Guernsey, 17 November 2009 - Volta Finance Limited (the "Company" or
"Volta Finance" or "Volta") has published its October 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 30.10.09 | At 30.09.09 |
|-----------------------------+-------------+-------------|
| Gross Asset Value (GAV / €) | 76,368,834 | 68,735,527 |
|-----------------------------+-------------+-------------|
| GAV per share (€) | 2.52 | 2.27 |
+---------------------------------------------------------+
At the end of October 2009, the Gross Asset Value (the "GAV") of
Volta Finance Limited (the "Company", "Volta Finance" or "Volta") was
€76.4 m or €2.52 per share, an increase of €0.25 per share from €2.27
per share as at the end of September 2009.
The October mark-to-market variations* of Volta Finance's asset
classes have been: +1.2% for ABS investments, +27.6% for mezzanine of
CDO investments, +32.3% for residuals of CDO investments and +3.4%
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 €2.5m of cash flows
during October 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 €4.4m, compared with €7.2m for the same three-month period in
2008.
In October the Company invested a total of €5.8m in five deals: a
senior tranche of a Corporate Credit portfolio (Dryden XVII), a combo
note of CLO (Leopard IV), a mezzanine tranche of a CLO (H1776 2006)
and two very senior tranches of European ABS (Permanent Financing and
Herme 7).
MARKET ENVIRONMENT
In October, credit spreads continued to tighten modestly. The
economic data collected over the month tend to confirm that the
improvement in economic sentiment recorded for several months is
materialising through economic real outputs. 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 despite some improvement of consumer sentiments.
The 5y European iTraxx index (series 11) was unchanged at 85 bps at
the end of October. During the month, the 5y iTraxx European
Crossover Index (series 11) continued to tighten from 482 bps to 431
bps. According to the CSFB Leverage Loan Index, the average price for
US liquid first lien loans increased modestly, from 84.38% to
84.76%.**
VOLTA FINANCE PORTFOLIO
As regards the Company's Corporate Credit holdings, Jazz III suffered
the default of CIT Group and ARIA III recorded no particular event.
One year ago after the default of Lehman Brothers Holding Inc., the
Jazz III Euro and USD tranches, accounting respectively for 85% and
15% of the Jazz III residual positions, were respectively 0/3.41% and
0/3.27% tranches. After the default of CIT and considering the
current market recovery on this default, they are expected to be
respectively 0/3.74% and 0/3.41%. This, we believe, demonstrates the
ability of the manager to preserve and even create some value over
the last 12 months. In September, the positions in Jazz III paid
their coupon in line with previous expectations and are expected to
do so in the coming periods. However, 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, but payments received from those
positions have been increasing. As a matter of fact, the amount
received from the six US residual positions that were supposed to pay
in October, totalled USD1.6m compared with USD0.8m for the previous
payment three months ago.
As regards the 14 mezzanine debt tranches held by Volta, which
represent 20.1% 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, as demonstrated by the payments received in
October from the US residual positions, the rebound in loan prices
allowed some CLO managers to clean up certain positions, and evidence
showing that some improvement could be expected on the payments from
these positions despite the economic environment has started to
appear.
As regards the Company's ABS investments, no particular event has
affected the six UK non-conforming residual holdings as well as
Promise Mobility, a residual position in a very diversified portfolio
of small and medium German company loans. The three positions taken
as a substitute for cash management in very senior euro ABS tranches
behaved as expected.
At the end of September, the Company held the equivalent of €20.0m of
cash (€0.66 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
|
