Volta Finance deliver another month of strong performance

AXA IM has published the Volta Finance Ltd (LON:VTA) monthly report for June.

PERFORMANCE and PORTFOLIO ACTIVITY

June delivered another month of strong performance after May and April, helping further to recover the mark-to-market impact of the COVID-19 pandemic. Accounting for the €0.10 per share dividend paid 16th of June, Volta’s NAV* total return performance in June was +6.9%.

With the increased confidence around cash flows from underlying assets over the medium term, not only was the Company able to restore the dividend ordinarily payable in April but has further declared a dividend of €0.11 per share payable on 29th July 2020, which is a return to the Company’s original payment timetable.

The monthly performances** were, in local currency: +0.8% for Bank Balance Sheet transactions, +9.5% for CLO Equity tranches; +13.0% for CLO Debt; -0.6% for Cash Corporate Credit deals (this bucket compromises of funds that have a one-month delay in publishing their NAV); and -6.2% for ABS.

At the end of the month, the average price for USD CLO debt was 71.8%. All the company’s USD CLO debt positions are receiving their coupons in full, none of them has been downgraded and 10 of them are “Watch Neg” either with Moody’s or S&P (none with Fitch). We continue to be highly confident that all these positions will go through the current crisis without any loss and continue to think that the latest prices do not reflect the embedded value of these positions.

Regarding our CLO Equity positions, the July cash flow payments are due over the coming weeks. Of all our positions, only one is expected to suffer a diversion of cash flow in July. It is a position from 2013 that has already significantly amortized. In normal market conditions, this position would have been called as the arbitrage in favor of the equity is less and less attractive now that all the original AAA debt tranche has been prepaid.

Of the other CLO equity positions, 3 out of 46 came close to breaching a reinvestment test but all three have now seen improvement in May and June and now have larger cushions.

So far, the consequences of the COVID-19 crisis are being smoothed through time as the increase in default rates is very slow. This means that CLO managers have more time to re-arrange portfolios to avoid diversion of cash flows and generate added value.

There has been widespread comment that private equity funds raised billions of new capital in recent months. For Loans and CLOs, it means that we should expect an acceleration of M&A activity over the coming months. Some loans, even some trading at a discount, will be called at par and that will permit an acceleration in reinvestment opportunities for CLO managers. As a reminder, in 2009 even though default rates peaked near 10%, the prepayment rate in the US loan market was close to 10% rising to
nearly 20% in 2010.

This comment is not to suggest that the future is rosy but it might be far less dark than it appeared just a few months ago and less gloomy than current CLO pricing suggests.

As usual, June was a quiet month in terms of interest and cash flows received with only the equivalent of €0.6m received. On a six-month basis, we are still close to Volta’s historical high with the equivalent of €21.5m received as at the end of June.

In June Volta invested €4.1m through one newly issued EUR BB CLO tranche and additional capital was called by the existing CMV.

As at the end of June 2020, Volta’s NAV was €214.9m or €5.87 per share.
The month-end cash position was €4.3m. Considering the payment of the dividend in July and the necessity to maintain a working capital balance to cover potential margin calls from currency hedging positions and further capital calls from pre-existing investments, Volta was almost fully invested as of the end of June. With the cash flows due in July, Volta will have again some room for investments.

*It should be noted that approximately 11.4% of Volta’s GAV comprises investments for which the relevant NAVs as at the monthend 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 5.7% as at 31 May 2020, 5.7% 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 crosscurrency rates. Nevertheless, some residual currency effects could impact the aggregate value of the portfolio when aggregating each bucket.

Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Volta Finance

More articles like this

Volta Finance

Mortgage-Backed Securities and Collateralized Mortgage Obligations

Mortgage-backed securities (MBS) are debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property. Mortgage loans are purchased from banks, mortgage companies, and other originators and then assembled into

Volta Finance

CLO prices edge higher

Prices for the highest-rated bonds backed by leveraged loans are creeping higher in trading markets, signaling that at least some investors are snatching up securities they see as cheap, and the debt may rally further.   Collateralized loan

Volta Finance

How do collateralized loan obligations work?

Understanding CLO Collateral: Leveraged Loans A portfolio of loans act as the collateral supporting a CLO. The proceeds of these loans are typically used by non-investment grade borrowers to support a range of activities, including mergers and acquisitions,

Volta Finance

Demystifying collateralized loan obligations

What Is a Collateralized Loan Obligation? A collateralized loan obligation (CLO) is a portfolio of predominantly senior secured loans that is securitized and actively managed. Each CLO issues a series of floating rate bonds, along with a first-loss equity tranche.

Volta Finance

Collateralised loan obligations explained

Against a backdrop of geopolitical and economic volatility, collateralised loan obligations (CLOs) continue to navigate uncertainty and hold net asset values. Collateralised loan obligations (CLOs) sit at the pinnacle of various financial processes, in terms of both their

Volta Finance

What is the difference between a CDO and a CLO?

Many who followed the 2008 financial crisis closely would know about CDO (collateralized debt obligations). They were a major reason triggering the financial crises. There is another similar term, CLO (collateralized loan obligations), and many people do get confused

Volta Finance

CLOs: Uncover opportunity beyond AAAs

Collateralized loan obligations (CLOs), which are securitized pools of leveraged loans, may provide several attractive benefits within an income-oriented portfolio, including enhanced yields, structural risk protections and diversification. We believe CLOs are particularly attractive in today’s rising rate environment. They

Volta Finance

Mortgage Investment

Mortgage Investment means a direct or indirect interest in a tax-exempt mortgage revenue Bond secured by a Property, including residual interests in one or more trusts which hold tax-exempt mortgage revenue Bonds, and any other loan (whether or not

Volta Finance

Collateralized Loan Obligations (CLO)

Collateralized loan obligations (CLOs) are loans that are repackaged and bought by investors. These securities are backed by a pool of loans comparable to collateralized mortgage obligations (CMOs). With CLOs, the underlying debt is loans, as opposed to

Volta Finance

The U.S. leveraged loan market

Broadly syndicated loans to non-investment grade U.S. Corporations (“leveraged loans”) are widely misunderstood. A number of commentators imply that leveraged loans are shadowy corporate equivalents to pre-crisis sub-prime mortgages. We do not believe this to be true and

Volta Finance

CLOs: Lower duration risk and pick up yield

With higher relative yields, a history of strong risk-adjusted returns, and protection against rising rates, there is a strong case for a strategic allocation to collateralized loan obligations (CLOs) within an income portfolio. In the upcoming webcast, CLOs: Lower

Volta Finance

A look at leveraged loans and CLOs

Chris Galipeau, Senior Market Strategist of Putnam’s Capital Market Strategies group, recently spoke with Scott M. D’Orsi, CFA, a Portfolio Manager in Putnam’s Fixed Income group on the Active Insights podcast. Scott has been in the investment industry

Volta Finance

Why invest in CLOs?

CLOs have historically offered a compelling combination of above-average yield, strong risk profiles, and the potential for strong upside appreciation. Over the long term, collateralized loan obligation (CLO) tranches have historically performed well relative to other corporate debt categories, including

No more posts to show