Vpc Specialty Lending In... Share Discussion Threads

[ctrader3] 28/10/2022 10:28

just as I posted they have shifted off the offer
now FCAP 5k > 83.4p

[ctrader3] 28/10/2022 10:25

At the open Jeffian had 10,000 shares on offer.
There have been 174k shares bought and 45k shares
unknown trades which are mostly probably sells.
Currently Jeffian have 10,000 shares on offer.
The unknown is how many shares they have to sell.

[ctrader3] 28/10/2022 07:47

Staude Capital Ltd and Metage Capital Ltd on Monday sent an open letter to fellow investors in VPC Speciality Lending Investments PLC outlining an alternative proposal to a tender offer made in 2020.

VPC Speciality Lending is an investment company which provides asset-back lending to emerging and established businesses.

The letter stated that there is "strong and widespread support from independent shareholders for the introduction of a periodic 100% realisation opportunity, via a run-off share class."

In June 2020 VPC Speciality Lending committed to a discount-dependent tender offer for 25% of the shares in issue immediately after the 2023 annual general meeting. However, the open letter states that "the discount on the company's shares remains stubbornly wide."

A discount in relation to net asset value occurs when an investment fund's market trading price is lower than its daily net asset value. A discount often indicates that the market is generally bearish on the investments in the fund. A tender offer is a public solicitation to shareholders requesting they tender their stock at a specific price at a specific time.

The 100% realisation opportunity provides "the opportunity to receive returns of capital in the normal life cycle of the underlying investments", Staude and Metage noted, rather than the chance to sell assets prematurely.

The letter states that this opportunity should be offered at least every fifth year to enable "shareholders to remain invested knowing that they have access to liquidity at net asset value in the future."

This proposal, Staude and Metage said, would "allow shareholders to ultimately realise returns that are similar to the underlying net asset value performance and eliminates discount risk for longer-term investors."

Staude and Metage are both long-term shareholders in the VPC Speciality Lending.

Staude and Metage engaged with other institutional and professional shareholders "who are independent of the company's investment manager" to put forward their "alternative consideration".

The board of VPC Speciality Lending "actively engaged" with the concerns. The company is expected to bring forward its own thoughts on the 2023 tender proposal.

12/09/2022

[spectoacc] 28/10/2022 07:47

"There was a big premium relative to gilts, which has now gone."

Seriously? Gone? It still looks a pretty big premium to me. VSL are 10p lower than they were when the risk-free rate was nearer 0.5% than 3.5%.

VSL arguably beneficiaries from rising rates, they're not like a 10 year Gilt.

[ctrader3] 28/10/2022 07:30

Nick Greenwood, who manages the Migo Opportunities investment trust, has about 1pc of his fund’s money in VPC.

“It is good at what it does,” he says. “It offers quite a large dividend, although this was even more attractive when interest rates were 1pc instead of 4pc; that change takes away a bit of a prop for the shares because people were buying these trusts when they were starved for yield elsewhere. There was a big premium relative to gilts, which has now gone.

“But over the longer term fundamentals will come back into play, by which I mean that investors will begin to appreciate the scope for trusts such as this one to raise their dividends.”

He points out that VPC’s 25pc‑plus discount has attracted the attention of two hedge funds, which eye the chance of a big profit if, for example, some of the trust’s assets can be realised at par value and returned to investors. Thanks to the short duration of its loans, this could be a simple enough process.

“You have a decent yield, the chance of dividend growth and a potential catalyst for narrowing the discount,” Greenwood says. “I was lucky enough to buy my stake at prices as low as 71p, but had I not done so I would be inclined to invest at the current price too.”

Questor says: buy

Ticker: VPC

[guitarsolo] 27/10/2022 20:49

Thanks CT3, I don't have a Telegraph subscription so would have missed that.
I'd agree with everything written and have been in VSL since 2017 (and followed it since the IPO) so have seen much of the ride.
I'm intrigued by the commments "the chance of dividend growth" as this is something I've wondered about. If possible, would a progressive dividend policy be extra-supportive to the share price?
My understanding is that it is not on the cards. So I wonder why the comment in the Telegraph?

[spectoacc] 27/10/2022 15:27

Thanks @cbtrader. Damnit, I usually sell into Questor tips, but don't want to lose VSL.

[ctrader3] 27/10/2022 12:00

The Telegraph


Rishi Sunak will help this fund’s returns – and it’s on offer at a bargain price
Richard Evans - 5h ago



If Rishi Sunak’s mere arrival in 10 Downing Street really does push down how much the Government pays to borrow, which is what seems to be happening, it will be positive for the listed fund we cover today – and others that offer “bond‑like” income.

To briefly recap the reasons, discussed here several times in recent weeks, investors expect income‑producing assets to yield more than the “risk‑free” return from government bonds or gilts (the term “risk‑free” assumes that the bonds are held to maturity, so price fluctuations become irrelevant, and does not cover the risk posed by inflation).

So when that risk‑free return goes up, as it did very sharply indeed after the mini‑Budget, the market ensures that less safe bond‑like investments continue to yield more than gilts. It does this, of course, by marking down prices. Hence the damage done to property, infrastructure and bond funds in recent weeks.

Now that this process has gone into reverse with the prospect of financial stability from the new administration, we can expect a recovery in the share prices of listed funds that invest in these assets.

One such is VPC Specialty Lending Investments. It makes loans to businesses, mostly American, which typically lend the money on to their own customers. These businesses are often tech start‑ups such as online providers of car loans and other types of short‑term consumer lending.


