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% 86.00 16:35:23
Open Price Low Price High Price Close Price Previous Close
85.80 85.80 85.80 86.00 86.00
more quote information »
Industry Sector
GENERAL FINANCIAL

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
25/02/2021InterimGBX231/12/201931/12/202004/03/202105/03/202101/04/20218
19/11/2020InterimGBX230/05/202030/09/202026/11/202027/11/202017/12/20200
20/08/2020InterimGBX230/12/201930/06/202027/08/202028/08/202017/09/20200
07/05/2020InterimGBX201/12/201931/03/202021/05/202022/05/202011/06/20200
27/02/2020InterimGBX231/12/201831/12/201905/03/202006/03/202002/04/20208
20/11/2019InterimGBX230/05/201930/09/201928/11/201929/11/201919/12/20190
21/08/2019InterimGBX230/12/201830/06/201929/08/201930/08/201919/09/20190
22/05/2019InterimGBX201/12/201831/03/201930/05/201931/05/201927/06/20190
28/02/2019InterimGBX231/12/201731/12/201807/03/201908/03/201904/04/20198
14/11/2018InterimGBX230/05/201830/09/201822/11/201823/11/201813/12/20180
22/08/2018InterimGBX230/12/201730/06/201830/08/201831/08/201820/09/20180
23/05/2018InterimGBX201/12/201731/03/201831/05/201801/06/201828/06/20180
01/03/2018InterimGBX1.831/12/201631/12/201708/03/201809/03/201805/04/20186.8
16/11/2017InterimGBX1.830/05/201730/09/201723/11/201724/11/201714/12/20170
23/08/2017InterimGBX1.730/12/201630/06/201731/08/201701/09/201721/09/20170
24/05/2017InterimGBX1.501/12/201631/03/201701/06/201702/06/201722/06/20170
01/03/2017InterimGBX1.531/12/201531/12/201609/03/201710/03/201707/04/20176
17/11/2016InterimGBX1.530/05/201630/09/201624/11/201625/11/201619/12/20160
17/08/2016InterimGBX1.530/12/201530/06/201625/08/201626/08/201620/09/20160
26/05/2016InterimGBX1.501/12/201531/03/201602/06/201603/06/201630/06/20160
01/02/2016InterimGBX231/12/201431/12/201511/02/201612/02/201607/03/20164.79
12/11/2015InterimGBX1.8930/05/201530/09/201519/11/201520/11/201511/12/20150
13/08/2015InterimGBX0.930/12/201430/06/201520/08/201521/08/201503/09/20150

Top Dividend Posts

DateSubject
07/4/2021
10:12		davebowler: Liberum; NAV performance benefits from gains on equity investments Mkt Cap £238m | Prem/(disc) -18.8% | Div yield 9.4% Event VPC Specialty Lending Investments' NAV per share rose by 1.9% in February to 104.5p. The YTD NAV total return is 9.2% following the large NAV uplift in January. The NAV increase in February was due to gross revenue returns of 0.8% and a capital return of 1.9%. The gross capital return was driven primarily by unrealised gains in several equity positions. The gross revenue return has typically been c.1.0% per month and the lower return in February was primarily due to the lower day count. There has been no change in the underlying performance of the balance sheet investments. In March, VSL sold its equity position in Elevate Credit (in line with the February book value). New investments have been completed in two SPACs, VPC Impact Acquisition Holdings II and VPC Impact Acquisition Holdings III for $1.3m each. Both vehicles are targeting investments in the fintech sector and have two years to complete a transaction. As previously reported, VSL has completed a new $130m gearing facility with MassMutual. $80m has been drawn from the facility to repay the previous debt facility with Pacific Western Bank and the first-out participation facility on Avant. The new debt facility has a lower interest cost than the prior facility and and there is also an option to increase the facility to $200m. The look-through gearing ratio is currently 33% of NAV. Liberum view The equity investments have been very profitable over the last six months and it is important to see further realisation across these investments. VSL has the highest exposure to equity investments of the direct lending funds. Equity investments account for 19% of gross assets and this could rise further following the two investments in SPACs. Many of the equity investments are warrants and common stock that are often received in conjunction with funding the a platform's balance sheet loan investments. Returns on equity investments have been relatively small across the sector to date. In recent months, VSL's equity investments have generated meaningful NAV uplifts from a number of liquidity events. Equity investments added c.3% to NAV in the period from IPO in 2015 to the end of 2020. This was boosted by gains in WeFox and Katapult in H2 2020. The Bakkt transaction and February's revaluation gains have added 9.6% to NAV (pre-performance fees) to date in 2021. The higher exposure to equity investments will result in additional volatility in NAV performance. We note the 8% reduction in the share price of VPC Impact Acquisition Holdings (Bakkt) since the end of February, which we estimate has reduced NAV by 0.8%. The position is currently held at a 30% discount to the value implied by the share price to reflect illiquidity and deal closing risks.
