc: Missed this an hour ago: 14 May 2020 Dear fellow shareholders of VPC Specialty Lending Plc The investment personnel at Staude Capital Limited act as the portfolio management team for the Global Value Fund, an investment company that has been an investor in VPC Specialty Lending Plc (VSL, "the Company") since 2017. We note that the articles of VSL require a continuation vote to be presented at the 2020 Annual General Meeting (AGM). These periodic votes, rather than a formality, are important events, the purpose of which is for shareholders and boards to consider a manager's investment performance over a suitable time horizon, and to honestly reflect on whether a fund's structure remains fit for purpose. Even before the turmoil that the coronavirus pandemic brought to financial markets, it was plainly the case that in its current format VSL suffered from structural problems. Despite a turnaround in investment performance by the investment manager in recent years, VSL shares have continued to trade at a persistent and unacceptably wide discount to their net asset value (NAV). More recently, the market dislocations that the coronavirus pandemic has generated have starkly laid bare the challenges the Company faces. Throughout March's sell-off, VSL performed significantly worse than both the wider investment trust universe and most of its debt focused peers. As of today, it continues to trade at a c. 38% discount to its underlying asset backing. Given the clear challenges that VSL is facing, we find it hard to believe that the board of the Company has not been directly engaged in a rigorous and proactive shareholder engagement program ahead of this important vote. Therefore, we find ourselves deeply concerned that the board will be bringing forward its own set of proposals for the Company's future without widespread shareholder input. Frustrated by a lack of direct board engagement, we sent a letter (available here) to the Company's independent directors on 28 April 2020, putting forward what we believe was a reasonable proposal given the structural challenges the Company faces. Specifically, we argued that shareholders should have the right to realise all or part of their investment in an orderly manner, in a way that has no impact on others' interest in the portfolio. We also sought to address, pre-emptively, the likely arguments against our suggestion. Subsequent to our letter, we were grateful for the opportunity to speak to the Chairman on 12 May 2020. We found ourselves frustrated, however, that he was unable to discuss any of the issues we had raised, even at a high-level, prior to the publication of the AGM notice. In our view, it is hard to justify engaging with shareholders about the options available to address VSL's structural problems after the board has published its proposals for the AGM. Given it seems likely that once the AGM proposals have been published it will be too late to change them, shareholders shall be left with an unappealing binary choice: acquiesce to proposals they have had no real input into, or vote against continuation. Since our letter in April, we have spoken to many VSL shareholders, representing a significant proportion of the register and a range of investor types. We found most, like us, surprised by the lack of independent board engagement. In fact, we were disappointed to learn that none of the investors had recently spoken to the board on this matter prior to our call. Instead, our impression has been that the feedback exercise has largely been driven by the manager, Victory Park Capital (VPC). While we have a positive view on the manager and the recent NAV performance it has delivered, shareholder discussions ahead of a continuation vote should clearly be led by the board. Even if shareholder feedback reaches the board unfiltered and with the correct emphasis, there are naturally some things shareholders would tell a chairman that they would rather not say to an external manager. The common message we have taken from speaking to other shareholders is that the status quo is unacceptable. We do not pretend to have the only solutions to solving the Company's challenges and welcome others' perspectives. We believe that approached properly, there is scope for a redesign of the current VSL fund structure which properly addresses the discount challenge, without necessarily calling time on the Company. Informed by our conversations with a wide number of VSL shareholders, it is our belief that for the Company to have a successful, long-term future, the following changes are needed: § Periodic opportunities for shareholders to realise part of their investment at NAV. § The addition of a shareholder-advocate to the board. One that the market can be confident is engaged and independent of the manager. § An assurance to appropriately manage the inherent potential conflict of interest that the manager's significant voting stake creates, particularly in relation to sensitive matters such as continuation votes. On the final point, while the Company's announcement on 24 February 2020 hailed the purchase of a significant minority stake as a positive development, we struggle to recall an example where a significant stake controlled by an external manager has had a positive impact on a fund's rating, particularly where the manager's voting power is greater than its economic interest and was acquired on the eve of a continuation vote. Ensure you have a say in your investment We do not seek to speak on behalf of other shareholders. Rather, we have published this open-letter to urge all shareholders to communicate their views directly to the board before the company's AGM proposals are finalised. We sincerely believe that it is possible to formulate a set of proposals which give the Company every chance of long-term success, if there is a genuine and unchaperoned shareholder and board engagement process. We would very much welcome the opportunity to discuss the issues raised in this letter with VSL shareholders. Should you wish to contact us, please email myself and Emma Davidson at the addresses below. Yours sincerely, Miles Staude Emma Davidson Director, Staude Capital Limited Director, Staude Capital Limited Miles.Staude@staudecapital.com Emma.Davidson@staudecapital.com
cwa1: Excellent, pleased with this outcome:- Acquisition of Significant Minority Stake by SVS Opportunity Fund, L.P. 24 February 2020 VPC Specialty Lending Investments PLC ("VSL" or "the Company") announces that SVS Opportunity Fund, L.P. ("SVS") has acquired 16.61% of the outstanding share capital in VSL from a major shareholder in the Company. SVS is a newly formed investment vehicle managed by Victory Park Capital Advisors ("the Manager") and backed by a large US insurance company, alongside the Manager and certain of its principals. Pro forma for the contribution of existing shares owned by the Manager and its principals, SVS owns 18.12% of the Company. Kevin Ingram, Non-Executive Director and Chairman of the Board of VSL, stated; "We are pleased to welcome SVS as a new significant shareholder in VSL. This investment is clear evidence of their confidence in VSL's management, long-term strategy and growth prospects. Building on the performance announced in January 2020, VSL is well-positioned to achieve its near- and medium-term objectives. We look forward to continuing to generate an attractive total return for all shareholders, built on a consistent distributable income and capital growth strategy, through asset-backed lending."
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