TIDMRCOI
RNS Number : 3672I
Riverstone Credit Opps. Inc PLC
12 August 2021
Riverstone Credit Opportunities Income Plc
Interim Report and Unaudited Interim Condensed Financial
Statements
For the six months ended 30 June 2021
We lend to companies working to drive change and deliver
solutions across the energy sector, spanning renewable as well as
conventional sources, with a primary focus on infrastructure
assets.
Our aim is to build a portfolio that generates an attractive and
consistent risk adjusted return for our investors.
Company number: 11874946
All capitalised terms are defined in the list of defined terms
below unless separately defined.
Riverstone Credit Opportunities Income Plc is an externally
managed closed-ended investment company trading on the Main Market
of the London Stock Exchange.
The Company's Ordinary Shares were admitted to the Specialist
Fund Segment of the London Stock Exchange plc's Main Market and
incorporated and registered on 11 March 2019 in England and Wales
with an unlimited life.
INVESTMENT MANAGER
The Company's Investment Manager is Riverstone Investment Group
LLC, which is controlled by affiliates of Riverstone.
Riverstone is an energy and power-focused private investment
firm founded in 2000 by David M. Leuschen and Pierre F. Lapeyre
with over $40 billion of capital raised. Riverstone conducts
buyout, growth and credit investments in the E&P, midstream,
energy services, solar, lithium-ion, power and coal sectors of the
global energy industry. With offices in New York, London, Houston,
Mexico City and Menlo Park, the firm has committed approximately
$43 billion to over 200 investments in North America, South
America, Europe, Africa, Asia and Australia.
The registered office of the Company is 27-28 Eastcastle Street,
London, W1W 8DH.
Key Financials
NAV as at 30 June 2021 $94.74m
NAV per Share as at 30 June 2021 $1.03
Market capitalisation as at 30 June 2021 $78.5m
Share price at 30 June 2021 $0.86
Total comprehensive income for period ended 30 June 2021 $2.59m
EPS for the period ended 30 June 2021 2.83 cents
Distribution per share with respect to the period ended 30 June 2021 3.5 cents
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Highlights
-- The NAV at 30 June 2021 was $1.03 per share.
-- Distributions of 3.5 cents per share approved with respect to
the period ended 30 June 2021.
-- 5 investments and 3 full realisations executed in the period ended 30 June 2021.
INVESTMENT OBJECTIVE
The Company seeks to generate consistent shareholder returns
predominantly in the form of income
distributions, principally by making senior secured loans to
energy-related companies.
We lend to companies working to drive change and deliver
solutions across the energy sector, spanning renewable as well as
conventional sources, with a primary focus on infrastructure
assets. Our aim is to build a portfolio that generates an
attractive and consistent risk adjusted return for our
investors.
INVESTMENT POLICY
The Company seeks to achieve its investment objective through
investing in a diversified portfolio of direct and indirect
investments in loans, notes, bonds and other debt instruments,
including convertible debt, issued by Borrowers operating in the
energy sector. The Company may also invest
in warrants or other equity interests or instruments received in
connection with, or as a consequence
of, an investment in the loans.
Further details on the Company's investment strategy, investment
restrictions and distribution policy are outlined in the Company's
Annual Report for the period ended 31 December 2020.
Chairman's Statement
Niche renewable and conventional energy infrastructure lending
with downside structural protections
On behalf of the Board, I would like to first thank our
shareholders for their support as we begin to see a return towards
normalcy, with material improvements from both a public health and
economic perspective. For the majority of the 2 years we have been
investing, Riverstone Credit Opportunities Income plc had to
navigate through a period of extreme volatility created by a
combination of geopolitical uncertainty and the COVID-19 global
pandemic.
The beginning of 2021 brought about a vastly improving macro
environment, with the trend continuing in the second quarter.
Brought on by the successful vaccine rollout and increased demand
in major economies, particularly the U.S. and China, commodity
prices have seen drastic improvements this year. S&P Energy
Index is up over 40% year to date through June and WTI prices are
up 54% in that same time period. RCOI's portfolio has remained
resilient, with the differentiated investment strategy, structural
protection provisions and well-diversified exposure allowing for
continued yield and principal preservation.
RCOI's NAV has remained strong, with the current NAV per share
of $1.03. RCOI has seen a rapid increase in the pace of capital
deployment, closing on 4 direct deals in the first half of 2021,
compared to 3 in all of 2020. As RCOI has continued to broaden deal
activity away from upstream following the second quarter
realisations of Ascent Energy and Pursuit Oil & Gas, RCOI
believes the current economic climate is very favourable for many
of our remaining investments as well as our robust pipeline of
opportunities.
RCOI is actively adapting to a post-COVID world, with the need
for capital within infrastructure, infrastructure services and
energy transition being particularly prevalent. In the second
quarter of 2021, RCOI committed to two new deals, a water
infrastructure company (Blackbuck Resources) and a lithium-ion
battery manufacturer (Imperium3NY LLC). Blackbuck was RCOI's first
sustainability-linked loan, whereby the loan pricing steps up if
key sustainability targets are not achieved. The team are looking
to make more loans that have sustainability goals embedded within
them, and strive to hold themselves as well as their Borrowers to
higher environmental standards.
Performance
The Company reported a profit of $2.6 million for the period
ending 30 June 2021 as a result of income received from the
investment portfolio and changes in the portfolio's valuations. The
Net Asset Value ("NAV") of the Company ended the period at $1.03
per share.
The current unrealised portfolio remains profitable at a 1.12x
Gross MOIC. Characteristics of RCOI's conservative investment
strategy, particularly the focus on conservative LTV, a diversified
sector and end-user base, as well as structured incentives for
early repayment, have assisted the portfolio in its ability to
limit the impact of broad market fluctuations on performance.
RCOI has executed 16 direct investments since inception and Q2
2021 also saw the full realisations of two direct deals within the
upstream sector, eliminating our exposure to exploration and
production companies.
As of 30 June 2021, RCOI had committed over 74.9 per cent of the
fund to investments and had $64.3 million net invested, equating to
68.3 per cent of net capital available, and a cash balance of over
$29 million, including cash held at the Company's SPVs. Capital
that has been committed but not yet invested continues to generate
income through undrawn fees.
In closing, I appreciate the support of our shareholders during
this period and look forward to the continued improvements in the
broader economy. As always, the Board and RCOI remain vigilantly
focused on managing the portfolio to ensure long-term value
creation for our shareholders.
Reuben Jeffery, III
Chairman
11 August 2021
Investment Manager's Report
ABOUT THE INVESTMENT MANAGER
Appointed in May 2019, the Investment Manager, an affiliate of
Riverstone, will seek to generate consistent shareholder returns
predominantly in the form of income distributions principally by
making senior secured loans to energy-related businesses. We lend
to companies working to drive change and deliver solutions across
the energy sector, spanning renewable as well as conventional
sources, with a primary focus on infrastructure assets. Our aim is
to build a portfolio that generates an attractive and consistent
risk adjusted return for our investors.
The Company will seek to achieve its investment objective
predominantly through investing in a diversified portfolio of
direct and indirect investments in loans, notes, bonds and other
debt instruments, including convertible debt, issued by Borrowers
operating in the energy sector. Riverstone's investment
professionals have a combination of industry knowledge, financial
expertise and operating capabilities. The Company will also benefit
from the guidance and input provided by non-Riverstone Credit Team
members of Riverstone's credit investment committee who will be
involved in the Company's investment process. The Company believes
that Riverstone's global network of deep relationships with
management teams, investment banks and other intermediaries in the
energy sector will lead to enhanced sourcing and deal origination
opportunities for the Company.
INVESTMENT STRATEGY
The Investment Manager will seek to leverage the wider
Riverstone platform to enhance its investment strategy through the
synergies gained from being part of one the largest dedicated
energy focused private equity firms.
The key elements of the Investment Manager's investment strategy
in relation to the Company and its SPVs are summarised below.