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03/3/2021
09:45		davebowler: Liberum Mkt Cap £252m | Prem/(disc) -12.8% | Div yield 8.9% Event VPC Specialty Lending Investments' NAV per share rose by 7.1% in January to 102.6p. The NAV increase in December was due to gross revenue returns of 1.0% and a capital return of 7.7%. The gross capital return was driven primarily by unrealised gains in the investments in VPC Impact Acquisition Holdings. VPC Impact Acquisition Holdings (VIH), a SPAC sponsored by an affiliate of VSL's investment manager, entered into a definitive agreement on 11 January to combine with Bakkt Holdings, a digital asset marketplace launched in 2018 by Intercontinental Exchange. VSL's investment in VIH was held at cost ($2.7m) at 31 December. The transaction price implies a total value of $22.2m for VSL's investment and the share price of VIH has risen a further 50% above the transaction price. At 31 January 2021, VIH's share price of $14.93 implied a total value of $42.5m for VSL's investment. VSL has applied a 30% discount to this to reflect illiquidity and deal closing risks and the position is held at a value of $29.7m. VSL's shares and warrants are subject to one-year lockup and the transaction is expected to close in Q2 2021. Despite the significant sell-off in the US tech sector over the past week, the current share price of VIH is 0.6% above the level at 31 January. Bakkt was launched three years ago enabling institutions and consumers to buy, sell, store and spend digital assets. Bakkt’s existing equity holders and management will roll 100% of their equity into the combined company. Bakkt will have $574m of cash to fund the growth of the business following the transaction. VSL has agreed a new $130m gearing facility with MassMutual. $80m has been drawn from the facility to repay the previous debt facility with Pacific Western Bank and the first-out participation facility on Avant. The new debt facility has a lower interest cost than the prior facility and and there is also an option to increase the facility to $200m. The look-through gearing ratio has increased marginally to 33% of NAV as a result (32% of NAV at 31 January 2021). Liberum view The investment in VIH has been highly profitable in part due to the attractive economics for sponsors in SPAC transactions. The implied valued at 31 January (pre-discount) represents a 15.7x multiple on VSL's initial $2.7m investment. Liquidity events across a number of the equity positions have contributed to the strong NAV growth since mid-2020. Many of the equity investments are warrants and common stock that are often received in conjunction with funding the a platform's balance sheet loan investments. Based on the current share price of VIH, we estimate the potential NAV upside is 2.8% after stripping out the 30% discount. These potential gains are subject to the deal completing (expected in Q2 2021) and the holding is also subject to a lock-up period. In addition to the positive performance from equity investments, the company's balance sheet debt portfolio continues to perform well and is generating a return of c.1% per month. Cash collection has been robust across the debt portfolio and this has enabled the release of some of the ECL provisions taken in H1 2020. A high level of prepayments has enabled debt reduction from 59% of NAV at 31 March 2020 to 32% currently.
