Vpc Specialty Lending In... Share Discussion Threads

[ramellous] 21/12/2023 08:38

What’s going on with ii and the dividend. I received it my account 3 days ago and now another one for the same amount was credited this morning?

[nk104] 18/12/2023 13:55

Dividend seems to have landed in my account three days earlier than expected. Odd but not unwelcome.

[chucko1] 12/12/2023 10:41

You are right about Heyday. With that and my observation that he cited entirely the wrong percentage of NAV represented by WeFox, it calls into question his modus operandi - i.e. seemingly a speed research of a company followed by some resulting logic. The logic is generally fine, but worthwhile checking his inputs to ensure any error is not material.

In the case of VSL, it is by no means a show stopper, but as I wrote in a previous post, I felt he was somewhat more bullish than me. Nevertheless, a worthwhile read and raises good points. But a strong case of DYOR.

[legaleye47] 11/12/2023 22:36

Worth pointing out that the Heyday that VSL has invested in is not the one mentioned in OakBloke’s blog but instead the Amazon brand aggregator. From a few quick searches I can see that industry is struggling with lots of consolidation and layoffs. It’s unclear how Heyday is doing as there is very little recent news. So possibly that equity stake (and even the related loan) are not worth much? I own VSL shares and bought more recently, so if anyone has any insights into how Heyday is doing and what it might be worth that would be appreciated!

[chucko1] 11/12/2023 13:37

CWA, thanks. But if anyone has cause to disagree, I am happy to consider and change the model if appropriate. There is not great visibility here on the investment assets and personally, I am looking to go large on this. So if I have made an error somewhere, please let me know! (though I tend not to make errors, but age can do funny things)

That said, it was by modelling SLFR/X that gave me the confidence to really go against the grain. Made around 200% and on some decent size. Still hold quite a few. Ditto GPE.L in a previous era.

In my opinion, GABI could be another gem, though early days. They all have in common that they are (or will be) in run-off, so you do not have to be concerned with potential bad decisions - just ones that you can already see are bad! It becomes a maths/statistics/modelling game.

[cwa1] 11/12/2023 12:36

Many thanks for that analysis and comment chucko1, much appreciated

[2wild] 11/12/2023 12:18

As far as I'm concerned, they Can extend doubt as many Loans as they want. There is a 12% yield on offer. Added at 66.7p.

Never wanted a Liquidation in the first place, would have Preferred a 25% tender near nav.

[chucko1] 11/12/2023 11:39

CWA - read with caution. The OakBloke cites a 12.65% exposure to WeFox, but that is not correct. It is about 6.5%. He picked on the largest of the credit assets (Deinde Group LLC) by mistake. Still would be a fair result, but an absurd error to make.

To some eyes, the pushing out of some of the repayments by a couple of years is a good thing, or at least an expected thing. This is quite normal for work-outs and wind-downs. It seems as though one particular loan has been extended, as they had originally said was a possibility according to "maximising return". One or two have seemingly been accelerated, hence the blip in Q2 of this year. Worth noting that in Q4, about $44mn of gross proceeds has been received, which allowing for unwinding of leverage should result in around £27mn of reduction. This compares with the most recent estimate of £12mn for Q4. There is also £14mn for Q1 2024, so it may be that a few of them were repaid a few months or perhaps only weeks early. They are not very forthcoming about the precise details which frustrates a more accurate analysis.

However, the big picture seems to be that the leverage has been falling rapidly. Debt was £121mn in June 2022, £105mn in Dec 2022 and £74mn by June 2022. This was the last published figure. I have spent a while writing a model for VSL (largely finished last night) and despite there being ill-defined information put out across their monthly reports, annual and semi reports as well as marketing documents, I am pretty confident that I have a decent calibration. My estimate of current debt outstanding as of Oct 31st 2023 is £59mn and that does NOT include any reductions from the recently announced $30mn of gross proceeds. It appears to me that they are not just repaying the amount associated with a particular asset, but going beyond that by some degree. This suggests that the capital repayment targeted for late Q4 or early Q1 will be modest.

Furthermore, there are some concerns about the valuation of the "Investment Assets". You may recall that one poster on this board worriers that they might be close to worthless, something I think is a function of not seeing the wood for the trees. Or worse? Well, they were £131mn in Dec 2022 and £110mn in June 2023. My new model has calculated a figure of £109mn for June 2023, so I am happy with the calibration and therefore modelling assumptions made. There is still some chance of luck having played a part in this, but not a high chance. My current estimate for such assets is £99mn.