Core Strategy - Direct Lending
The Investment Manager will be primarily focused on originating
opportunities from small to middle-sized energy companies in what
the Riverstone team call the "Wedge"; companies too small for the
capital markets and without the conforming credit metrics that
allow access to the commercial bank market.
All investments directly originated by the Company's SPVs are
expected to involve providing primary capital to the Borrower,
after having completed a thorough and comprehensive due diligence
process. In each case the Riverstone team will be able to influence
terms and conditions. In many cases, direct investments are
expected to be held solely by the Company's SPVs, in some cases
alongside Other Riverstone Funds. In others, the Company's SPVs
(and Other Riverstone Funds) may be a member of a syndicate
arranged by a third party.
The Investment Manager expects that lending investments made
directly by the Company's SPVs will have a contractual duration of
three to five years from inception and an expected duration of one
to two years. The maximum term of any investment made by the
Investment Manager will be 7 years.
Complimentary Strategies - Capital Relief and Market-Based
Opportunities
The Investment Manager may be presented with opportunities to
acquire from banks' so-called "non-conforming" loans which can no
longer be held on bank balance sheets. The Investment Manager
expects that such "capital relief" transactions will be secondary
in nature, will typically be based on public due diligence
information and will typically not allow the Company to influence
the underlying terms of the relevant Investment. The Investment
Manager expects that, in capital relief transactions, the Company
may participate as part of a broader syndicate of third-party
lenders. The Investment Manager expects capital relief transactions
made by the Company's SPVs to have a duration of one to three years
from inception and an expected duration of less than 12 months.
Riverstone believes that the same trends which make it difficult
for smaller Borrowers to access capital markets may create
attractive opportunities for investors such as the Company to
acquire syndicated loans and bonds in the open market at
risk-adjusted returns that match or exceed the returns available
from direct lending opportunities. In such circumstances, the
Company's SPVs may make selected investments in the secondary
market for syndicated loans and bonds where the Investment Manager
believes that such instruments offer suitable risk adjusted
returns.
The Investment Manager expects market-based opportunities
generally to be secondary in nature, typically to be based on
public due diligence information and may, typically, not allow the
Company any influence on the underlying terms of the investment.
The Investment Manager expects market-based opportunities will
typically involve the Company's SPVs being part of a broader
syndicate of lenders.
INVESTMENT PORTFOLIO SUMMARY
The Investment Manager has reviewed numerous opportunities
within the Investment Guidelines since RCOI's admission. As of 30
June 2021, the Company holds ten direct investments; five for
midstream companies, three for infrastructure services companies
and two for energy transition companies as further discussed below.
Three direct realisations occurred during the period ended 30 June
2021; two exploration and production companies, and one midstream
company. The Investment Manager continues to maintain a strong
pipeline of investment opportunities and expects to make a number
of further commitments across the infrastructure, infrastructure
services and energy transition sectors. RCOI, when making a new
investment, will receive an allocation of the investment in
accordance with the limitations illustrated in the Company's
Investment Restrictions. The determination of what percentage they
will receive will be pro rata to the available capital for all of
the RCP funds that are eligible to participate in the
investment.
In the descriptions that follow, yield to maturity is inclusive
of all upfront fees, original issue discounts, drawn spreads and
prepayment penalties through the stated maturity of the loan. Most
loans have incentives to be called early. A portion of the loans
have a "payment-in-kind" feature for drawn coupons for a limited
time period. Similarly, some of the loans have a "delayed-draw"
feature that allows the borrower to call capital over time, but
always with a hard deadline. Loans that are committed are loans
with signed definitive documentation where a structuring fee and/or
original issue discount have been earned and the Company earns an
undrawn spread. Loans that are invested are loans with signed
definitive documentation where a structuring fee and/or original
issue discount have been earned, the Company has funded the loan to
the borrower and the Company is earning a drawn coupon.
Project Mariners - RCOI participated in a $140.0 million first
lien delayed-draw term loan for a privately-owned company that
provides vessel and logistic services including tugboat, ship
assist, and escort services, and cargo handling and towing
predominantly focused on the energy sector.
The Company is headquartered in Houston, TX with navigation
centres in Ingleside, TX, Brownsville, TX, Pascagoula, MS, and
Jacksonville, FL as well as a shipyard and repair facility in
Pascagoula, MS. The term loan closed in July 2019.
At closing, $14.9 million was committed by RCOI which was
reduced to $12.2 million via a secondary sale. The first lien term
loan has a maturity of July 2022 and an all-in expected yield to
maturity of 12.6% on a fully drawn basis. In April 2020, RCP
provided a new $7.0 million pari passu revolver and the term loan
was upsized by $3.0 million to $143.0 million. RCOI committed an
additional $1.0 million to the Revolver and a third party provided
the entire term loan upsize. The term loan upsize has since been
cancelled.
Following a sale leaseback in Q1 2021, 15% of outstanding
principal, along with interest and fees at the 109 call premium,
was repaid. RCOI's remaining commitment is $10.1 million.
As of 30 June 2021, the $9.6 million of the remaining $10.1
million commitment has been invested.
Caliber Midstream - RCOI participated in a $10.0 million upsize
of RCP's commitment to a $65.0 million first lien Holdco term loan
for a sponsor-backed Bakken focused midstream company that provides
crude oil and natural gas gathering and processing, produced water
transportation and disposal, and freshwater sourcing and
transportation. RCP closed the initial $65.0 million financing in
June 2018. The term loan upsize closed in August 2019.
At closing, $3.4 million was committed by RCOI. The first lien
HoldCo term loan has a maturity of June 2022 and an all-in expected
yield to maturity of 11.8% on a fully drawn basis.
Use of proceeds, combined with an Opco revolving credit facility
draw, was to fund an acquisition.
In March 2021, the Caliber Midstream Partners' (the "Company" or
"OpCo") largest customer, Nine Point Energy, terminated their
midstream contract with Caliber and subsequently filed for Chapter
11 bankruptcy. In April 2021, RCOI and other RCP affiliates
purchased a small allocation of the OpCo revolving credit facility
with a maturity in June 2023. In May 2021, RCP and other HoldCo
Lenders completed a recapitalization of Caliber resulting in HoldCo
Term Loan Lenders receiving substantially all of the equity in
HoldCo. To-date, Caliber has not reached a contract resolution with
Nine Point Energy and Caliber continues to assess all strategic
alternatives.
As of 30 June 2021, the full $3.9 million commitment has been
invested.
EPIC Propane - RCOI participated in a $75.0 million first lien
delayed-draw term loan to a sponsor-backed midstream company that
will provide propane purity offtake transportation to the Houston,
TX export market. The term loan closed in December 2019.
At closing, $14.8 million was committed by RCOI. The first lien
term loan has a maturity of December 2022 and an all-in expected
yield to maturity of 11.6% on a fully drawn basis.
Use of proceeds from the credit facility was for the
construction of a new propane pipeline from Robstown and Corpus
Christi, TX to Sweeney, TX.
As of 30 June 2021, the full $14.8 million commitment has been
invested.
FS Crude, LLC - RCOI originally participated in a $75 million
first lien delayed-draw term loan for a sponsor-backed midstream
company that provides crude gathering, storage and blending
services to a diversified footprint of producers in the core of the
Delaware Basin. The term loan closed in March 2020.
At closing, $13.7 million was committed by RCOI. The first lien
term loan originally had a maturity of March 2023 and an all-in
expected yield to maturity of 11.7% on a fully drawn basis. As part
of a fulsome amendment and in exchange for covenant relief, the
Borrower paid down $40 million of principal as well as interest and
fees on 28 December 2020. The remaining $35 million remains in a
first lien senior-secured position, of which RCOI's commitment is
$6.4 million. As part of the paydown, the maturity date was amended
to March 2024.
Use of proceeds from the credit facility was to fund
construction, operation, and maintenance costs of the crude
system.
As of 30 June 2021, the full $6.4 million commitment has been
invested.
Hoover Circular Solutions - RCOI originally participated in a
recapitalisation of a sponsor-backed company that is the leading
specialty rental provider of containers and mobile asset management
solutions across the energy, industrial, refining, and
petrochemical industries. The term loan closed October 2020.