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03/2/2021
09:34		davebowler: Liberum; Equity returns drive strong finish to 2020 Mkt Cap £242m | Prem/(disc) -10.7% | Div yield 9.4% Event VPC Specialty Lending Investments generated a NAV total return of 2.1% in December, resulting in an overall return of 11.1% for 2020. The NAV increase in December was due to gross revenue returns of 1.0% and a capital return of 1.9%. The gross capital return was driven by unrealised gains in the investments in Katapult Holdings and Elevate Credit's share price. $22m of capital was deployed into debt investments in the month. This included an initial investment in Cap Hill Brands, a technology driven consumer goods platform that will acquire and operate a portfolio of branded Amazon third-party seller assets. As previously disclosed, recent M&A activity in two of the company's equity investments could result in a material NAV increase. Part of the uplift in Katapult was reflected in the December NAV:: Katapult - Katapult will go public through a merger with SPAC FinServ Acquisition Corp, valuing the business at c.$1bn. VSL holds equity and warrants in Katapult with a combined value of c.$4m prior to the transaction. VSL will receive a combination of cash and shares in FinServ. The NAV uplift reflected at December from this transaction was 1.2% (gross of fees). The December valuation represents a 30% discount to the market value of the transaction and we note that Finserv's share price has risen a further 34% in 2021. The transaction is expected to close in Q2 2021 and the shares are subject to a six-month lock-up. Bakkt - VPC Impact Acquisition Holdings (VIH), a SPAC sponsored by an affiliate of VSL's investment manager, has entered into a definitive agreement to combine with Bakkt Holdings, a digital asset marketplace launched in 2018 by Intercontinental Exchange. VSL's investment in VIH was held at cost ($2.7m) at 31 December. The transaction price implies a total value of $22.2m for VSL's investment and the share price of VIH has risen a further 49% above the transaction price. VSL's shares and warrants are subject to one-year lockup and the transaction is expected to close in Q2 2021. Liberum view VSL's 11% NAV TR was predominantly due to consistent revenue returns of c.1% per month from the balance sheet investments. Cash collection has been robust across the debt portfolio and this has enabled the release of some of the ECL provisions taken in H1. A high level of prepayments has enabled debt reduction from 59% of NAV at 31 March 2020 to 32% by December 2020. Liquidity events across a number of the equity positions contributed to the strong NAV growth in H2. 16% of NAV is invested in common stock, preferred stock, warrants and convertible debt across 26 investments in portfolio companies. Many of the equity investments are warrants and common stock that are often received in conjunction with funding the a platform's balance sheet loan investments. We believe the two recently announced transactions (Katapult and Bakkt) imply an additional NAV uplift of c.10% after performance fees (based on the current share prices of Finserv Acquisition Corp and VIH). Part of the uplift from the Katapult transaction has been reflected in the NAV and we calculate the current share price of Finserv implies an additional uplift of c.1% (after removing the 30% discount). The current share price of VIH implies a total value of $42.2m on VSL's initial investment of $2.7m. This would imply a NAV uplift of c.9% (net of fees). These potential gains are subject to both deals completing (expected in Q2 2021) and the holdings are also subject to lock-up periods.
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21/1/2021
09:17		davebowler: Stifel; Summary Credit should be given where it is due. We believe the manager has done a good job navigating the economic impact of the virus and is now also reaping the rewards of its equity portfolio. In 2020 the manager commented on the resilience of their portfolio and so far this has proven to be true. They also believed in the hidden value of their equity holdings and this has been corroborated by two transactions which we believe will add c.12% to NAV. We think the prospective discount to NAV of c.18% and the dividend yield of 10% are attractive for a fund that has delivered on its objectives. Key Points SPACs will lead to c.12% NAV Uplift Over the past few months we have seen VPC announce two important transactions involving its equity holdings. The first was the investment in stock and warrants of Katapault Holdings which has announced a definitive merger agreement with a Specialty Purpose Acquisition Company (ticker FSRV). On closing of the deal (expected in Q2 2021) VPC Specialty will receive $3.33 per Katapault share and 604,821 shares of FSRV. The second, is the announcement that the VPC SPAC (ticker VIH) has announced an agreement to acquire Bakkt Holdings. As part of the pre-IPO sponsor economics VPC Specialty will receive 2.2m shares in VIH and 2.7m warrants (with an exercise price of $11.50). The current share price of FSRV is $16.85 and VIH $14.57. We understand VPC Specialty (VSL) may apply up to a 20% discount to post-uplift valuation of VIH to account for the risk that the deal may not close. Impact: Overall, the net impact from Katapault Holdings gain over the 30/11/20 NAV of 93.76p will be c. +3% (+2.8p) and the gain from VIH c.