Volta Finance Limited - Net Asset Value as at 31 March 2020
Volta Finance Limited (VTA / VTAS) –
March 2020 monthly report
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE
OR IN PART, IN OR INTO THE UNITED STATES
***** Guernsey, 14 April 2020
AXA IM has published the Volta Finance Limited
(the “Company” or “Volta Finance” or “Volta”) monthly report for
March. The full report is attached to this release and will be
available on Volta’s website shortly (www.voltafinance.com).
PERFORMANCE and PORTFOLIO
ACTIVITY
In March, the impact of the COVID-19 crisis was
very material on Volta, with the Company’s NAV* falling by
-32.4%.
The monthly performance** in local currency was:
-4.5% for Bank Balance Sheet transactions, -36.9% for CLO Equity
tranches; -41.3% for CLO Debt; +0.1% for Cash Corporate Credit
deals (this bucket comprises funds that have one-month delay in
publishing their NAV); and -11.9% for ABS.
Considering the above market reactions, the
strategy that was in place for several quarters already to prefer
CLO equity positions instead of leveraging CLO debt tranches
permitted avoiding an even larger impact from the pandemic.
At the end of the month, average prices for CLO
Equity tranches were 43.6% and 28.9% respectively for USD and Euro
positions, 54.3% for USD CLO debt (Volta does not hold Euro CLO
debt).
These prices incorporate what we consider as a
highly probable assumption that some CLO Equity positions will
start suffering partial diversion of cash flows as early as July
and that this might become more pronounced in October due to the
likely increase of the excess CCC bucket in CLOs.
The lower average price for EUR CLO Equity
relative to USD CLO Equity is, we believe, the reflection of lower
liquidity and risk appetite in Europe than in the US for this type
of assets, as the industries of bigger concern like energy and
gaming have significant lower weightings in Europe than in the
US.
As mentioned in our interim communication on
24th March, our first priority was to secure Volta’s balance sheet.
A number of positions had been sold prior to the crisis but an
additional four positions were sold (three CLO Debt and one ABS)
for a total of €9.7m to face margin calls from currency hedging and
amounts drawn from previous investments. These positions
generated a loss of €4.9m (0.13 cents per share) relative to the
end February valuation. We also reduced significantly the
amount of currency hedging to avoid margin calls and, at the end of
March, Volta had almost enough cash to fully close its repurchase
agreement. April is a month with large cashflows from our assets.
We expect this to result in a comfortable net cash cushion
following the repo repayment.
As announced on 2nd April, the decision was
taken to cancel the dividend due for payment at the end of April.
This was a precautionary measure to ensure adequate cash resources
given the uncertainty around the cash flow receipts in April.
However, both the Board of Volta and AXA IM are committed to
reinstituting dividend payments as soon as possible.
As at the end of March 2020, Volta’s NAV was
€185.1m or €5.06 per share (including €9m in cash). The GAV stood
at €197.1m with nearly €12m liabilities, principally being the repo
which is expected to be repaid by the end of April.
Regarding longer term performance, it is, as
yet, too early to say with certainty how this crisis will impact
Volta’s cash flows and NAV. However, it is reasonable to
expect that:
- Rating agencies will continue to downgrade underlying loans so
that the CCC bucket in the underlying loan portfolios will on
average exceed the typical 7,5% authorized level. Our view is that
the CCC buckets, on average, might reach c. 15% on average in the
CLO underlying leveraged loan market. Depending on realized losses
and loans in default, such levels would trigger diversion of
payments due to CLO Equity. In 2009 Volta faced a similar situation
and, in that period, Volta’s portfolio outperformed significantly
the average market. We will keep you informed about how Volta’s
positions are performing relative to market.
- Most rating agencies/economic researchers envisage that the
COVID-19 crisis might cause defaults in high yield corporate names
to rise to around 10% (not accounting for the recession impact), in
line with the Global Financial Crisis, 12 years ago. One of the
differences though should be the pace at which defaults will occur.
During the GFC we had, in the US, a spike of defaults in 2009 and
then almost a normal situation in 2010. This time, as the vast
majority of loans are covenant light, companies are not pushed into
default rapidly and have more time to survive the EBITDA reductions
that the COVID-19 crisis is causing. Adding to that the massive
governmental and central bank support that is being implemented the
pattern regarding defaults might be significantly different from
the GFC with a few years of above average default rates but without
a brutal 2009-like spike. Should the covenant-lite issuers be kept
alive (though with very high leverage), the resulting default
pattern from all those actions would be better for CLO Equity
positions and for Volta as it gives more time for reinvestments at
discount (inside and outside CLOs).
*It should be noted that approximately 15.5% of
Volta’s GAV comprises investments for which the relevant NAVs as at
the month-end date are normally available only after Volta’s NAV
has already been published. Volta’s policy is to publish its own
NAV on as timely a basis as possible in order to provide
shareholders with Volta’s appropriately up-to-date NAV information.
Consequently, such investments are valued using the most recently
available NAV for each fund or quoted price for such subordinated
note. The most recently available fund NAV or quoted price was for
9.0% as at 29 February 2020, 4.3% as at 31 December 2019 and 2.2%
as at 30 September 2019.
** “performances” of asset classes are
calculated as the Dietz-performance of the assets in each bucket,
taking into account the Mark-to-Market of the assets at period
ends, payments received from the assets over the period, and
ignoring changes in cross currency rates. Nevertheless, some
residual currency effects could impact the aggregate value of the
portfolio when aggregating each bucket.