At closing, $7.4 million was committed by RCOI. The first lien
term loan has a maturity of October 2024 and an all-in expected
yield to maturity of 10.4% on a fully drawn basis. Following the
sale of the Company's offshore business, $3.2 million of RCOI's
outstanding principal was repaid on 3 December 2020, with the
residual $4.2 million investment remaining in a first lien
senior-secured position with sub 3x leverage. A portion of the
commitment was paid down, with interest and fees, in the first half
of 2021.
As of 30 June 2021, the remaining $3.8 million commitment has
been invested.
Aspen Power Partners - RCOI participated in a $20.0 million
first lien delayed-draw term loan to a community solar development
company. Led by operating partners of a private equity sponsor, the
company acquires, constructs, and manages community solar
portfolios across attractive markets in the United States. The term
loan closed in December 2020.
At closing, $6.9 million was committed by RCOI. The first lien
term loan has a maturity of December 2021 and an expected all-in
yield to maturity of 13.3% for RCOI on a fully drawn basis. The
delayed draw component has since expired.
Use of proceeds from the credit facility was for the purchase of
Safe Harbor solar panels and refundable interconnection payments
for a community solar portfolio in Maine.
As of 30 June 2021, $3.4 million has been invested and the
remaining delayed draw commitment has been cancelled.
U.S. Shipping Corporation - RCOI participated in a $165.0
million first lien term loan to a private midstream company that is
a leading provider of long haul marine transportation services for
chemical, petroleum, and clean petroleum product cargoes in the
U.S. Jones Act trade operating along the U.S. Gulf, East and West
Coasts.
At closing 10 February 2021, $6.5 million was committed by RCOI.
The first lien term loan has a maturity of February 2024 and an
expected all-in yield to maturity of 11.6% for RCOI on a
fully-drawn basis.
Use of proceeds from the credit facility was to refinance
existing indebtedness.
As of 30 June 2021, the full $6.5 million has been invested.
Roaring Fork Midstream - RCOI participated in a $50.0 million
first lien delayed-draw term loan to a sponsor-backed midstream
company that owns and operates pipeline and storage related
infrastructure moving natural gas and oil from the wellhead to
market.
At closing on 2 March 2021, $5.9 million was committed by RCOI.
The first lien term loan has a maturity of March 2024 and an
expected all-in yield to maturity of 11.8% for RCOI on a
fully-drawn basis.
Use of proceeds from the credit facility was to fund a pipeline
acquisition and growth capex.
As of 30 June 2021, $2.7 million has been invested.
Imperium3 New York, Inc - RCOI participated in a $63.0 million
first lien delayed-draw term loan to a lithium-ion battery company
that will commercialise high performing lithium-ion batteries by
developing a large-scale manufacturing facility in Endicott, NY. In
addition to having a first lien on the manufacturing assets, the
credit facility is supported by two parent guarantors: Charge CCCV
("C4V"), which is a research and development company based in
Binghamton, New York with patented discoveries in battery
composition, and Magnis Energy Technologies Limited ("Magnis")
[ASX: MNS]. Once producing at scale, the company will be the first
U.S. battery cell supplier not captive to an original equipment
manufacturer and supply various underserved industrial
end-markets.
At closing on 16 April 2021, $6.8 million was committed by RCOI
and $5.4 million was drawn at closing. Following the close 20% of
the funded investment was sold to a third party. The first lien
term loan has a maturity of April 2025 and an estimated all-in
yield to maturity of 22.1% for RCOI on a fully-drawn basis. The
yield is made up of upfront fees, a drawn coupon and exit fees that
are higher than the average in the rest of the portfolio.
Use of proceeds was primarily to construct the manufacturing
facility.
As of 30 June 2021, $4.2 million has been invested. As of 30
July 2021, the remaining delayed draw commitment has been
cancelled.
Blackbuck Resources - RCOI participated in a $50.0 million first lien delayed-draw term loan to a sponsor-backed water infrastructure company focused on providing E&P operators with a one-stop shop for all things related to water management, including treatment, gathering, recycling, storage and disposal. At closing on 30 June 2021, $9.9 million was committed by RCOI. The first lien term loan has a maturity of June 2024 and an estimated all-in yield to maturity of 11.9% for RCOI on a fully-drawn basis.
Use of proceeds was primarily to refinance existing indebtedness
and growth capex.
As of 30 June 2021, $8.9 million has been invested.
Three direct investments were realised during the first half of
2021. Project Yellowstone, a $5.8 million first lien commitment
made in June 2019 with a November 2021 maturity was purchased by a
third party in March 2021. RCOI received $7.2 million on the $5.8
million invested which represents a 13.5% IRR and a 1.23x Multiple
on Invested Capital. Ascent Energy, a $13.3 million first lien
commitment made in June 2019 with a June 2022 maturity, was
purchased by a third party in June 2021. RCOI received $16.1
million on the $13.3 million invested which represents a 19.5% IRR
and a 1.21x Multiple on Invested Capital. Finally, Pursuit Oil
& Gas, a $12.3 million first lien commitment made in July 2019
with a July 2021 maturity date was refinanced in June 2021. RCOI
received $15.0 million on the $12.3 million invested which
represents a 19.8% IRR and 1.22x Multiple on Invested Capital.
The Investment Manager continues to believe that this is a
market where patience and a disciplined approach to investing are
likely to be well rewarded.
SUBSEQUENT EVENTS AND OUTLOOK
RCOI's portfolio continues to generate value for shareholders
through a combination of current income and capital gains, despite
a prolonged period of economic and commodity price headwinds. The
Investment Manager remains focused on adapting to broader macro
conditions and underwriting transactions that have advantageous
attributes to protect against the downside.
The beginning of 2021 brought about a vastly improving macro
environment, with the trend continuing in the second quarter.
Brought on by the successful vaccine rollout and increased demand
in major economies, particularly the U.S. and China, commodity
prices have seen drastic improvements this year. These dynamics
create a robust transaction pipeline, and the Investment Manager
will continue to focus on investments with the ability to generate
attractive risk-adjusted returns. In addition, the Investment
Manager will also seek to identify opportunities that can
capitalise on secular trends around energy transition
longer-term.
As of 30 June 2021, RCOI is 75% committed and 68% invested.
The Company has ample capital available for investments. The
investment pipeline remains strong such that we expect the
remaining balance of RCOI to be largely committed throughout 2021.
In each deal, RCOI will invest pro rata to other RCP managed
vehicles based on their available capital.
BUSINESS REVIEW
GOING CONCERN
The Company's cash balance at 30 June 2021 was $4.5 million,
which is sufficient to cover its existing liabilities of $0.7
million, distribution of $1.6 million with respect to the quarter
ended 30 June 2021 and any foreseeable expenses for the period to
31 December 2022, being the period of at least 12 months from
approval of the financial statements.
The outbreak of COVID-19 has had a negative impact on the global
economy. As this situation is both unprecedented and continues to
evolve, it raises some uncertainties and additional risks for the
Company.
The Directors and Investment Manager are actively monitoring
this and its potential effect on the Company and its underlying
investments. In particular, they have considered the following
specific key potential impacts:
-- unavailability of key personnel at the Investment Manager or Administrator;
-- increased volatility in the fair value of investments;
-- disruptions to business activities of the underlying investments; and
-- recoverability of income and principal and allowance for expected credit losses.
In considering the above key potential impacts of COVID-19 on
the Company and its underlying investments, the Investment Manager
has assessed these with reference to the mitigation measures
in place. At the Company level, the key personnel at the
Investment Manager and Administrator have successfully implemented
business continuity plans to ensure business disruption is
minimised, including remote working, and all staff are continuing
to assume their day-to-day responsibilities. At the underlying
investment level, there are various risk mitigation plans in place,
including the use of social distancing and personal protective
equipment, to ensure business activities are maintained as far as
possible.
