Net Asset Value as at 31 July 2020

Volta Finance Limited (VTA / VTAS) – July 2020 monthly report

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR PART, IN OR INTO THE UNITED STATES

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Guernsey, 12 August 2020

AXA IM has published the Volta Finance Limited (the “Company” or “Volta Finance” or “Volta”) monthly report for July. The full report is attached to this release and will be available on Volta’s website shortly (www.voltafinance.com).

PERFORMANCE and PORTFOLIO ACTIVITY

In July the monthly performance, after considering the 11 cents per share dividend paid 29^th of July, is negative at -1.2%. Despite a flat performance at the asset class level, USD weakness had a negative impact as USD depreciated against EUR by 4.6% during the month while, after adjusting for hedging, Volta has a USD exposure close to 45%.

The monthly asset class performances** were, in local currency: -0.3% for Bank Balance Sheet transactions, +1.1% for CLO Equity tranches; -0.5% for CLO Debt; +5.9% for Cash Corporate Credit deals (this bucket comprises funds that have a one-month delay in publishing their NAV); and +1.7% for ABS.

In July, like the first month of every quarter, most of the CLO positions received their coupon payments. However, according to WellsFargo research, 24% of USD CLOs were suffering a breach of the Interest Diversion test as at the end of the month. Only one USD CLO position in Volta did not receive any cash flows (due to an IC test (Interest Coverage) breach). This position is a 2013 vintage position, the full AAA tranche has been amortized and the AA tranche will finish being amortized in October so that it is almost normal that cash flows from this position are close to zero. In normal market conditions, this position would have been called. We are working with the CLO manager to find a way/the timing for a partial call.

Except for this position, all CLO Equity and CLO debt held by Volta paid their coupons. However, it should be noted that CLO Equity payments were on average 30% lower than in April due to two technical effects:  firstly, lower short-term rates in the US, an impact that was beginning to be seen in January and April.  If and when rates go up, we will benefit from the opposite technical effect.  Secondly, since April, roughly 40% of the European loans elected to pay their coupon on a 6-month basis instead of the classic 3-month basis.  This effect will unwind with higher cash flows in October.

As a result, in July, Volta received “only” the equivalent of €3.9m from its CLO Equity positions, relative to €5.7m in April. The decline is almost evenly split between the two technical effects so that October cash flows are expected to be roughly €1m higher. On a 6-month basis, Volta received the equivalent of €17.7m as at the end of July. Nonetheless, this represents a solid 17% annualised yield based on the end of July NAV, despite the previously mentioned technical impacts.

On a longer-term basis, CLO managers are, on average, improving CLO portfolios to limit the impact of the COVID-19 pandemic. According to Nomura research, in April, 19% of USD CLOs were breaching their BB OC test (the Overcollateralization test that protects the BB tranche), in July this figure was down to 11% although USD loans continued to be downgraded and some defaults started to materialize. None of the USD CLO positions in Volta suffered a diversion of cash flow due to a BB OC test breach in April nor in July.

We reiterate our view that going forward, as long as there is no second wave requiring significant lockdowns of the economy, full cash flow payments should be the norm for Volta’s portfolio as CLO managers are regaining some cushion on the OC tests.

On the most senior CLO debt tranches, spreads continued to tighten so that we can envisage transforming the CLO warehouse presently held by Volta into an actual CLO. Probably in September or October.

In July Volta invested €2.2m through one newly issued EUR BB CLO tranche and additional capital was called by the existing CMV and the Warehouse.

As at the end of July 2020, after the 11 cents per share dividend payment, Volta’s NAV was €208.2m or €5.69 per share.

The month-end available cash position was €8.7m leaving some room for investments.

*It should be noted that approximately 10.6% of Volta’s GAV comprises investments for which the relevant NAVs as at the month-end 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 9.0% as at 30 June 2020 and 1.6% 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 cross-currency rates. Nevertheless, some residual currency effects could impact the aggregate value of the portfolio when aggregating each bucket.

CONTACTS

For the Investment Manager
AXA Investment Managers Paris
Serge Demay
[email protected]

+33 (0) 1 44 45 84 47

Company Secretary and Administrator
BNP Paribas Securities Services S.C.A, Guernsey Branch
[email protected] 
+44 (0) 1481 750 853

Corporate Broker
Cenkos Securities plc
Andrew Worne
Daniel Balabanoff
Rob Naylor
+44 (0) 20 7397 8900

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ABOUT VOLTA FINANCE LIMITED

Volta Finance Limited is incorporated in Guernsey under The Companies (Guernsey) Law, 2008 (as amended) and listed on Euronext Amsterdam and the London Stock Exchange's Main Market for listed securities. Volta’s home member state for the purposes of the EU Transparency Directive is the Netherlands. As such, Volta is subject to regulation and supervision by the AFM, being the regulator for financial markets in the Netherlands.

Volta’s investment objectives are to preserve capital across the credit cycle and to provide a stable stream of income to its shareholders through dividends. Volta seeks to attain its investment objectives predominantly through diversified investments in structured finance assets. The assets that the Company may invest in either directly or indirectly include, but are not limited to: corporate credits; sovereign and quasi-sovereign debt; residential mortgage loans; and, automobile loans. The Company’s approach to investment is through vehicles and arrangements that essentially provide leveraged exposure to portfolios of such underlying assets. The Company 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.

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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 753 investment professionals and €801 billion in assets under management as of the end of April 2020. 

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This press release is published by AXA Investment Managers Paris (“AXA IM”), in its capacity as alternative investment fund manager (within the meaning of Directive 2011/61/EU, the “AIFM Directive”) of Volta Finance Limited (the "Volta Finance") whose portfolio is managed by AXA IM.

This press 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 document is not an offer for sale of the securities referred to herein in the United States or to persons who are “U.S. persons” for purposes of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or otherwise in circumstances where such offer would be restricted by applicable law. Such securities may not be sold in the United States absent registration or an exemption from registration from the Securities Act. Volta Finance does not intend to register any portion of the offer of such securities in the United States or to conduct a public offering of such securities in the United States.

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This communication is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). The securities referred to herein are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in 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.

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This press 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 Finance'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. AXA IM 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.

The figures provided that relate to past months or years and past performance cannot be relied on as a guide to future performance or construed as a reliable indicator as to future performance. Throughout this review, the citation of specific trades or strategies is intended to illustrate some of the investment methodologies and philosophies of Volta Finance, as implemented by AXA IM. The historical success or AXA IM’s belief in the future success, of any of these trades or strategies is not indicative of, and has no bearing on, future results.

The valuation of financial assets can vary significantly from the prices that the AXA IM could obtain if it sought to liquidate the positions on behalf of the Volta Finance due to market conditions and general economic environment. Such valuations do not constitute a fairness or similar opinion and should not be regarded as such.

 Editor: AXA INVESTMENT MANAGERS PARIS, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6, Place de la Pyramide - 92800 Puteaux. AXA IMP is authorized by the Autorité des Marchés Financiers under registration number GP92008 as an alternative investment fund manager within the meaning of the AIFM Directive.

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