That type of lending may strike readers as quite risky, but VPC ensures that its own level of risk is considerably lower.


“We secure our loans against the loan books of our customers,” Gordon Watson, lead manager of the trust, tells Questor. “But we also lend only 80pc‑90pc of the value of those loans, which means there is a buffer before we suffer any loss should a customer experience a default.

“On top of that, we have a dedicated risk team and monitoring system that reviews the companies we lend to on a daily, weekly and monthly basis. We have had a few defaults, but in many cases we were able to recover much of what was owed.”

This steady source of income has enabled the trust to pay a consistent annual dividend of 8p a share since 2018. At the current share price of 78.5p this equates to a yield of 10.2pc – comfortably more than the 3.6pc offered by gilts due to be repaid in five years.


Better still, VPC has the scope to make more interest on its loans. They are all “floating rate”, which means its customers pay more as interest rates generally rise, but the trust’s loans are also typically of short duration, such as two years, so as it receives its capital back when existing loans mature it has the ability to relend the money at higher rates.

The trust does acknowledge, however, that an environment of rising rates does make defaults in its clients’ loan books more likely, which could affect its returns.

Nick Greenwood, who manages the Migo Opportunities investment trust, has about 1pc of his fund’s money in VPC.

“It is good at what it does,” he says. “It offers quite a large dividend, although this was even more attractive when interest rates were 1pc instead of 4pc; that change takes away a bit of a prop for the shares because people were buying these trusts when they were starved for yield elsewhere. There was a big premium relative to gilts, which has now gone.

“But over the longer term fundamentals will come back into play, by which I mean that investors will begin to appreciate the scope for trusts such as this one to raise their dividends.”

He points out that VPC’s 25pc‑plus discount has attracted the attention of two hedge funds, which eye the chance of a big profit if, for example, some of the trust’s assets can be realised at par value and returned to investors. Thanks to the short duration of its loans, this could be a simple enough process.

“You have a decent yield, the chance of dividend growth and a potential catalyst for narrowing the discount,” Greenwood says. “I was lucky enough to buy my stake at prices as low as 71p, but had I not done so I would be inclined to invest at the current price too.”

Questor says: buy

Ticker: VPC

Share price at close: 78.5p

[mwj1959] 11/10/2022 16:20

Pressure needs to be built on the board as this sort of discount is unacceptable in the MT / LT. There clearly needs to be some of liquidity discount for the underlying assets and for the potential risks to NAV from a recession, but it still looks too large.

[rambutan2] 11/10/2022 13:54

Good chance an arb bought, I would have thought.

[spectoacc] 11/10/2022 12:31

Thanks, with more to go too.

[cwa1] 11/10/2022 11:31

Big reduction by AXA...

[spectoacc] 11/10/2022 07:04

Wow - about 11m at 71p, in a series of blocks. No idea. Someone's dumped, who's bought?

[badtime] 10/10/2022 22:54

Some crazy trades near close of play today ..what's that all about?

[2wild] 07/10/2022 15:53

Back in at 74.75p. 10.7% div yield and 29.9% discount to nav.

Sell the rips, average into dips. Seems a sensible strategy for now.

[mwj1959] 04/10/2022 11:04

While statements may be re-assuring the share price performance has reacted in the opposite direction, hitting new 2022 lows and the lowest level since the start of 2021. Yield now nearing 11% with shares at a 31% discount. I recognise that there are NAV risks out there and we've not lived through a "proper" recession with this company, but this looks excessive, particularly against the backdrop of tender offers / realisation opportunities down the line. Unlike Kwasi / Liz the board needs to be getting a move on here and do something about this.

[waterloo01] 02/10/2022 07:20

Again, reassuring. " For the month, the Company's gross revenue return was 1.14% (1.22p), as the Company’s asset-backed investment portfolio continues to perform in line with expectations. Similar to the last few months, short-term interest rates continue to rise, leading to increased revenue returns."

[rambutan2] 02/10/2022 03:44

The weighted average coupon climbed again in Aug, by 0.5% to 12.1%.

[smidge21] 01/10/2022 07:08

It relates to turnover of assets caused by the cash flows needed to service the currency hedges and not because of any change in investment view. Normally these adjustments are modest, but when GBP weakness is material - as recently - the asset mix can be changed significantly with the risk that the best assets are sold.The recent half-year report was the opportunity to discuss these issues and - hopefully- reassure. To ignore the matter falls short of good shareholder communication.

[waterloo01] 30/9/2022 22:39

What does that imply? Surely dollar earnings should enhance. What am i missing?

[smidge21] 30/9/2022 22:25

The explanation offered for little FX detail was that cable was 1.22 at the period end. While this is true, the carnage in £ would have begun when the narratives were prepared and some real time comment would, IMHO, been sensible.

[scrwal] 30/9/2022 20:47

If the discount doesn't narrow there may well be a high uptake on whatever share buyback scheme is agreed upon.

[waterloo01] 30/9/2022 17:13

Given the changes in the portfolio and active and to date effective management, the reliable and 10%+ divi, the discount does seem out of whack. But then it has done for years. Degree of comfort though as it's one of the very few that at least matches inflation.

[mwj1959] 30/9/2022 17:07

Small drop in NAV for August. At 74pish on a discount to Aug Nav of over 30%.

[badtime] 30/9/2022 14:36

..hmm not today :(