As further detailed in note 4 to the financial statements, the
Investment Manager uses a third-party valuation provider to perform
a full independent valuation of the underlying investments. The
Investment Manager has also assessed the recoverability of income
due from the underlying investee
companies and has no material concerns. Additionally, the
Investment Manager and Directors have considered the cash flow
forecast and a reverse stress test to determine the term over which
the Company can remain viable given its current resources.
Based on the assessment outlined above, including the various
risk mitigation measures in place, the Directors do not consider
that the effects of COVID-19 have created a material uncertainty
over the assessment of the Company as a going concern.
On the basis of this review, and after making due enquiries to
the Investment Manager, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the period to 31 December 2022, being the period of
assessment covered by the Directors and at least 12 months from
approval of the financial statements. Accordingly, they continue to
adopt the going concern basis in preparing the financial
statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets consist of investments, through SPVs,
within the global energy industry, with a particular focus on
opportunities in the global E&P and midstream energy
sub-sectors. Its principal risks are therefore related to market
conditions in the energy sector in general, but also the particular
circumstances of the businesses in which it is invested. The
Investment Manager seeks to mitigate these risks through active
asset management initiatives and by carrying out due diligence work
on potential targets before entering into any investments.
The Board thoroughly considers the process for identifying,
evaluating and managing any significant risks faced by the Company
on an ongoing basis and these risks are reported and discussed at
Board meetings. The Board ensures that effective controls are in
place to mitigate these risks and that a satisfactory compliance
regime exists to ensure all applicable local and international laws
and regulations are upheld. During the period the Audit and Risk
Committee has reviewed and made minor updates to the Company's
principal risks, which are outlined below. The principal risks are
otherwise consistent with those set out in the 2020 Annual
Report.
For each material risk, the likelihood and consequences are
identified, management controls and frequency of monitoring are
confirmed and results reported and discussed at the quarterly Board
meetings.
The key areas of risk faced by the Company and mitigating
factors are summarised below:
1. The Ordinary Shares may trade at a discount to NAV per Share
for reasons including but not limited to market conditions,
liquidity concerns and actual or expected Company performance. As
such, there can be no guarantee that attempts to mitigate such
discount will be successful or that the use of discount control
mechanisms will be possible, advisable or adopted by the Company.
To mitigate this risk, the Investment Manager closely monitors and
identifies the reasons for significant fluctuations, and considers
the Company's share repurchase program when applicable and in the
interests of shareholders.
2. The ability of the Company to meet the target distribution
will depend on the Investment Manager's ability to find investments
that generate sufficient and consistent yield to support the Target
Distribution. The Investment Manager will identify and manage
suitable investments in accordance with the Investment Policy,
market conditions and the economic environment. To mitigate this
risk, the Company's Investment Policy and investment restrictions
enable the Company to build a diversified energy portfolio that
should deliver returns that are in line with the Target
Distribution range.
3. The ability of the Company to achieve its investment
objectives is dependent on the Investment Manager sourcing and
making appropriate investments for the Company. Investment returns
will depend upon the Investment Manager's ability to source and
make successful investments on behalf of the Company. To mitigate
this risk, the Investment Manager believes sourcing investments is
one of its competitive advantages. The Investment Manager is well
resourced and has access to the wider skills and expertise at
Riverstone whose personnel have years of experience in the global
energy sector.
4. Environmental exposures and existing and proposed
environmental legislation and regulation may adversely affect the
operations of Borrowers. Delay or failure to satisfy any regulatory
conditions or other applicable requirements could prevent the
Company from acquiring certain investments or could hinder the
operations of certain Borrowers. To mitigate this risk, The
Investment Manager implements monitoring and quality control
procedures to mitigate the occurrence of any violation of
safety/health and environmental laws. The Investment Manager has a
clear ESG policy which is implemented and reviewed by the
Board.
5. The Company's investment objective requires it to invest in
loans that are likely to be both illiquid and scarce. If there is
an adverse change in the underlying credit, then the ability of
RCOI to recover value may be impaired. To mitigate this risk, the
Company primarily originates shorter duration senior secured loans
with protective provisions. In some instances the loans incentivise
early repayment.
6. The valuations used to calculate the NAV on a quarterly basis
will be based on the Investment Manager's unaudited estimated fair
market values of the Company's investments and may be based on
estimates which could be inaccurate. To mitigate this risk, the
Investment Manager has an extensive valuation policy and also has
engaged the independent valuation services of Houlihan Lokey on a
quarterly basis. Semi-annually, EY, as auditor of the Company,
attends valuation discussions with the Investment Manager and
Houlihan Lokey.
7. In today's global technological environment, the Company, its
investments and its engaged service providers are subject to risks
associated with cyber security. The effective operation of the
Investment Manager and the businesses of Borrowers are likely to be
highly dependent on the availability and operation of complex
information and technological systems. To mitigate this risk, The
Audit Committee Chairman monitors cyber security risk and best
practices and cyber security due diligence is performed on each
potential borrower.
8. The Company may be exposed to fluctuations and volatility in
commodity prices through investments it makes, and adverse changes
in global supply and demand and prices for such commodities may
adversely affect the business, results of operations, and financial
condition of the Company. To mitigate this risk, the Investment
Manager intends to create a diversified portfolio across various
energy subsectors, commodity exposures, technologies and
end-markets to provide natural synergies that aim to enhance the
overall stability of the portfolio.
9. The Company will only lend to Borrowers in the global energy
sector and such single industry concentration could affect the
Company's ability to generate returns. Adverse market conditions in
the energy sector may delay or prevent the Company from making
appropriate investments. The ongoing coronavirus pandemic has led
to a decline in global commerce and travel, thereby causing
reductions in the near-term demand for energy especially within oil
and gas, and long-term impacts remain unknown for our Borrowers. To
mitigate this risk, the Investment Manager intends to create a
diversified portfolio across various energy subsectors, commodity
exposures, technologies and end-markets to provide natural
synergies that aim to enhance the overall stability of the
portfolio.
10. The performance of the Company may be affected by changes to
interest rates and credit spreads. To mitigate this risk, the
Investment Manager assesses credit risk and interest rate risk on
an ongoing basis and closely monitors each investment with the
assistance of each respective management team and the engaged
service providers.
The principal risks outlined above remain the most likely to
affect the Company in the second half of the year.
Directors' Responsibilities Statement
The Directors are responsible for preparing this Interim Report
in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
-- The unaudited interim condensed financial statements have
been prepared in accordance with UK adopted IAS 34 Interim
Financial Reporting; and
-- The Chairman's Statement, Investment Manager's Report and the
notes to the condensed financial statements include a fair review
of the information required by:
i. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the period and their impact on the unaudited interim condensed
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
ii. DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the period and that have materially affected the financial position
and performance of the Company during that period.
On behalf of the Board
Reuben Jeffery, III
Chairman
11 August 2021
Independent Review Report to Riverstone Credit Opportunities
Income Plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the Interim Report for the six months
ended 30 June 2021 which comprises the Condensed Statement of
Financial Position, the Condensed Statement of Comprehensive
Income, the Condensed Statement of Changes in Equity, the Condensed
Statement of Cash Flows and related notes 1 to 15. We have read the
other information contained in the Interim Report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Interim Report for the six months ended 30 June 2021 is not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34 and the Disclosure Guidance
and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Company will be prepared in accordance with UK adopted IFRSs. The
condensed set of financial statements included in this Interim
Report has been prepared in accordance with UK adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Responsibilities of the Directors
The directors are responsible for preparing the Interim Report
in accordance with the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority
Auditor's Responsibilities for the review of the financial
information
In reviewing the Interim Report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the Interim Report. Our conclusion, is based
on procedures that are less extensive than audit procedures, as
described in the Basis for Conclusion paragraph of this report.
