Volta Finance Limited : Net Asset Value(s) as at 31 August 2020
Volta Finance Limited (VTA / VTAS) –
August 2020 monthly report
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE
OR PART, IN OR INTO THE UNITED STATES
***** Guernsey, 10 September 2020
AXA IM has published the Volta Finance Limited
(the “Company” or “Volta Finance” or “Volta”) monthly report for
August. 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 August, the monthly performance of Volta is
+1.9%. The performance may have been even higher but for USD
weakness which had a negative impact close to -0.6%. The USD
depreciated against EUR by 1.3% during the month while, after
adjusting for hedging, Volta has a USD exposure of approximately
47%.
The monthly asset class performances** were in
local currency: +0.3% for Bank Balance Sheet transactions, +3.5%
for CLO Equity tranches; +2.9% 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 +0.3% for ABS.
Now that all Q3 payments to our CLO equity
positions have been made, we can confirm that all Volta’s equity
positions received their coupon payments with one minor exception –
a very old position that breached its Interest Diversion test now
that all the AAA and most of the AA tranches amortized.
For comparison, Wells Fargo reported*** that 24%
of USD CLOs were suffering a breach of the Interest Diversion test
at the end of July, leading to a diversion of cash flow from the
equity position.
Equally encouraging, the August trustee reports
show that for most of our positions, CLO managers were able to
improve cushions on reinvestment tests and OC tests. We expect all
our positions to receive their full payment in October (except for
the very old one noted above). Payments in October are expected to
be higher than in July as the technical reductions that led to
lower cash flows in Q3 will partially reverse as there will be no
further negative impact from interest rate declines and we will
receive full payments on the European loans that elected in Q2 to
switch to a 6-month Euribor basis.
In August, Volta received the equivalent of €1m
in terms of Interest or Coupons from its assets. On a 6-month
rolling basis, Volta received the equivalent of €17.0m as at the
end of August. It is still representing a 16% annualised yield
based on the end of August NAV.
Looking further into the future, our view is
still that although default rates in both loan markets (US and
Europe) are expected to increase, we expect them to increase
slowly. In such a context, full payment of cash flows to our CLO
Equity positions is expected to stay the norm. Although the COVID
crisis had an economic impact that is roughly twice more severe
than the consequences of the Sub-prime crisis and the GFC, the
impact on CLO equity and CLO debt is expected to be much more
reduced, thanks to a delay in default occurrences.
We observed, in August, a significant tightening
in USD CLO senior tranche spreads (Europe was lagging). Our view is
that it was the first sign of what we expect on a more long term
basis: CLO senior tranches are gaining traction amongst investors
and even if it is too early to figure out when it might happen, we
are more and more confident that at some point in time we might
have the opportunity to refinance or reset some of Volta positions
to benefit from a better arbitrage in favor of our CLO equity
positions. USD CLO AAA tranches were issued at Libor+130/135bps
spread before the COVID crisis and we are now almost back to these
levels.
Regarding the CLO warehouse held by Volta, we
entered discussions with the arranging bank to transform this
position into an actual CLO, targeting pricing by the end of
September.
As at the end of August 2020, Volta’s NAV was
€212.1m or €5.80 per share.
The month-end available cash position was €8.9m
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 4.6% as at 31
July 2020 and 6.0% as at 30 June 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.
*** ”CLO: This Week Down in the OC” – Wells
Fargo Research, August 2020
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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