VTAS Volta Finance Limited

 
TIDMVTA 
 
 
   Volta Finance Limited (VTA / VTAS) -- April 2020 monthly report 
 
   NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR 
INTO THE UNITED STATES 
 
   ***** 
 
   Guernsey, 14 May 2020 
 
   AXA IM has published the Volta Finance Limited (the "Company" or "Volta 
Finance" or "Volta") monthly report for April. The full report is 
attached to this release and will be available on Volta's website 
shortly ( 
https://www.globenewswire.com/Tracker?data=cVI5yFJ-T5lsElcOo9jB0t4ny_bTV14BprMRKNpi_9MoRx7pej0kGoGxDL7ynIYMfgBenBC4MPM83CKdSyKlBOprnr8TgMOKZLnYqr3u-Ic= 
www.voltafinance.com). 
 
   PERFORMANCE and PORTFOLIO ACTIVITY 
 
   In April, after the significant mark to market impact of the COVID-19 
crisis in March, we had a modest rebound in terms of valuation. Volta's 
NAV* total return performance in April was +5.7%. 
 
   The monthly performances** were, in local currency: +0.3% for Bank 
Balance Sheet transactions, +10.0% for CLO Equity tranches; +12.1% for 
CLO Debt; -9,9% for Cash Corporate Credit deals (this bucket compromises 
of funds that have one-month delay in publishing their NAV); and +0.6% 
for ABS. 
 
   At the end of the month, the average price for CLO Equity tranches was 
43.0% and 33.4% respectively for USD and Euro positions, 59.7% for USD 
CLO debt (no Euro CLO debt positions were held by Volta). 
 
   These general market prices mark downs incorporate the expectation that 
a number of CLO Equity tranches will start suffering partial diversion 
of cash flows as early as in July, the next quarter payment dates for 
most positions, with further deterioration in October due to the 
increasing excess CCC bucket in CLOs. For Volta's positions specifically 
we have identified, at present, only one position that might suffer a 
partial diversion of cash flow in July. If this remains the case, 
Volta's positions should significantly outperform the wider market for 
July cash flow receipts. Rating agencies recently confirmed that they 
have already reviewed their ratings for 80 to 90% of loans and certainly 
the pace of loan downgrades has significantly reduced during the recent 
weeks, lowering the probability that Volta will suffer additional 
unexpected diversion of cash flows in July. 
 
   Now that April trustee reports have been collected, it appears that 20% 
of the USD CLO Equity universe suffered a partial or full diversion of 
cash flows in April. None of Volta positions saw any diversion and cash 
flows were received in full on all positions. The average CCC/Caa3 
bucket is now 8% for S&P and 6% for Moody's with levels of around 3% 
less for EUR deals. That said, even though European CLO Equity 
outperformed USD CLO Equity in April, the average price for EUR CLO 
Equity positions is still far below that for USD deals. We believe that 
this reflects the lower liquidity and lower risk appetite in Europe than 
in the US. 
 
   As mentioned in our interim communication of 24(th) March, our first 
priority was to secure Volta's liquidity and solvency. Whilst, as at the 
end of April the repurchase agreement was still in place for $10m, this 
has now been repaid. Given the modest level of commitments to existing 
positions and the very low level of currency hedging still in place, the 
liquidity demands on the Company can now be met comfortably from 
expected cash flows.  Overall in April, Volta received EUR7.9m from 
coupons and interest, with the decline accounted for solely by falling 
short term interest rates. 
 
   Therefore, the Company has been able to declare a dividend.  At the end 
of March, ratings agencies were downgrading loans at an unprecedented 
pace and considerable uncertainty existed for the Company regarding cash 
flows and the economic outlook. Now that the full April cash flows have 
been received and the acute liquidity and volatility conditions seen in 
late March have eased, the Company has declared a dividend of EUR0.10 
per share, payable 16(th) of June, which corresponds to roughly 8% of 
the latest NAV. The balance of net cash flows received, other than a 
modest working capital balance, will be re-invested. 
 
   As at the end of April 2020, Volta's NAV was EUR195,7m or EUR5,35 per 
share (including EUR20,4m in cash). The GAV stood at EUR207,1m with 
nearly EUR11,4m liabilities. 
 