Use of our Report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
11 August 2021
Condensed Statement of Financial Position
As at 30 June 2021
30 June 2021 31 December 2020
$'000 $'000
Note (Unaudited) (Audited)
-------------------------------------------------- ----- ------------- -----------------
Non-current assets
Investments at fair value through profit or loss 4 88,213 88,548
-------------------------------------------------- ----- ------------- -----------------
88,213 88,548
Current assets
Loan interest receivable 4 1,403 1,315
Dividends receivable 4 1,094 1,135
Trade and other receivables 6 192 84
Cash and cash equivalents 4,519 5,374
-------------------------------------------------- ----- ------------- -----------------
7,208 7,908
Current liabilities
Trade and other payables 7 (684) (926)
-------------------------------------------------- ----- ------------- -----------------
Net current assets 6,524 6,982
Net assets 94,737 95,530
-------------------------------------------------- ----- ------------- -----------------
Equity
Share capital 8 915 915
Capital redemption reserve 8 85 85
Other distributable reserves 8 91,179 91,179
Retained earnings 2,558 3,351
Total shareholders' funds 94,737 95,530
-------------------------------------------------- ----- ------------- -----------------
Number of Shares in issue at period/year end 91,545,383 91,545,383
Net assets per share (cents) 12 103.49 104.35
-------------------------------------------------- ----- ------------- -----------------
The interim condensed financial statements were approved and
authorised for issue by the Board of Directors on 11 August 2021
and signed on their behalf by:
Reuben Jeffery, III Emma Davies
Chairman Director
The accompanying notes below form an integral part of these
interim condensed financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 June 2021 (Unaudited)
For the six months For the six months
ended ended
30 June 2021 30 June 2020
Note Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
Investment
loss
Change in fair
value
of
investments
at
fair value
through
profit or
loss 4 - (898) (898) - (1,185) (1,185)
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
- (898) (898) - (1,185) (1,185)
Income
Investment
income 4 4,516 - 4,516 4,236 - 4,236
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
4,516 - 4,516 4,236 - 4,236
Expenses
Directors'
fees and
expenses 14 (83) - (83) (85) - (85)
Other
operating
expenses (498) - (498) (561) - (561)
Profit share 10 (444) - (444) - - -
Total expenses (1,025) - (1,025) (646) - (646)
Operating
profit
/(loss) for
the period 3,491 (898) 2,593 3,590 (1,185) 2,405
Finance income
Interest
income 1 - 1 51 - 51
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
Total finance
income 1 - 1 51 - 51
Profit /
(loss) for
the period
before
tax 3,492 (898) 2,594 3,641 (1,185) 2,456
Tax 11 - - - - - -
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
Profit /
(loss) for
the period
after
tax 3,492 (898) 2,594 3,641 (1,185) 2,456
Profit /
(loss) and
total
comprehensive
income for
the period 3,492 (898) 2,594 3,641 (1,185) 2,456
Profit /
(loss) and
total
comprehensive
income
attributable
to:
Equity holders
of
the Company 3,492 (898) 2,594 3,641 (1,185) 2,456
Earnings per
share
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
Basic and
diluted
earnings per
Share
(cents) 12 3.81 (0.98) 2.83 3.66 (1.19) 2.47
--------------- ----- ----------------------- ---------------- -------- -------------------- ---------------- --------
All 'Revenue' and 'Capital' items in the above statement derive
from continuing operations. No operations were acquired or
discontinued in the period.
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies. Profit / (loss) for the
period after tax also represents Total Comprehensive Income.
The accompanying notes below form an integral part of these
interim condensed financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 June 2021 (Unaudited)
For the six months
ended Capital redemption Other distributable
30 June 2021 Share capital reserve reserves Retained earnings Total
Note $'000 $'000 $'000 $'000 $'000
--------------------- ----- -------------- -------------------- -------------------- ------------------ --------
Opening net assets
attributable to
shareholders 915 85 91,179 3,351 95,530
Total comprehensive
income for the
period - - - 2,594 2,594
Interim
distributions paid
in the period 13 - - - (3,387) (3,387)
Closing net assets
attributable to
shareholders 915 85 91,179 2,558 94,737
--------------------- ----- -------------- -------------------- -------------------- ------------------ --------
After taking account of cumulative unrealised gains of $621k and
other distributable reserves, the total reserves distributable by
way of interest distribution as at 30 June 2021 were $93,116k.
For the six months Capital
ended Share redemption Other distributable Retained
30 June 2020 capital reserve reserves earnings Total
$'000 $'000 $'000 $'000 $'000
------------------------------- --------- ------------ -------------------- ---------- --------
Opening net assets
attributable to shareholders 1,000 - 97,000 3,351 101,351
Repurchase and cancellation
of share capital (27) 27 (1,830) - (1,830)
Total comprehensive
income for the period - - - 2,456 2,456
Interim distributions
paid in the period - - - (4,321) (4,321)
Closing net assets
attributable to shareholders 973 27 95,170 1,486 97,656
-------------------------------- --------- ------------ -------------------- ---------- --------
After taking account of cumulative unrealised losses of $1,185k
and other distributable reserves, the total reserves distributable
by way of interest distribution as at 30 June 2020 were
$96,656k.
The accompanying notes below form an integral part of these
interim condensed financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 June 2021 (Unaudited)
For the six For the six
months ended months ended
Note 30 June 2021 30 June 2020
$'000 $'000
--------------------------------------- ----- -------------- --------------
Cash flows from operating activities
Operating profit for the financial
period 2,593 2,405
Adjustments for:
Movement in fair value of investments 4 898 1,185
Investment income 4 (4,516) (4,236)
Movement in payables (242) (28)
Movement in receivables (108) (58)
Loan interest received 4 2,672 3,591
Dividends received 1,797 636
Bank interest received 1 71
--------------------------------------- ----- -------------- --------------
Net cash generated from operating
activities 3,095 3,566
Cash flows from investing activities
Investment additions 4 (563) -
--------------------------------------- ----- -------------- --------------
Net cash used in investing
activities (563) -
Cash flows from financing activities
Distributions paid 13 (3,387) (4,321)
Repurchase and cancellation
of share capital - (1,830)
--------------
Net cash used in financing
activities (3,387) (6,151)
Net movement in cash and cash
equivalents during the period (855) (2,585)
Cash and cash equivalents at
the beginning of the period 5,374 8,549
--------------------------------------- ----- -------------- --------------
Cash and cash equivalents at
the end of the period 4,519 5,964
--------------------------------------- ----- -------------- --------------
The accompanying notes below form an integral part of these
interim condensed financial statements.
Notes to the Unaudited Interim Condensed Financial
Statements
For the six months ended 30 June 2021
1. General Information
The Company was incorporated and registered in England and Wales
on 11 March 2019 with registered number 11874946 as a public
company limited by shares under the Companies Act 2006
(the "Act"). The principal legislation under which the Company
operates is the Act. The Directors intend, at all times, to conduct
the affairs of the Company so as to enable it to qualify as an
investment trust for the purposes of section 1158 of the
Corporation Tax Act 2010, as amended.
2. Significant accounting policies
The principal accounting policies applied in the preparation of
these condensed financial statements are set out below. These
policies have been consistently applied, unless otherwise
stated.
Basis of preparation
The condensed financial statements have been prepared in
accordance with UK adopted IAS 34 Interim Financial Statements.
Where presentational guidance set out in the AIC SORP is consistent
with the requirements of IFRS, the Directors have sought to prepare
the condensed financial statements on a basis compliant with the
recommendations of the AIC SORP. In particular, supplementary
information which analyses the Statement of Comprehensive Income
between items of a revenue and capital nature has been presented
alongside the total Statement of Comprehensive Income.
The same accounting policies, presentation and methods of
computation are followed in these condensed financial statements as
were applied in the preparation of the Company's annual financial
statements for the year ended 31 December 2020. These accounting
policies will be applied in the Company's financial statements for
the year ended 31 December 2021.
The Company's annual financial statements were prepared on the
historic cost basis, as modified for the measurement of certain
financial instruments at fair value through profit or loss and in
accordance with IFRS and with those parts of the Companies Act 2006
applicable to companies under IFRS.
These condensed financial statements do not constitute statutory
accounts as defined in section 434 of the Companies act and do not
include all information and disclosures required in an Annual
Report. They should be read in conjunction with the Company's
Annual Report for the year ended 31 December 2020.
