Volta Finance Limited (NL) – VOLTA FINANCE – JANUARY MONTHLY REPORT
VOLTA FINANCE – JANUARY MONTHLY REPORT
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
Volta Finance Limited (the “Company” or “Volta Finance” or “Volta”) has published its January 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 29.01.10 At 31.12.09
Gross Asset Value (GAV / €) 86,771,993 78,477,357
GAV per share (€) 2.87 2.59
At the end of January 2010, the Gross Asset Value (the “GAV”) of Volta Finance Limited (the “Company”, “Volta Finance” or “Volta”) was €86.8m or €2.87 per share, an increase of €0.28 per share from €2.59 per share at the end of December 2009.
The January mark-to-market variations* of Volta Finance’s asset classes have been: +1.9% for ABS investments, +9.5% for mezzanine of CDO investments, +30.1% for residuals of CDO investments and -2.8% for Corporate Credit investments. These performances reflect the modest widening of spreads in the corporate credit area and the acknowledgement by market participants of the improving situation of residual positions in CLOs.
Excluding principal payments from short-term ABS investments (€0.1m in January), Volta’s assets have generated the equivalent of €1.6m of cash flows during January 2010 (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 began on the 1st of August 2009 to €7.4m (excluding principal payments from short-term ABS), compared with €13.7m for the same six-month period in 2008 and with €8.8m collected for the previous semi-annual period ended in July 2009.
In January, the Company invested a total of €2.6m in two deals: a mezzanine tranche of CLO (Guggenheim 2002 – C) and one short-term ABS (HMI 2006 – 3A2). As of the end of January the Company held €4.2m of cash, including €0.5m posted through margin calls linked to its currency hedge positions.
In January, credit spreads widened modestly on the back of sovereign risk tensions.
The 5y European iTraxx index (series 12) and the 5y iTraxx European Crossover Index (series 12) widened respectively from 73 bps and 430 bps at the end of December to 82 bps and 454 bps at the end of January. According to the CSFB Leverage Loan Index, the average price for US liquid first lien loans increased significantly, from 87.41% to 88.94%.**
VOLTA FINANCE PORTFOLIO
As regards the Company’s Corporate Credit holdings, in January, no particular event materially affected the situation of the Corporate Credit holdings. The two first-loss positions in Jazz III and ARIA III remain highly sensitive to any credit event that could occur. At the end of January, these two first-loss positions represented 60% of Volta’s €17.4m Corporate Credit assets, the remaining portion being composed of two senior tranches (initially rated AAA) and one mezzanine tranche (initially rated A). The slight decline in value for these assets is linked to the modest widening of credit spreads.
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. Taking all these positions together, it has been highlighting for several months in the previous monthly reports that the average situation of those positions were improving. In January, it finally started to be reflected by their market prices: the average market price of the classical residual positions (excluding Tennenbaum Opportunities Fund and Confluent) went from 19.8% to 28.8%.
Considering the latest purchase made in January, the mezzanine debt tranche portfolio held by Volta is now made of 21 different positions, representing 37% of the end-of-month GAV. Nothing material occurred during the month regarding these assets. Two of these positions (Alpstar 2A E and Cheyne Credit Opp.) are still unable to pay their coupon due to an overcollateralisation test breach.
As regards the Company’s ABS investments, in January, no particular event affected the six UK non-conforming residual holdings as well as Promise Mobility, a residual position in a highly diversified portfolio of small and medium German company loans. The various investments in short-term euro ABS senior tranches amounted to €3.5m.
The Company considers that opportunities could arise in several structured credit sectors in the current market environment. Among others, mezzanine tranches of CLOs and of European ABS or senior tranches of Corporate Credit portfolios could be considered for investments. Investments will be made depending on the pace at which market opportunities could be seized and cash is available. From time to time, as it was the case in December, the Company should be expected to sell some previous investments in order to seize other opportunities in the market.
* “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.
ABOUT VOLTA FINANCE LIMITED
Volta Finance Limited is incorporated in Guernsey under the Companies (Guernsey) Laws, 1994 to 1996 (as amended) and listed on Euronext Amsterdam. Its investment objectives are to preserve capital and to provide a stable stream of income to its shareholders through dividends. For this purpose, it pursues a multi-asset investment strategy targeting various underlying assets. Volta Finance’s basic approach to its underlying assets is through vehicles and arrangements that provide leveraged exposure. The exposure to those underlying assets is gained through direct and indirect investment in five principal asset classes: corporate credits, CDOs, ABS, leveraged loans, and infrastructure assets.
Volta Finance 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 nearly €500 billion in assets under management as of the end of November 2009. AXA IM employs approximately 2,875 people around the world and operates out of 21 countries.
This 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 press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Volta Finance has not registered, and does not intend to register, any portion of any offering of its securities in the United States or to conduct a public offering of any securities in the United States.
This document is being distributed by Volta Finance Limited in the United Kingdom only to investment professionals falling within article 19(5) of the Financial Services and Market Act 2000 (Financial Promotion) Order 2005 (the “Order”) or high net worth companies and other persons to whom it may lawfully be communicated, falling within article 49(2)(A) to (E) of the Order (“Relevant persons”). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the shares will be engaged 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 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’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. Volta Finance 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.