+9% (c.+8p, i.e.+1.6p from warrants and +6.4p from common shares), after accounting for a merger arbitrage discount. In total, these two transactions will add c.+10.8p to the NAV. As a result, we are expecting the prospective NAV at 31/01/21 to be c.104p after deducting the 2p dividend (ex-dividend date of 26/11/20). Levered equity: It is important to note that the warrants will behave like levered equity, given they will have no intrinsic value below their strike price of $11.50. VSL’s holding in VIH will also be subject to a one-year holding period and therefore crystallisation of any gains will have to wait. Given these factors, we think it is unlikely that the full NAV uplift which we expect to be reported to 31/01/21 will be reflected in the share price and a discount will persist. However, we think it is important to recognise that the manager has had their positive comments regarding their equity holdings validated through actual transactions. This comes on the back of the portfolio also proving to be resilient from the economic shock of the virus in 2020 as reserves have been slowly released in Q4. All in all it has been a very good period for the fund, in our view. Cash Dividend Cover The dividend policy of VSL is to pay 2p a quarter. We believe the cash dividend cover has been under some pressure over the past year due to a combination of 1) the share buyback policy, 2) look through leverage falling from 43% to 37% of NAV over the past 12 months, 3) high gross cash balance of 9% of assets and 4) the weighted average coupon of balance sheet loans falling from 14% to 11% over two years. These factors would have led to the income producing proportion of VSL to fall. However, the manager is expecting to deploy the bulk of its cash shortly, and so we think the current snapshot should represent the trough of revenue earnings. Key Positives. 1) Expected fully cash covered dividend, 2) The demise of Pollen St Secured Lending may lead to a technical tailwind as there are limited options to gain exposure to the sector, 3) The Board have highlighted the need to close the discount to NAV and have put a number of objectives in place. Key Negatives. 1) Gains from equity holdings will be subject to lock-up periods and share price volatility until released, 2) Negative sentiment amongst shareholders for the sector. 3) Ownership structure of VSL is overshadowed by a holding of 20% of share capital which is effectively controlled by the manager.
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12/1/2021
09:07		davebowler: Stifel; VPC Speciality Lending - 15% gain following announcement of SPAC deal Stifel View: We have commented earlier on the beneficial economics for VPC sponsoring a SPAC (Special Purpose Acquisiton Co.) (link here) and this has been borne out with an estimated positive impact of +15% or +14p (based on the 30/11/20 NAV of 94p) to VSL shareholders based on the closing price of $15 for VIH (the SPAC). We expect the bulk of these returns to flow through in January as the deal is expected to close shortly. The underlying company, Bakkt, is also interesting as it focuses on digital payments including cryptocurrencies, providing a platform for users to convert one digital asset to another e.g. a giftcard for air miles. Given the large gain we expect greater volatility in the NAV of VSL and put pressure on the income paying ability of the fund. However, it is a good headache to have and we retain our Positive rating as the fund is trading at a 22% discount to the prospective NAV of c.108p. (Analyst: Sachin Saggar). Merger: VPC Impact Acquisition Holdings, a special purpose acquisition company sponsored by VPC Impact Acquisition Holdings Sponsor, LLC, an affiliate of Victory Park Capital, has entered into a definitive agreement to combine with Bakkt Holdings. Bakkt is a company launched by Intercontinental Exchange, Inc. in 2018. Through VPC Sponsor, VPC Specialty Lending Investments currently owns 2,220,530 Class B Shares and 2,697,467 private placement warrants in VIH, held at an aggregate cost basis of $2,713,994. Valuation impact: The transaction implies a $2.1bn post-merger enterprise value at a $10.00 price per Class A Common Stock. Upon the consummation of the transaction, VSL's Class B Shares shall be automatically converted into one share of Class A Common Stock of Bakkt with an aggregate implied transaction value of $22,205,300 to the Company. Warrants: Similarly, each private placement warrant shall be converted into a warrant to purchase one share of Class A Common Stock of Bakkt. VSL holds 2,697,467 warrants, which maintain a $11.50 per share strike price, provide for cashless exercise and expire five years after closing of the transaction. Lock-up: VSL's Class A Common Stock and warrants shall be subject to a one-year post-closing lockup unless otherwise accelerated based on average trading performance measured six months post-closing. The transaction is expected to close in the second quarter of 2021 and remains subject to VIH shareholder approval amongst other closing conditions.