The Company's Annual Report for the year ended 31 December 2020
included an unqualified audit report that did not reference any
matters by way of emphasis and did not contain any statements under
sections 498 (2) and (3) of the Companies Act 2006. A copy of this
annual report has been delivered the Registrar of Companies.
Going concern
The Company's cash balance at 30 June 2021 was $4.5 million,
which is sufficient to cover its existing liabilities of $0.7
million, distribution of $1.6 million with respect to the quarter
ended 30 June 2021 and any foreseeable expenses in the for the
period to 31 December 2022, being the period of assessment covered
by the Directors and at least 12 months from approval of the
financial statements.
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence to at least 31 December 2022, being the
period of assessment covered by the Directors and at least 12
months from the approval of the financial statements. In making
this assessment, they have considered the effects of COVID-19 as
outlined in the Business Review, including the various risk
mitigation measures in place and do not consider this to have had a
material impact on the assessment of the Company as a going
concern. Accordingly, the Company continues to adopt the going
concern basis of accounting in preparing the interim financial
statements.
Segmental Reporting
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors, as a
whole. The key measure of performance used by the Board to assess
the Company's performance and to allocate resources is the
Company's Net Asset Value, as calculated under IFRS, and therefore
no reconciliation is required between the measure of profit or loss
used by the Board and that contained in the Interim Report.
For management purposes, the Company is organised into one main
operating segment, which invests through its SPVs in a diversified
portfolio of debt instruments, issued by Borrowers operating in the
energy sector.
All of the Company's current income is derived from within the
United States.
All of the Company's non-current assets are located in the
United States.
Due to the Company's nature, it has no customers.
Seasonal and Cyclical Variations
The Company's results do not vary as a result of seasonal
activity.
3. Significant accounting judgements, estimates and assumptions
The judgements, estimates and assumptions made by the Directors
are consistent with those made in the annual financial statements
for the period ended 31 December 2020.
4. Investments at fair value through profit or loss
For the six months For the year ended
ended 31 December 2020
30 June 2021
Loans Equity Total Loans Equity Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------- ------- ------- ------- ---------------------------- ------------------- ----------------
Opening balance 60,049 28,499 88,548 62,864 28,677 91,541
Repayment of
capitalised
interest - - - (764) - (764)
Investment addition
/
(proceeds) - 563 563 (2,051) (920) (2,971)
Unrealised movement
in
fair value of
investments - (898) (898) - 742 742
60,049 28,164 88,213 60,049 28,499 88,548
------------------- ------- ------- ------- ---------------------------- ------------------- ----------------
The Company's investment in its SPVs comprises a loan investment
and an equity investment, as set out above. The SPVs invest in a
diversified portfolio of direct and indirect investments in loans,
notes, bonds and other debt instruments.
Interest receivable on the loan investment at 30 June 2021 was
$1,403k (31 December 2020: $1,315k) and the dividend receivable on
the equity investment at 30 June 2021 was $1,094k (31 December
2020: $1,135). The total unfunded commitments of the Company as at
30 June 2021 is $6.2m (31 December 2020: $4.2m)
Reconciliation of investment income recognised in the period
For the six months ended For the six months ended
30 June 2021 30 June 2020
$'000 $'000
-------------------------------------------------- ------------------------- -------------------------
Movement in loan interest receivable 88 (42)
Loan interest received as cash 2,672 2,827
Total loan interest recognised in the period 2,760 2,785
Dividend income 1,756 1,451
Total investment income recognised in the period 4,516 4,236
--------------------------------------------------- ------------------------- -------------------------
Fair value measurements
As disclosed on pages 68 and 69 of the Company's Annual Report
for the year ended 31 December 2020, IFRS 13 "Fair Value
Measurement" requires disclosure of fair value measurement by
level. The level of fair value hierarchy within the financial
assets or financial liabilities ranges from level 1 to level 3 and
is determined on the basis of the lowest level input that is
significant to the fair value measurement.
The fair value of the Company's investments are ultimately
determined by the fair values of the underlying investments. Due to
the nature of the investments, they are always expected to be
classified as level 3 as the investments are not traded and contain
unobservable inputs. There have been no transfers between levels
during the six months ended 30 June 2021 (31 December 2020:
none).
Valuation methodology and process
The Directors base the fair value of investment in the SPVs on
the fair value of their assets and liabilities, adjusted if
necessary, to reflect liquidity, future commitments, and other
specific factors of the SPVs and Investment Manager. This is based
on the components within the SPVs, principally the value of the
SPVs' investments, in addition to cash and short-term money market
fixed deposits. Any fluctuation in the value of the SPVs'
investments held will directly impact on the value of the Company's
investment in the SPVs.
The Investment Manager's assessment of fair value of investments
held by the SPVs is determined in accordance with IPEV Valuation
Guidelines. When valuing the SPVs' investments, the Investment
Manager reviews information provided by the underlying investee
companies and other business partners and applies IPEV
methodologies, to estimate a fair value as at the date of the
Statement of Financial Position.
Initially, acquisitions are valued at the price of recent
investment. Subsequently, and as appropriate, the Investment
Manager values the investments on a quarterly basis using common
industry valuation techniques, including comparable public market
valuation, comparable merger and acquisition transaction valuation
and discounted cash flow valuation. The techniques used in
determining the fair value of the Company's investments through its
SPVs are selected on an investment by investment basis so as to
maximise the use of market based observable inputs. Due to the
illiquid and subjective nature of the Company's underlying
investments, the Investment Manager uses a third-party valuation
provider to perform a full independent valuation of the underlying
investments.
Quantitative information of significant unobservable inputs -
Level 3 - SPV
30 June 2021 Valuation Unobservable Range / weighted
Description (unaudited) technique input average
$'000
------------- ------------- ------------------- -------------- -----------------
Adjusted net asset
SPV 88,213 value NAV $88,213k
Discount
for lack
of liquidity 0%
------------- ------------- ------------------- -------------- -----------------
The Directors believe that it is appropriate to measure the SPVs
at their adjusted net asset value, incorporating a valuation of the
underlying investments which has taken into account risks to fair
value, inclusive of liquidity discounts, through appropriate
discount rates.
Sensitivity analysis to significant changes in unobservable
inputs within Level 3 hierarchy
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 30 June
2021 are as shown below:
Sensitivity Effect on
Description Input used fair value
$'000
------------- -------------------------------- ------------ -----------
SPV Discount for lack of liquidity +/- 3% -/+2,646
------------- -------------------------------- ------------ -----------
The Company's valuation policy is compliant with both IFRS and
IPEV Valuation Guidelines and is applied consistently. As the
Company's investments are generally not publicly quoted, valuations
require meaningful judgment to establish a range of values, and the
ultimate value at which an investment is realised may differ from
its most recent valuation and the difference may be
significant.
For the period ended 30 June 2021, the valuations of the
Company's investments, through its SPVs, are detailed in the
Investment Manager's Report.
Fair
value Fair
sensitivity value
to a sensitivity
Investments 100 to a
at Fair bps 0.5x
Value increase decrease
as of Weighted in the in the
30 June Investment Valuation Unobservable Average discount EBITDA/Revenue
2021 Type technique(s) input(s) Range (a) rate Multiple
--------------
Industry $'000 Low High $'000 $'000
---------------- ------------ ----------- ------------- ------------- ------ ------ --------- ------------ ---------------
Senior
Secured Discounted Discount
Midstream 31,585 Loans Cash Flow rate 7% 13% 11% (516) NA
Senior
Secured Public EBITDA
1,927 Loans Comparables multiple 6.5x 10.0x 8.3x NA (230)
Senior Recovery NA NA NA NA NA NA
Secured Approach
Loans
Senior
Secured Discounted Discount
Infrastructure 14,067 Loans Cash Flow rate 8% 18% 14% (141) NA
Services 8,850 Senior Lastest NA NA NA NA NA NA
Secured Round of
Loans Financing
210 Equity Waterfall NA NA NA NA NA NA
Rights Approach
Senior
Secured Discounted Discount
Energy 7,055 Loans Cash Flow rate 16% 48% 25% (87) NA
Public EBITDA
Transition 654 Equity Comparables multiple 26.0x 31.0x 28.5x NA (7)
Public Revenue
654 Equity Comparables multiple 5.3x 5.8x 5.5x NA (36)
65,003(b) (745) (273)
(a) Calculated based on fair values. Weighted average is not
applicable for industry categories with only one investment.