CONTACTS
For the Investment ManagerAXA
Investment Managers ParisSerge Demayserge.demay@axa-im.com+33 (0) 1
44 45 84 47
Company Secretary and
AdministratorBNP Paribas Securities Services S.C.A,
Guernsey Branch guernsey.bp2s.volta.cosec@bnpparibas.com +44
(0) 1481 750 853
Corporate Broker Cenkos Securities plc Andrew
WorneDaniel BalabanoffRob Naylor+44 (0) 20 7397 8900
***** ABOUT VOLTA FINANCE
LIMITED
Volta Finance Limited is incorporated in
Guernsey under The Companies (Guernsey) Law, 2008 (as amended) and
listed on Euronext Amsterdam and the London Stock Exchange's Main
Market for listed securities. Volta’s home member state for the
purposes of the EU Transparency Directive is the Netherlands. As
such, Volta is subject to regulation and supervision by the AFM,
being the regulator for financial markets in the Netherlands.
Volta’s investment objectives are to preserve
capital across the credit cycle and to provide a stable stream of
income to its shareholders through dividends. Volta seeks to attain
its investment objectives predominantly through diversified
investments in structured finance assets. The assets that the
Company may invest in either directly or indirectly include, but
are not limited to: corporate credits; sovereign and
quasi-sovereign debt; residential mortgage loans; and, automobile
loans. The Company’s approach to investment is through vehicles and
arrangements that essentially provide leveraged exposure to
portfolios of such underlying assets. The Company has appointed AXA
Investment Managers Paris an investment management company with a
division specialised in structured credit, for the investment
management of all its assets.
*****
ABOUT AXA INVESTMENT
MANAGERSAXA Investment Managers (AXA IM) is a multi-expert
asset management company within the AXA Group, a global leader in
financial protection and wealth management. AXA IM is one of the
largest European-based asset managers with 739 investment
professionals and €750 billion in assets under management as of the
end of March 2019.
*****
This press release is published by AXA
Investment Managers Paris (“AXA IM”), in its capacity as
alternative investment fund manager (within the meaning of
Directive 2011/61/EU, the “AIFM Directive”) of Volta Finance
Limited (the "Volta Finance") whose portfolio is managed by AXA
IM.
This press release is for information
only and does not constitute an invitation or inducement to acquire
shares in Volta Finance. Its circulation may be prohibited in
certain jurisdictions and no recipient may circulate copies of this
document in breach of such limitations or restrictions. This
document is not an offer for sale of the securities referred to
herein in the United States or to persons who are “U.S. persons”
for purposes of Regulation S under the U.S. Securities Act of 1933,
as amended (the “Securities Act”), or otherwise in circumstances
where such offer would be restricted by applicable law. Such
securities may not be sold in the United States absent registration
or an exemption from registration from the Securities Act. Volta
Finance does not intend to register any portion of the offer of
such securities in the United States or to conduct a public
offering of such securities in the United States.
*****
This communication is only being
distributed to and is only directed at (i) persons who are outside
the United Kingdom or (ii) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the “Order”) or (iii) high net
worth companies, and other persons to whom it may lawfully be
communicated, falling within Article 49(2)(a) to (d) of the Order
(all such persons together being referred to as “relevant
persons”). The securities referred to herein are only available to,
and any invitation, offer or agreement to subscribe, purchase or
otherwise acquire such securities will be engaged in only with,
relevant persons. Any person who is not a relevant person should
not act or rely on this document or any of its contents. Past
performance cannot be relied on as a guide to future
performance.
*****This press release
contains statements that are, or may deemed to be, "forward-looking
statements". These forward-looking statements can be identified by
the use of forward-looking terminology, including the terms
"believes", "anticipated", "expects", "intends", "is/are expected",
"may", "will" or "should". They include the statements regarding
the level of the dividend, the current market context and its
impact on the long-term return of Volta Finance's investments. By
their nature, forward-looking statements involve risks and
uncertainties and readers are cautioned that any such
forward-looking statements are not guarantees of future
performance. Volta Finance's actual results, portfolio composition
and performance may differ materially from the impression created
by the forward-looking statements. AXA IM does not undertake any
obligation to publicly update or revise forward-looking
statements.
Any target information is based on
certain assumptions as to future events which may not prove to be
realised. Due to the uncertainty surrounding these future events,
the targets are not intended to be and should not be regarded as
profits or earnings or any other type of forecasts. There can be no
assurance that any of these targets will be achieved. In addition,
no assurance can be given that the investment objective will be
achieved.
The figures provided that relate to past
months or years and past performance cannot be relied on as a guide
to future performance or construed as a reliable indicator as to
future performance. Throughout this review, the citation of
specific trades or strategies is intended to illustrate some of the
investment methodologies and philosophies of Volta Finance, as
implemented by AXA IM. The historical success or AXA IM’s belief in
the future success, of any of these trades or strategies is not
indicative of, and has no bearing on, future results.
The valuation of financial assets can
vary significantly from the prices that the AXA IM could obtain if
it sought to liquidate the positions on behalf of the Volta Finance
due to market conditions and general economic environment. Such
valuations do not constitute a fairness or similar opinion and
should not be regarded as such.
Editor: AXA INVESTMENT MANAGERS
PARIS, a company incorporated under the laws of France, having its
registered office located at Tour Majunga, 6, Place de la Pyramide
- 92800 Puteaux. AXA IMP is authorized by the Autorité des Marchés
Financiers under registration number GP92008 as an alternative
investment fund manager within the meaning of the AIFM
Directive.
*****
- March 2020 Monthly Press Release final
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