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11/1/2021
13:10		spectoacc: @chucko1, you're good explaining these: "VPC Specialty Lending Investments PLC (the "Company") Update Regarding its Holding in VPC Impact Acquisition Holdings Sponsor, LLC The Company notes that earlier today, 11 January 2021, VPC Impact Acquisition Holdings (NASDAQ: "VIH"), a special purpose acquisition company sponsored by VPC Impact Acquisition Holdings Sponsor, LLC ("VPC Sponsor"), an affiliate of Victory Park Capital ("VPC"), announced it had entered into a definitive agreement to combine with Bakkt Holdings, LLC ("Bakkt"), a company launched by Intercontinental Exchange, Inc. in 2018. Through VPC Sponsor, VPC Specialty Lending Investments PLC ("VSL") currently owns 2,220,530 Class B Shares and 2,697,467 private placement warrants in VIH, held at an aggregate cost basis of $2,713,994. The transaction implies a $2.1 billion post-merger enterprise value at a $10.00 price per Class A Common Stock. Upon the consummation of the transaction, VSL's Class B Shares shall be automatically converted into one share of Class A Common Stock of Bakkt with an aggregate implied transaction value of $22,205,300 to the Company. Similarly, each private placement warrant shall be converted into a warrant to purchase one share of Class A Common Stock of Bakkt. VSL holds 2,697,467 warrants, which maintain a $11.50 per share strike price, provide for cashless exercise and expire five years after closing of the transaction. VSL's Class A Common Stock and warrants shall be subject to a one-year post-closing lockup unless otherwise accelerated based on average trading performance measured six months post-closing. The transaction is expected to close in the second quarter of 2021 and remains subject to VIH shareholder approval amongst other closing conditions.
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04/1/2021
10:19		davebowler: Liberum; Further release of reserves and potential equity uplift Mkt Cap £222m | Prem/(disc) -16.1% | Div yield 10.2% Event VPC Specialty Lending Investments generated a NAV total return of 1.7% in November 2020 (9.0% in 2020 to 30 November). The revenue return was 0.28% and capital return was 1.45% for the month. The capital return was driven by a decrease in Expected Credit Loss provisions as as credit performance remains strong. Total provisions are now 2.8% of the invested capital in balance sheet investments. During November, VSL made new balance sheet investment in FinAccel and Zip Money as the company continues to close on new deals following a number of new opportunities. FinAccel is a Singapore-based fintech that provides Indonesian consumers with a digital credit platform to finance e-commerce purchases, pay bills, and secure personal loans. Australian lender Zip Money offers point-of-sale credit and digital payment services to the retail, home, health, automotive and travel industries. VSL holds shares in Bread Financial, which agreed to be acquired by Alliance Data Systems Corporation. VSL sold its investment in December upon closing of the transaction. The sale crystallised an unrealised gain of $1.3m and was in line with the latest book value. In addition, M&A activity may result in a valuation uplift on the company's investment in Katapult Holdings. Katapult will go public through a merger with SPAC FinServ Acquisition Corp, valuing the business at c.$1bn. VSL holds equity and warrants in Katapult with a combined value of c.$4m. The merger is expected to close in Q2 2021 and VSL will receive a combination of cash and shares in FinServ. Based on the latest price for FinServ, the NAV uplift from the transaction is c.2%. Liberum view VSL continues to deliver strong NAV performance, primarily due to strong cash collections from the balance sheet portfolio. The improving credit outlook has enabled the release of some of the ECL provisions taken in H1 and a number of liquidity events on the equity investments have also contributed to NAV performance. A high level of prepayments has enabled debt reduction from 59% of NAV at 31 March 2020 to 37% by November 2020. The company appears to be increasingly on the front foot with $600m of new deals agreed by the manager in recent months, which VSL will participate in. These new loans have been written to tighter credit standards. VSL's discount to NAV has narrowed from 23% to 16% during December. This is still the widest discount of the performing direct lending funds and we regard it as attractive given the structural protection within the loans.