(b) The difference between the fair value of the SPVs of
$88,213k and the fair value of the underlying investments at 30
June 2021 is due to cash balances of $24,924k and residual
liabilities of $1,714k, held within the SPVs.
5. Unconsolidated subsidiaries
The following table shows subsidiaries of the Company. As the
Company is regarded as an Investment Entity, these subsidiaries
have not been consolidated in the preparation of the financial
statements:
Investment Place of business Ownership interest as at 30 June 2021
----------------------------------------------- ------------------- --------------------------------------
Held directly
Riverstone International Credit Corp. USA 100%
Riverstone International Credit L.P. USA 100%
Held indirectly
Riverstone International Credit - Direct L.P. USA 100%
------------------------------------------------ ------------------ --------------------------------------
The registered office of the above subsidiaries is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801.
The amounts invested in the Company's unconsolidated
subsidiaries during the period and their carrying value at 30 June
2021 are as outlined in note 4. This comprised $87,645,000 (31
December 2020: $88,548,000) invested in Riverstone International
Credit Corp., which was subsequently invested in Riverstone
International Credit - Direct L.P. and $568,000 invested in
Riverstone International Credit L.P. to enable these vehicles to
fund underlying investments. The Company intends to fund further
underlying investments through its unconsolidated subsidiaries.
There are no restrictions on the ability of the Company's
unconsolidated subsidiaries to transfer funds in the form of cash
dividends or repayment of loans.
6. Trade and other receivables
30 June 2021 31 December 2020
$'000 $'000
---------------- ------------- -----------------
Prepayments 164 56
VAT receivable 28 26
Debtors - 2
----------------- ------------- -----------------
192 84
7. Trade and other payables
30 June 2021 31 December 2020
$'000 $'000
---------------------- ------------- -----------------
Profit share payable 444 668
Other payables 240 258
684 926
8. Share capital and reserves
Number of Capital Other
Issued and shares redemption distributable Retained
Date fully paid issued Share capital reserve reserves earnings Total
-------------- -------------- ------------- -------------- ------------- -------------- -------------- --------
GBP GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 January 2021 1 - - - - -
30 June 2021 1 - - - - -
-------------- -------------- ------------- -------------- ------------- -------------- -------------- --------
USD $'000 $'000 $'000 $'000 $'000
1 January 2021 91,545,383 915 85 91,179 3,351 95,530
------------- -------------- ------------- -------------- -------------- --------
Profit and total
comprehensive income in the
period - - - - 2,594 2,594
Interim distributions paid in
the year - - - - (3,387) (3,387)
------------------------------
30 June 2021 91,545,383 915 85 91,179 2,558 94,737
------------------------------ ------------- -------------- ------------- -------------- -------------- --------
During the period, the Company did not repurchase Ordinary
Shares as part of its buy-back programme (31 December 2020:
8,454,617).
9. Audit fees
Other operating expenses include fees payable to the Company's
Auditor of $136k (June 2020: $106k).
For the six months ended For the six months ended
30 June 2021 30 June 2020
$'000 $'000
--------------------------------------------------- ------------------------- -------------------------
Fees to the Company's Auditor
for audit of the statutory financial statements 108 80
for other audit related services 28 26
---------------------------------------------------- ------------------------- -------------------------
136 106
The fees payable to the Company's Auditor include estimated
accruals proportioned across the year for the audit of the
statutory financial statements and the fees for other audit related
services were in relation to a review of the Interim Report.
10. Profit Share
Under the Investment Management Agreement, the Investment
Manager will not charge any base or other ongoing management fees,
but will receive from the Company, a Profit Share based on the
Company's income, as calculated for UK tax purposes and the
Company's Capital Account.
The Profit Share will be accrued quarterly and settled annually,
subject to an annual reconciliation in the last quarter of each
year, as disclosed on page 75 of the Company's Annual Report for
the year ended 31 December 2020. The Investment Manager will also
be entitled to reimbursement of reasonable expenses incurred by it
in the performance of its duties.
Amounts charged or accrued as Profit Share during the period
were $444k (30 June 2020: $nil).
11. Tax
As an investment trust, the Company is exempt from UK
corporation tax on capital gains arising on the disposal of shares.
Capital profits from its loan relationships or derivative contracts
are exempt from UK tax where the profits are accounted for through
the Capital column of the Statement of Comprehensive Income, in
accordance with the AIC SORP.
The Company has made a streaming election to HMRC in respect of
distributions and is entitled to deduct interest distributions paid
out of income profits arising from its loan relationships in
computing its UK corporation tax liability.
Therefore, no tax liability has been recognised in the financial
statements.
For the six months ended For the six months ended
30 June 2021 30 June 2020
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------- ---------- --------- ------ ---------- --------- ------
UK Corporation tax charge on profits for the period at - - - - - -
19% (2020: 19%)
For the six months ended For the six months ended
30 June 2021 30 June 2020
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------- ---------- --------- ------ ---------- --------- ------
Return on ordinary activities before taxation 3,492 (898) 2,594 3,641 (1,185) 2,456
Profit / (loss) on ordinary activities multiplied by
standard rate of corporation tax in the
UK of 19% (2020: 19%) 664 (171) 493 692 (225) 467
Effects of:
Non-taxable investment (losses) /
gains on investments - 171 171 - 225 225
Non-taxable dividend income (334) - (334) (276) - (276)
Tax deductible interest distributions (330) - (330) (416) - (416)
--------------------------------------------------------
Total tax charge - - - - - -
As at 30 June 2021 the Company had no unprovided deferred tax
assets or liabilities. At that date, based on current estimates and
including the accumulation of net allowable losses, the Company had
no unrelieved losses.
Deferred tax is not provided on capital gains and losses arising
on the revaluation or disposal of investments because the Company
meets (and intends to continue to meet for the foreseeable future)
the conditions for approval as an Investment Trust company.
12. Earnings per share and Net assets per share
Earnings per share
For the six months For the six months
ended ended
30 June 2021 30 June 2020
Revenue Capital Total Revenue Capital Total
----------------------------- ------------ -------- ----------- ------------------------ -------- -----------
Profit/(loss) attributable
to equity holders
of the Company -
$'000 3,492 (898) 2,594 3,641 (1,185) 2,456
Weighted average
number of Ordinary
Shares in issue 91,545,383 99,429,320
----------------------------- ------------ -------- ----------- ------------------------ -------- -----------
Basic and diluted
earnings per Share
from continuing operations
in the period (cents) 3.81 (0.98) 2.83 3.66 (1.19) 2.47
----------------------------- ------------ -------- ----------- ------------------------ -------- -----------
There are no dilutive shares in issue.
Net assets per share
30 June 2021 31 December 2020
---------------------------------- ------------- -----------------
Net assets - $'000 94,737 95,530
Number of Ordinary Shares issued 91,545,383 91,545,383
----------------------------------- ------------- -----------------
Net assets per Share (cents) 103.49 104.35
----------------------------------- ------------- -----------------
13. Distributions declared with respect to the period
Distribution per share Total distribution
Interim distributions paid during the period ended 30 June cents $'000
2021
------------------------------------------------------------- ------------------------------- -------------------
With respect to the period ended 31 December 2020 2.00 1,831
With respect to the quarter ended 31 March 2021 1.70 1,556
-------------------------------------------------------------- ------------------------------- -------------------
3.70 3,387
------------------------------------------------------------- ------------------------------- -------------------
Distribution per share Total distribution
Interim distributions declared after 30 June 2021 and not cents $'000
accrued in the period
------------------------------------------------------------- ------------------------------- -------------------
With respect to the quarter ended 30 June 2021 1.8 1,648
-------------------------------------------------------------- ------------------------------- -------------------
1.8 1,648
------------------------------------------------------------- ------------------------------- -------------------
On 11 August 2021, the Board approved a distribution of 1.8
cents per share with respect to the quarter ended 30 June 2021. The
record date for the distribution is 20 August 2021 and the payment
date is 24 September 2021.
