Guernsey, 21 October 2009 - Volta Finance Limited (the "Company" or
"Volta Finance" or "Volta") has published its September monthly
report. The full report is attached to this release and is available
on Volta Finance Limited's financial website (www.voltafinance.com).
Gross Asset Value
+---------------------------------------------------------+
| | At 30.09.09 | At 31.08.09 |
|-----------------------------+-------------+-------------|
| Gross Asset Value (GAV / €) | 68,735,527 | 64,385,155 |
|-----------------------------+-------------+-------------|
| GAV per share (€) | 2.27 | 2.13 |
+---------------------------------------------------------+
At the end of September 2009, the Gross Asset Value (the "GAV") of
Volta Finance Limited (the "Company", "Volta Finance" or "Volta") was
€68.7m or €2.27 per share, an increase of €0.14 per share from €2.13
per share as of the end of August 2009.
The September mark-to-market variations* of Volta Finance's asset
classes have been: +2.0% for ABS investments, +27.1% for Mezzanine of
CDO investments, +33% for Residuals of CDO investments and -7.4% for
Corporate Credit investments. The increase in the GAV is mostly due
to price increases in the CDO bucket both from equity pieces and
mezzanine debt tranches.
Volta's assets have generated the equivalent of €1.4m of cash flows
during September 2009 (non-Euro amounts converted into Euro using
end-of-month cross currency rates) bringing the total cash generated
for the current semi-annual period that begun on the 1st of August
2009 to €2m, compared with €3.4m for the same two-month period in
2008.
In September the Company invested a total of €2.7m in four deals: a
mezzanine tranche of a corporate credit portfolio (Valleriite), a
large residual tranche of CLO (Confluent), a mezzanine tranche of a
CLO (Duane 2006) and a very senior tranche of European ABS (Permanent
Financing).
MARKET ENVIRONMENT
In September, credit spreads continued to tighten after a pause in
August. The economic data collected over the month tend to show that
the improvement in economic sentiment recorded for several months is
starting to materialise through several economic real outputs.
However, domestic consumption (excluding government spending) in
developed countries remains weak, which is likely to remain a drag on
the economic recovery for the foreseeable future.
The 5y European iTraxx index (series 11) modestly tightened from 91
bps at the end of August to 85 bps at the end of September. During
the same period, the 5y iTraxx European Crossover Index (series 11)
significantly tightened from 601 bps to 482 bps. According to the
CSFB Leverage Loan Index, the average price for US liquid first lien
loans increased for the eighth consecutive month, from 81.87% to
84.38%.**
VOLTA FINANCE PORTFOLIO
As regards the Company's Corporate Credit holdings, nothing
particular occurred during the month. The position in Jazz III paid
its coupon in line with previous expectations. The two first-loss
positions in Jazz III and ARIA III remain highly sensitive to any
credit event that could occur.
As regards the Company's investments in residual and mezzanine debt
of CLOs, defaults and downgrades in underlying portfolios continued
to occur, albeit at a slower pace than in the previous months. The
number of residual tranches suffering at least a partial diversion of
cash flows remains almost stable.
As regards the 12 mezzanine debt tranches held by Volta, which
represent 15.3% of the end of month GAV, nothing material occurred
during the month.
The depressed economic environment and the ongoing wave of downgrades
and defaults are expected to continue having a negative impact on the
expected cash flows of most of the Company's CLO residuals and debt
holdings. However, the rebound in loan prices allowed some CLO
managers to clean up certain positions, and we started to collect
evidences that, in some cases, OC tests improved. If such a situation
were to continue, some improvement could be expected on the payments
from these positions despite the economic environment.
As regards the Company's ABS investments, no particular event has
affected the six UK non-conforming residual holdings. Promise
Mobility, which is a residual position in a very diversified
portfolio of small and medium German companies loans, started to show
signs of a modest deterioration of its credit performance and the
default rate in the underlying portfolio is expected to increase.
Nevertheless, taking into account the latest information collected on
this deal, the default rate should stay in line with what was
expected at the time of purchase. Over its first two and a half years
of existence, credit events in the underlying loan portfolio were
significantly below such expectations.
At the end of September, the Company held the equivalent of €23.3m of
cash (€0.77 per share). Most of the cash held by the Company will be
used for investing as well as paying operating expenses and
dividends.
The Company considers that opportunities could arise in several
structured credit sectors in the current market environment.
Mezzanine tranches of CLOs and of European ABS or senior tranches of
Corporate Credit portfolios could be considered as the main area for
such investments. Investments will be made depending on the pace at
which market opportunities could be seized.
* "Mark-to-market variation" is calculated as the Dietz-performance
of the assets in each bucket, taking into account the MtM of the
assets at month-end, 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.
** Index data source: Markit, Bloomberg
(Full monthly report in attachment or on www.voltafinance.com)
*****
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