Guernsey, 11 March 2011 - Volta Finance Limited (the "Company" or "Volta Finance" or "Volta") has published its 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 28.02.11 At 31.01.11
Gross Asset Value (GAV / €) 148,897,123 140,603,324
GAV per share (€)4.84 4.57
At the end of February 2011, the Gross Asset Value (the "GAV") of Volta Finance Limited (the "Company", "Volta Finance" or "Volta") was €148.9m or €4.84 per share, an increase of €0.27 per share from €4.57 per share at the end of January 2011.
The February mark-to-market variations* of Volta Finance's asset classes have been: +1.2% for ABS investments, +4.7% for mezzanine of CDO investments, +9.6% for residuals of CDO investments and +9.3% for Corporate Credit investments. The increase of the GAV in February reflected an increase in prices of most of Volta's assets in line with the continuing improvement in the view held by market participants on these assets and with the overall stabilization of credit spreads in February.
Volta's assets generated the equivalent of €1.9m of cash flows in February 2011 (non-euro amounts converted into euro using end-of-month cross currency rates and excluding principal payments from debt assets) bringing the total cash generated during the last six months to €10.2m. This amount can be compared with the amount of €10.4m for the previous six-month period ended in August 2010 (the most recent period which is comparable considering the seasonality of payments).
In February, the Company did not buy nor sell any asset.
At the end of February, Volta held €3.4m in cash including €0.5m posted for margin calls in respect of its currency hedge positions.
MARKET ENVIRONMENT
In January, credit spreads were almost unchanged in Europe and in the US except for below investment grade credit that tightened modestly. It mostly reflects the improvement in the current economic situation in most of the G7 countries that counterbalance increases in potential risks coming from current geopolitical instability in or near oil-producer countries. The spread of the 5y European iTraxx index (series 14) was stable at 98 bps, the 5y iTraxx European Crossover Index (series 14) decreased from 415 at the end of January to 386 bps at the end of February. During the same period, credit spreads in the US stabilized as illustrated by the 5y CDX main index (series 15) that went from 84 to 82 bps at the end of February 2011. According to the CSFB Leverage Loan Index, the average price for US liquid first lien loans modestly increased from 95.64% to 95.86%.**
Overall, in line with what already happened in January, February was a month of significant increases in the number of transactions in structured finance markets echoing the renewed appetite from some investors for this asset class. CLO tranches were again leading the way.
VOLTA FINANCE PORTFOLIO
In February, no particular event materially affected the situation of the Corporate Credit holdings. However, it should be mentioned that the first-loss positions in Jazz III and ARIA III remain highly sensitive to any credit event that could occur. At the end of February, the average price of all the assets in this bucket (the first loss positions plus three other corporate credit positions (initially rated AAA and A tranches)) increased from an average price of 45.6% to 49.8% reflecting the modest tightening of corporate credit spreads and the tightening of discount margin for structured finance assets.
As regards the Company's investments in residual and mezzanine debt of CLOs, at the end of February, from a total of 52 positions in residual or mezzanine debt of CLOs, one of the mezzanine positions (Alpstar 2A E) and two of the residual positions (Carlyle IX and Northwoods VIII) are still unable to pay their coupon due to over collateralisation test breaches. The 49 other positions are currently paying. According to the latest report of Alpstar 2, the E tranche held by Volta should resume paying its coupon for the following payment in May.
At the end of February the mezzanine debt tranches of CLOs, totalling the equivalent of €94.0m of principal amount, were valued at an average price of 74.5% of par; the classic residual tranches of CLOs, totalling the equivalent of €51.6m of principal amount, were valued at an average price of 61.5%; the rest of the bucket, one loan fund, for the equivalent of €11m of principal amount, was valued at 93.5% of par.
As regards the Company's ABS investments, in February, no particular event materially affected the six UK non-conforming residual holdings nor the position held by Volta in Promise Mobility 2006-1. One investment in short-term euro ABS senior tranches held by the Company to enhance its cash management amounted to €1.7m.
The Company considers that opportunities could arise in several structured credit sectors in the current market environment. Amongst others, mezzanine tranches of CLOs and of European ABS or senior tranches of Corporate Credit portfolios could be considered for investments. Potential investments could be made depending on the pace at which market opportunities could be seized and cash is available. Thanks to the recent rally in prices, the Company could be expected to sell some assets at yield below Volta's target in order to reinvest the sale proceeds according to current market opportunities.
* "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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