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10/12/2020
08:52		davebowler: Stifel; ACI (formerly Pollen St Secured) wrote down a number of positions in their first fact sheet after replacing Pollen St Capital as investment manager. The read across to Honeycomb, still managed by Pollen St Capital, is limited although our preference is that where a market bid can be obtained, a position should be marked to that level as this reduces subjectivity. As the read across is limited, we believe Honeycomb's discount tightening has further to run while it also provides an attractive 8.5% dividend yield. As a result, we maintain our Positive recommendation. Investors may also wish to look at VPC Specialty Lending which we believe offers greater value at a -22% discount and 11% yield while operating a similar lending strategy. Key Points Last month Alternative Credit Income (formerly Pollen Street Secured Capital) published their September fact sheet which showed a decline in the NAV of -3.85% over the month. The decline was driven by three aspects Markdown of tradeable bonds and notes by -£11.6m (or -1.6% of NAV). Impairment of US real estate loans Impairment of US auto loans ACI is in the process of being acquired by its investment manager (Waterfall Asset Management) but there are obvious questions raised to the potential read across to the portfolio of Honeycomb IT as the investment manager for both funds was historically Pollen Street Capital. The first point to note is that in the overall context of ACI, a fund that has c.£550m in assets, a markdown by a new manager of just under 4% is relatively small. We look at each of the three points below in relation to how it could impact Honeycomb. No US exposure. This is straightforward as Honeycomb does not have any US exposure and so has no US real estate or auto loans. As a result, the question of which is the correct valuation approach and how conservative it is does not arise. Tradeable bonds/notes. Currently, Honeycomb has £9m of exposure to Amigo and £5m of exposure to New Day loans that have an active secondary market, but these are held at amortised cost. This represents 4% of the 31/10/20 NAV. The ACI factsheet highlights Amigo loans were trading at a value below amortised cost and hence the impairment. The valuation approach of Honeycomb, which has not changed, is to hold all assets (except equity) at amortised cost as they do not trade positions and never have. The reliance then falls on manager/ Board to monitor this variance and whether a fall in the fair value of loan triggers an impairment i.e. there is a judgment to be made whether the fundamentals of the company have changed significantly or if fair value movements are short term changes in the risk premium. In the case of Amigo the manager/ Board came to the conclusion that the positions would be paid in full over its life. Our opinion is that if a fair value can be identified then it should be used. Yes, this may lead to a premium over amortised cost or a discount over time but it removes the subjectivity in the process and from a shareholders perspective it is difficult to disagree with. The New Day loan currently trades close to its amortised cost value. Interesting issues but small in context of the fund. While the issues raised are interesting it is small in the context of Honeycomb given its small exposure to tradeable loans. The manager does not expect this portion of the book to increase meaningfully either. Private fund. One of our concerns has been the sustainability of the credit team given the loss of fee income from managing the now renamed ACI. However, the manager believes they are on track to raise private capital in Q1 to an amount that would alleviate our concerns. Portfolio. The portfolio continues to perform in line with expectations and it is good to see a deal being done under the CBILs program (a loan partially guaranteed by the government) for the Nucleus investment, as the risk adjusted return will be attractive. Recommendation. The Honeycomb share price has rebounded c.15% over the past few months but still stands at an 8% discount to NAV (8.5% yield). We maintain our positive rating as we believe the discount rerating has further to go with the support of share buybacks. However, investors may also take a look at VPC Specialty Lending which operates a similar strategy (albeit in a different sector) but offers more value at a 22% discount to NAV and a 11% yield. Positives. 1) Attractive dividend yield of 8.5%, 2) The buyback program that will run to August 2021, 3) A continuation vote will likely be triggered as the average discount in 2020 is on course to be greater than 10%. Negatives 1) Loss of income from managing ACI, 2) Reputational impact from the public spat with the ACI Board.
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15/10/2020
09:23		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.
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14/5/2020
16:03		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
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