14. Related party transactions
Directors
The Company has three non-executive Directors. Directors' fees
for the period ended 30 June 2021 amounted to $83k (30 June 2020:
$73k), of which $nil (31 December 2020: $nil) was outstanding at
period end. Amounts paid to Directors as reimbursement of travel
and other incidental expenses during the period amounted to $nil
(30 June 2020 $12k), of which $nil (31 December 2020: $nil) was
outstanding at period end.
SPVs
The Company has provided a loan to the US Corp. which accrues
interest at 9.27 percent. Any interest that is unable to be repaid
at each quarter end is capitalised and added to the loan balance.
Total interest in relation to the period was $2,760,000 (30 June
2020: $2,785,000) of which $2,672,000 (30 June 2020: $2,827,000)
was received in cash and $1,403,081 remained outstanding at the
period end and received on 23 July 2021 (31 December 2020:
$1,315,064 outstanding, received on 19 January 2021). The balance
on the loan investment at 30 June 2021 was $60,049,295 (31 December
2020: $60,049,295).
The Company's other investments in its SPVs are made via equity
shareholdings as disclosed in notes 4 and 5.
Investment Manager
The Investment Manager is an affiliate of Riverstone and
provides advice to the Company on the origination and completion of
new investments, the management of the portfolio and on
realisations, as well as on funding requirements, subject to Board
approval. For the provision of services under the Investment
Management Agreement, the Investment Manager earns a Profit Share,
as disclosed in note 10 and on page 75 of the Company's Annual
Report for the year ended 31 December 2020.
15. Subsequent events
There are no significant subsequent events.
Glossary of Capitalised Defined Terms
Administrator means Ocorian Administration (UK) Limited
AGM means Annual General Meeting
AIC means the Association of Investment Companies
AIC Code means the AIC Code of Corporate Governance
AIC SORP means the Statement of Recommended Practice issued by
the AIC for the Financial Statements of Investment Trust Companies
and Venture Capital Trusts, as amended from time to time
Annual Report means the Company's yearly report and financial
statements for the year ending 31 December 2020
Auditor means Ernst & Young LLP or EY
Board means the Directors of the Company
Borrower means entities operating in the energy sector that
issue loans, notes, bonds, and other debt instruments including
convertible debt.
CA means the Companies Act 2006 which forms the primary source
of UK company law
Capital Amount means the amount of gross proceeds of the IPO,
plus the net proceeds of any future issues of Ordinary Shares, less
any amounts expended by the Company on share repurchases and
redemptions or, following a Realisation Election, attributable to
Realisation Shares.
Company or RCOI means Riverstone Credit Opportunities Income
Plc
D&C means drilling and completion
Directors means the Directors of the Company
Distributable Income means the Company's income, as calculated
for UK tax purposes
DTR means the Disclosure Guidance and Transparency Rules
sourcebook issued by the Financial Conduct Authority
E&P means exploration and production
FCA means the UK Financial Conduct Authority (or its successor
bodies)
IFRS means the International Financial Reporting Standards,
being the principles-based accounting standards, interpretations
and the framework by that name issued by the International
Accounting Standards Board, to the extent they have been adopted by
the UK
Investment Management Agreement means the Investment Management
Agreement entered into between the Investment Manager and the
Company
Investment Manager means Riverstone Investment Group LLC
IPEV Valuation Guidelines means the International Private Equity
and Venture Capital Valuation Guidelines
Listing Rules means the listing rules made by the UK Listing
Authority under Section 73A of the Financial Services and Markets
Act 2000
London Stock Exchange or LSE means London Stock Exchange plc
LTV means loan to value ratio
Main Market means the main market of the London Stock
Exchange
MOIC means multiple on invested capital
NAV or Net Asset Value means the value of the assets of the
Company less its liabilities as calculated in accordance with the
Company's valuation policy and expressed in US dollars;
Ordinary Shares means ordinary shares of $0.01 in the capital of
the Company issued and designated as "Ordinary Shares" and having
the rights, restrictions and entitlements set out in the Company's
articles of incorporation
Other Riverstone Funds means other Riverstone-sponsored,
controlled or managed entities, which are or may in the future be
managed or advised by the Investment Manager or one or more of its
affiliates, excluding the SPV
PIK means payment in kind
Profit Share means the payments to which the Investment Manager
is entitled in the circumstances and as described in the notes to
the financial statements
RBL means reserved base loan
RCP means Riverstone Credit Partners
Realisation Shares means realisation shares of US$0.01 in the
capital of the Company, as defined in the prospectus
SPV means any intermediate holding or investing entities that
the Company may establish from time to time for the purposes of
efficient portfolio management and to assist with tax planning
generally and any subsidiary undertaking of the Company from time
to time
Specialist Fund Segment means the Specialist Fund Segment of the
London Stock Exchange's Main Market
UK or United Kingdom means the United Kingdom of Great Britain
and Northern Ireland
UK Code means the UK Corporate Governance Code issued by the
FRC
US or United States means the United States of America, its
territories and possessions, any state of the United States and the
District of Columbia
US Corp. means Riverstone International Credit Corp.
WTI means West Texas Intermediate
Directors and General Information
Directors
Reuben Jeffery, III (Chairman) (appointed 2 April 2019)
Emma Davies (Audit and Risk Committee Chair) (appointed 2
April 2019)
Edward Cumming-Bruce (Nomination Committee Chair) (appointed
2 April 2019)
all independent and of the registered office below
Registered Office Website: www.riverstonecoi.com
27-28 Eastcastle Street ISIN GB00BJHPS390
London Ticker RCOI
W1W 8DH Sedol BJHPS39
Registered Company Number
11874946
Investment Manager Registrar
Riverstone Investment Group LLC Link Asset Services
c/o The Corporation Trust Company The Registry
Corporation Trust Center 34 Beckenham Road
1209 Orange Street Beckenham
Wilmington Kent
Delaware 19801 BR3 4TU
Company Secretary and Administrator Sole Bookrunner
Ocorian Administration (UK) Limited J.P. Morgan Securities plc
27/28 Eastcastle Street 25 Bank Street
London Canary Wharf
W1W 8DH London
E14 5JP
Independent Auditor Receiving Agent
Ernst & Young LLP Link Asset Services
25 Churchill Place Corporate Actions
London The Registry
E14 5EY 34 Beckenham Road
Beckenham
Kent
Legal Adviser to the Company BR3 4TU
Hogan Lovells LLP
Atlantic House
50 Holborn Viaduct
London
EC1A 2FG
Principal Banker and Custodian
J.P. Morgan Chase Bank, N.A.
270 Park Avenue
New York
NY 10017-2014
Cautionary Statement
The Chairman's Statement and Investment Manager's Report have
been prepared solely to provide additional information for
shareholders to assess the Company's strategies and the potential
for those strategies to succeed. These should not be relied on by
any other party or for any other purpose.
The Chairman's Statement and Investment Manager's Report may
include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can
be identified by the use of forward-looking terminology, including
the terms "believes", "estimates", "anticipates", "expects",
"intends", "may", "will" or "should" or, in each case, their
negative or other variations or comparable terminology.
These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this document and include statements regarding the intentions,
beliefs or current expectations of the Directors and the Investment
Manager, concerning, amongst other things, the investment
objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity,
prospects, and distribution policy of the Company and the markets
in which it invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and
the development of its financing strategies may differ materially
from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the Directors
and the Investment Manager expressly disclaim any obligations to
update or revise any forward-looking statement contained herein to
reflect any change in expectations with regard thereto or any
change in events, conditions or circumstances on which any
statement is based.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
IR FLFLDTRILLIL
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