What this all means is that I have maintained my expected IRR for the wind-down. Assuming you buy the shares at 66.6p and 3% per annum credit losses and a further 20% per annum reduction in the value of the equities, the IRR appears to me to be around 14.5%. It is worth noting that the actual annualised losses on the equities et al. is around 10% and the fact that there has been a reduction in amount they hold appear to suggest they can sell at a price not outrageously different from their marks. It is not easy at all to be sure about this as they never talk about the sales of these things. Worth noting that the value of the warrants portfolio, something I always considered to be the likeliest to take a caning, is down 55%. Not a lot more pain to take there.

If future credit losses are only 2% per annum and equity losses at only 10% per annum, then the IRR is around 21% per annum. In both cases, I have assumed an average 2 years to liquidate, hence around 3.5 years for there being materially no exposure left.

One large caution - the noises being made on the eCommerce credit assets are not great. But stressing credit losses to 11% per annum (over the entire portfolio) and reverting to 20% annualised equity losses results in an IRR of 5.4% - just what is available in MM funds! This is why I like the risk/reward and always look through the fog on this stock. The current share discount is highly supportive of this for a decentish portfolio with a short average life.

[cc2014] 11/12/2023 09:03

The problem is the market clearly knows something we don't by the sell off over the last few days.

A comparison of the September and October factsheets shows a deterioration in the payback schedule of the investments. I am wondering why about £35m of repayment due in Q3 2024 and around that area looks like it's been pushed back to Q1&Q2 2026.

[cwa1] 11/12/2023 07:55

Some further, speculative, chat here too FWIW:-

[cwa1] 11/12/2023 07:48

A clickable link for the indolent ;-)

[tag57] 10/12/2023 22:54

Rambutan - the Oak Bloke on substack has already produced a cash flow/capital return summary based around his expectations, might be worth a look and compare to your thoughts.
hxxps://theoakbloke.substack.com/p/is-vsl-a-risky-bet?utm_source=profile&utm_medium=reader2
Tag

[riskvsreward] 10/12/2023 21:28

I think debts adds up approximately to £180 m (check the bar charts more carefully) and then another 27% for the rest (cash included) making about £70 m, giving a total NAV of £250 m.

[rambutan2] 10/12/2023 20:52

Ok, I'm prob being thick, but the graph showing projected cash back from lending investments after debt paydown, very approx adds up to £160m up to Q2 2027. Currently, this accounts for 73% of nav, assuming they are not including the non debt investments. And of course, excludes the inc to be generated until maturity, I assume. But the current nav is £252m, which even when i add in the 27% of more equity style investments, I am falling well short of. What am i missing?

[robe7] 08/12/2023 15:57

Yes Chucko a good time to buy me thinks - unfortunately for me I'm fully invested here already but I may get another chance although!

[chucko1] 08/12/2023 15:21

The NAV announcement this morning was not much different from the most recent, so that is hardly an explanation. Might as well make the most of it and take the opportunity to add. I was intending adding (or not) as and when more portfolio information was released including results of asset sales and any impairments on debt, but market events have overtaken this!

[robe7] 08/12/2023 14:32

Looks like a large trader has traded around the Dividend but he would have got punished looking at the price before div and after

[badtime] 08/12/2023 14:29

Bit of weakness today

[jong] 30/11/2023 12:13

XD today. 2p per share payable on Thursday 21 December.

[robe7] 21/11/2023 11:52

Due to go Ex divy at end of month - could be that but a little strange anyway

[solarno lopez] 15/11/2023 17:15

Has someone got wind of the suggested payout ?

[solarno lopez] 15/11/2023 08:45

A little perky today !

[chucko1] 23/10/2023 17:23

Yup, and I do not disagree. He is a little more aggressive than I, but as he says, visibility on some aspects of the assets is not great. And I await the wind down narrative/updates that will become more common each month within the monthly reports. These may provide clues on both direction of travel and liquidation value of non-lending assets.

Nevertheless, I have calculated a conservative 14% or so IRR, and the one indicated from the Oakbloke is 16.5% ish. Very ish, but I do like the current cheapness of VSL. On top of all this is the backstory - things like the management and seemingly conservative accounting. I do not expect any shocks even if the fees they pay themselves are hardly "light". Oakbloke does not appear to have included the incentive formula payable to the managers, but in the big scheme of things, this is small.

[mondex] 23/10/2023 14:34

Thumbs up from the oak bloke website

hxxps://theoakbloke.substack.com/p/is-vsl-a-risky-bet? tm_source=profile&utm_medium=reader2