Volta Finance Limited : Net Asset Value as at 31 July 2020
Volta Finance Limited (VTA / VTAS) – July
2020 monthly report
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE
OR PART, IN OR INTO THE UNITED STATES
***** Guernsey, 12 August 2020
AXA IM has published the Volta Finance Limited
(the “Company” or “Volta Finance” or “Volta”) monthly report for
July. The full report is attached to this release and will be
available on Volta’s website shortly (www.voltafinance.com).
PERFORMANCE and PORTFOLIO
ACTIVITY
In July the monthly performance, after
considering the 11 cents per share dividend paid 29th of July, is
negative at -1.2%. Despite a flat performance at the asset class
level, USD weakness had a negative impact as USD depreciated
against EUR by 4.6% during the month while, after adjusting for
hedging, Volta has a USD exposure close to 45%.
The monthly asset class performances** were, in
local currency: -0.3% for Bank Balance Sheet transactions, +1.1%
for CLO Equity tranches; -0.5% for CLO Debt; +5.9% for Cash
Corporate Credit deals (this bucket comprises funds that have a
one-month delay in publishing their NAV); and +1.7% for ABS.
In July, like the first month of every quarter,
most of the CLO positions received their coupon payments. However,
according to WellsFargo research, 24% of USD CLOs were suffering a
breach of the Interest Diversion test as at the end of the month.
Only one USD CLO position in Volta did not receive any cash flows
(due to an IC test (Interest Coverage) breach). This position is a
2013 vintage position, the full AAA tranche has been amortized and
the AA tranche will finish being amortized in October so that it is
almost normal that cash flows from this position are close to zero.
In normal market conditions, this position would have been called.
We are working with the CLO manager to find a way/the timing for a
partial call.
Except for this position, all CLO Equity and CLO
debt held by Volta paid their coupons. However, it should be noted
that CLO Equity payments were on average 30% lower than in April
due to two technical effects: firstly, lower short-term rates
in the US, an impact that was beginning to be seen in January and
April. If and when rates go up, we will benefit from the
opposite technical effect. Secondly, since April, roughly 40%
of the European loans elected to pay their coupon on a 6-month
basis instead of the classic 3-month basis. This effect will
unwind with higher cash flows in October.
As a result, in July, Volta received “only” the
equivalent of €3.9m from its CLO Equity positions, relative to
€5.7m in April. The decline is almost evenly split between the two
technical effects so that October cash flows are expected to be
roughly €1m higher. On a 6-month basis, Volta received the
equivalent of €17.7m as at the end of July. Nonetheless, this
represents a solid 17% annualised yield based on the end of July
NAV, despite the previously mentioned technical impacts.
On a longer-term basis, CLO managers are, on
average, improving CLO portfolios to limit the impact of the
COVID-19 pandemic. According to Nomura research, in April, 19% of
USD CLOs were breaching their BB OC test (the Overcollateralization
test that protects the BB tranche), in July this figure was down to
11% although USD loans continued to be downgraded and some defaults
started to materialize. None of the USD CLO positions in Volta
suffered a diversion of cash flow due to a BB OC test breach in
April nor in July.
We reiterate our view that going forward, as
long as there is no second wave requiring significant lockdowns of
the economy, full cash flow payments should be the norm for Volta’s
portfolio as CLO managers are regaining some cushion on the OC
tests.
On the most senior CLO debt tranches, spreads
continued to tighten so that we can envisage transforming the CLO
warehouse presently held by Volta into an actual CLO. Probably in
September or October.
In July Volta invested €2.2m through one newly
issued EUR BB CLO tranche and additional capital was called by the
existing CMV and the Warehouse.
As at the end of July 2020, after the 11 cents
per share dividend payment, Volta’s NAV was €208.2m or €5.69 per
share.
The month-end available cash position was €8.7m
leaving some room for investments.
*It should be noted that approximately 10.6% of
Volta’s GAV comprises investments for which the relevant NAVs as at
the month-end date are normally available only after Volta’s NAV
has already been published. Volta’s policy is to publish its NAV on
as timely a basis as possible to provide shareholders with Volta’s
appropriately up-to-date NAV information. Consequently, such
investments are valued using the most recently available NAV for
each fund or quoted price for such subordinated note. The most
recently available fund NAV or quoted price was for 9.0% as at 30
June 2020 and 1.6% as at 31 March 2020.
** “performances” of asset classes are
calculated as the Dietz-performance of the assets in each bucket,
taking into account the Mark-to-Market of the assets at period
ends, payments received from the assets over the period, and
ignoring changes in cross-currency rates. Nevertheless, some
residual currency effects could impact the aggregate value of the
portfolio when aggregating each bucket.
CONTACTS
For the Investment ManagerAXA
Investment Managers ParisSerge Demayserge.demay@axa-im.com+33 (0) 1
44 45 84 47
Company Secretary and
AdministratorBNP Paribas Securities Services S.C.A,
Guernsey Branch guernsey.bp2s.volta.cosec@bnpparibas.com +44
(0) 1481 750 853
Corporate Broker Cenkos Securities plc Andrew
WorneDaniel BalabanoffRob Naylor+44 (0) 20 7397 8900
***** ABOUT VOLTA FINANCE
LIMITED
Volta Finance Limited is incorporated in
Guernsey under The Companies (Guernsey) Law, 2008 (as amended) and
listed on Euronext Amsterdam and the London Stock Exchange's Main
Market for listed securities. Volta’s home member state for the
purposes of the EU Transparency Directive is the Netherlands. As
such, Volta is subject to regulation and supervision by the AFM,
being the regulator for financial markets in the Netherlands.
Volta’s investment objectives are to preserve
capital across the credit cycle and to provide a stable stream of
income to its shareholders through dividends. Volta seeks to attain
its investment objectives predominantly through diversified
investments in structured finance assets. The assets that the
Company may invest in either directly or indirectly include, but
are not limited to: corporate credits; sovereign and
quasi-sovereign debt; residential mortgage loans; and, automobile
loans. The Company’s approach to investment is through vehicles and
arrangements that essentially provide leveraged exposure to
portfolios of such underlying assets. The Company has appointed AXA
Investment Managers Paris an investment management company with a
division specialised in structured credit, for the investment
management of all its assets.
*****
ABOUT AXA INVESTMENT
MANAGERSAXA Investment Managers (AXA IM) is a multi-expert
asset management company within the AXA Group, a global leader in
financial protection and wealth management. AXA IM is one of the
largest European-based asset managers with 753 investment
professionals and €801 billion in assets under management as of the
end of April 2020.
*****
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.
*****
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