   Regarding the medium to long term performance outlook, our view is that 
rating agencies, will continue to downgrade loans through to the end of 
2020, even if the pace of downgrades reduces somewhat.  Therefore, the 
CCC bucket will continue to increase. In April defaults began to pick up 
in both the US and European credit markets. Including loans and bonds, 
Moody's recorded 35 defaults in the US YTD of which 15 were in April; in 
Europe there have been 7 YTD of which 5 were in April.  We expect this 
trend to continue. Rating agencies are forecasting default rates to 
reach between 5 and 10% for the US loan market in 2020 but recognize, as 
we have noted previously, that defaults might be spread through time. 
 
   This scenario means that we might find in the USD CLO market (situation 
is expected to be better in Europe), that many CLOs are near breaching 
either the Reinvestment test (when breached, 50% of the amount that 
should have been paid to the Equity is diverted to be reinvested) or the 
most Junior OC test (when breached, 100% of the amount that should have 
been paid to the Equity is diverted to reimburse the most senior debt 
tranche) while strongly benefiting from loan reinvestment at discount 
(before the OC test is breached or once it is cured). 
 
   Typically, a CLO suffering, through a given year, 3% default (with 50% 
recovery) but being able to reinvest 15% of the portfolio in loans at an 
average 90% purchase price, might not see any deterioration of its tests 
(all other things being equal). Although it is speculative, it seems 
plausible that the most active and solid CLO managers might navigate 
through this environment (defaults spread through years with loans 
trading at discount as well for years) without causing too much pain to 
CLO Equity investors. For the moment and for the foreseeable future, 
with the positions we hold in Volta performing better than the broad 
market, we might be able to follow this hypothetical path. 
 
   *It should be noted that approximately 19.5% of Volta's GAV comprises 
investments for which the relevant NAVs as at the month-end date are 
normally available only after Volta's NAV has already been published. 
Volta's policy is to publish its own NAV on as timely a basis as 
possible in order to provide shareholders with Volta's appropriately 
up-to-date NAV information. Consequently, such investments are valued 
using the most recently available NAV for each fund or quoted price for 
such subordinated note. The most recently available fund NAV or quoted 
price was for 13.0% as at 31 March 2020, 4.2% as at 31 December 2019 and 
2.2% as at 30 September 2019. 
 
   ** "performances" of asset classes are calculated as the 
Dietz-performance of the assets in each bucket, taking into account the 
Mark-to-Market of the assets at period ends, payments received from the 
assets over the period, and ignoring changes in cross currency rates. 
Nevertheless, some residual currency effects could impact the aggregate 
value of the portfolio when aggregating each bucket. 
 
   CONTACTS 
 
   For the Investment Manager 
 
   AXA Investment Managers Paris 
 
   Serge Demay 
 
   https://www.globenewswire.com/Tracker?data=elsPhZTcYnj6vTdGSHlNWyY0seH77EUT26dko5CDlOuVD-ZH5z6l9j4_bMUNW4BnhgnoXshL5gNQK4yRs8Rjq1MvmvHgV1Bd7JinpEIjldA= 
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=LYVFfH1alq6xQde4l_JjNkY4f2Innri8onHfWjOoctxjyJT8PjFQZhvPfHb6nWNJUJpAP70p1RKVdwX34BVj92hwkf74Vf5ki0pidWAkX3YwNTJQdjXZdtGq5Vzc7J5W0mzsmzQqk7fzNtqZSM-Ivn6olureO5xGMZV4mvzUpN7kQ6yGDi8yeTd6BJtjjt_uXIwuQZsXibhBEwqx1qPfZd230oR-UIUfDkrh5Fwx8JHxFl-inYE9ZEdEaUze0nEjtoc0H2ewJyOLgWaesSaTaLP8Q7ybcavLX3oDV6gXvPIWidi3XUcgjgCWZUOygRwQH_Se4z1AvFVk4Gllhvf8t_k8-IUUKCRR0qWHa_iezbpqZiILYVz7mMvxV3Liyah8 
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 753 investment professionals and EUR801 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. 
 
   ***** 
 
 
 
   Attachment 
 
 
   -- Volta - Monthly Report - April 2020 
      https://ml-eu.globenewswire.com/Resource/Download/f88eb5aa-4d41-4d53-aed3-6455564e8a21 
 
 
 
 
 
 
 

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