TIDMVTA 
 
 
   Volta Finance Limited (VTA / VTAS) -- Intra-month Trading Update 
 
   NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR 
INTO THE UNITED STATES 
 
   ***** 
 
   Guernsey, 24 March 2020 
 
   Intra-month Update on the impact of COVID-19 and market movements on 
Volta Finance. 
 
   Effective risk management 
 
   For many years, we have followed restrictions and guidelines to avoid 
adding further correlated risk to those inherent in the assets held by 
Volta. As a result, the use of leverage has always been limited. 
 
   Volta had in place a repurchase agreement that permitted leveraging our 
CLO BB debt bucket. This repo was $50m one year ago, reduced to $40m in 
March 2019, reduced again to $35m in December 2019.  It was further 
reduced to $30m early in March and then to $20m, ahead of the greatest 
falls in asset prices. 
 
   Based on the current levels of uncertainty, we sold last week two 
positions (2 CLO BB tranches for $8m principal have been sold) to 
increase our cash position so that we can terminate the repurchase 
agreement whenever we wish. 
 
   Thanks to sales in January and February, Volta held a cash position of 
close to EUR29m by the ed of February, while the repurchase agreement 
represented a liability of EUR32m. We subsequently had to face few 
margin calls in relation with our currency hedging so that it was 
necessary to sell some positions to restore our cash level. 
 
   Since the 2008 Great Financial Crisis we have limited the exposure to 
margin calls that might come from hedging non-Euro currency risk. 
Structurally, we have been selling forward USD against Euro to limit 
Volta's USD exposure despite having circa 60% of Volta assets in USD. We 
took the opportunity early in March, given the USD weakness, to purchase 
forward $30m. Last week with the strong appreciation of the USD against 
Euro we decided to purchase forward $52m more so that Volta now has only 
very limited exposure from margin calls in relation with its currency 
hedging. 
 
   As a result, Volta's USD assets are largely unhedged and USD exposure is 
close to 50%. 
 
   Very limited liquidity risk 
 
   Having put aside the cash needed to close the repurchase agreement and 
having a very limited amounts of currency hedging in place, Volta has 
taken actions to minimize liquidity risk to almost zero. 
 
   Volta has only 2 assets with commitments, a CMV and a CLO warehouse. The 
remaining commitment on the CMV is very limited and can only be called 
to purchase a newly priced CLO Equity position, which is highly unlikely 
in the current environment. In relation to the warehouse, we instructed 
the CLO manager to stop any purchases of loans which will eliminate 
further short-term funding requirements. 
 
   At the time of writing Volta's cash is close to EUR3m in excess of the 
amount ($20m) needed to close the repo. 
 
   Mark-to-market Impact 
 
   The mark-to-market impact of the COVID-19 crisis is large. Prices, as 
usual in such circumstances, are mixing 3 forces: fundamentals, 
technical effects and sentiment. At this point it is too early to 
estimate the fundamental impacts and markets are driven by technicals 
and sentiment in a phase in which indiscriminate selling is at the 
forefront. 
 
   At the time of writing, we estimate that Volta's NAV is near EUR4.60 per 
share, a likely drop in NAV in the region of 35%.  This performance is 
highly volatile and may change materially (upwards or downwards) by the 
end of March. 
 
   Mid to long term performance 
 
   As outlined in the latest monthly report, because the underlying loans 
in CLOs are representative of the overall economy, when there is a risk 
we might suffer some losses (due to loan defaults or to a very large 
number of downgrades), governments and central banks intend to mitigate 
this risk because of the macro impact associated with that risk. It is 
clearly not an insurance that losses will always be avoided but it is a 
mitigant regarding the risk associated with Volta investments. 
 
   Most governments in the countries to which Volta is exposed are, almost 
every day, taking steps to support the general economy and corporates to 
avoid massive default and losses. Due to that and due to the very 
uncertainty around the length and the consequences of the COVID-19 
crisis it is very hard to make any predictions regarding likely 
aggregate default rates. 
 
   Prices at which CLO BB debt tranches and CLO Equity tranches are trading 
at this point in time are roughly in line with a scenario that 
incorporates additional defaults in the area of 10%, in relation with 
the COVID-19, in excess of the standard steady-state default assumption 
of 2% defaults. 
 
   At this point, considering this scenario as plausible is really a 
question of belief. Governments, almost in all developed countries claim 
that they will do almost whatever it takes to limit the impact of such 
crisis to the overall economy. Historically speaking a 10% default 
uplift (like in 2009) is in line with an increase of 4 to 6% in 
unemployment rate. 
 
   On a short-term basis, we expect all Volta assets to pay their cashflows 
in April, allowing us to pay the end of April dividend and seize 
opportunities created by the current dislocations. 
 
   Impact on AXA IM and actions taken by the manager 
 
   The first thing to say is that, we have activated our BCP plan and all 
AXA IM people involved in the management of Volta's assets are working 
effectively from home. We had no disruption in our ability to manage our 
assets, all tools/systems are available and working well.  None of the 
designated portfolio management team has contracted the virus. 
 
   Our first action was to take care of the liquidity risk by closing the 
repo and reducing FX hedging. 
 
   We are also having regular calls with the underlying CLO managers. The 
main conclusion is that US CLO managers are basically able to 
rotate/reposition portfolios although it is more difficult for European 
managers due to lower liquidity of the European loan market (one of the 
reasons Volta has no exposure to EUR CLO debt). 
 
   For the CLO market, trading of the most senior portion (CLO tranches 
rated AAA/AA/A) is very active, sometimes with even higher volumes than 
in normal market conditions (for AAA). For CLO BB/BB/Equity tranches 
there are some trades but with very wide bid/ask margin. 
 
   As always in such type of crisis, when the market is driven by liquidity 
needs, there are plenty of opportunities. Our first action was to secure 
the situation of Volta by avoiding liquidity issues, we can now 
concentrate on reshaping the portfolio for the future to capitalize on 
those opportunities as they arise. 
 
   CONTACTS 
 
   For the Investment Manager 
 
   AXA Investment Managers Paris 
 
   Serge Demay 
 
   https://www.globenewswire.com/Tracker?data=8l4nV4nogSeiDEkXUTekipvSmv7mDgizKsxZ7dSl-B-T7asp5_GgudfwviDMKVBb-Nblv50cYxdHT2TjZQ-kO1y7qMz-79mQINrFg0qr0MQ= 
serge.demay@axa-im.com 
 
   +33 (0) 1 44 45 84 47 
 
   Company Secretary and Administrator 
 
   BNP Paribas Securities Services S.C.A, Guernsey Branch 
 
   https://www.globenewswire.com/Tracker?data=em8QD0HpbzOPEqMybGigsusOCXNO_rlM9oB3SnMhuXCU0dTjhU1jJEVnLbn8ROqkt3ILq7IuQr6cjfwfylmeizxl7bIKU5nb9Ty2CjOWxdJPD39HVNL_AmRzD6zywZ58kD9cZUUqOufiYnmIyHYxAbwRgLEnt8FEp8UcD3uuPp9kfhtWqUliyfZvRTkI_U68Er1rdSDoT7yCVwNK2fWAZJrWX_nRyQay3LBtDVYmBTlnb_kACcWkkI6YkUyNYetd9RP5t1w1jtCPWNu8-1e9ROdBLqLCX-QNwWxfOdgf-W5zo6q4U0ofXhcbY3xi7oVlKH-OctXj3XoINKozdPpyRQvhmIdPhnqOGybmo4YkZxG7MbITDrJx7q5Oq6s106G9 
guernsey.bp2s.volta.cosec@bnpparibas.com 
 
   +44 (0) 1481 750 853 
 
   Corporate Broker 
 
   Cenkos Securities plc 
 
   Andrew Worne 
 
   Daniel Balabanoff 
 
   Rob 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 MANAGERS 
 
   AXA 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 EUR750 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. 
 
   ***** 
 
 
 
 
 
 

(END) Dow Jones Newswires

March 24, 2020 05:23 ET (09:23 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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