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Alcentra European Floating Rate Income Fund Limited
Performance in June was stable with no individual holdings moving more than 2% during the period. There were no new credit concerns in the portfolio.
New investments were made in the debt for Deoleo (a leading branded olive oil manufacturer), ION Trading (an outsourced trading software business) and Parex (a building materials company). These primary market investments were generally strong contributors to the monthly performance.
It was interesting to see the various comments from Mark Carney and other Bank of England policy makers over the month, which appeared to increase the chances of interest rate increases at some point in 2014, which would result in increased returns on the assets held.
The S&P European Leveraged Loan Index gained 0.57% in June on a currency adjusted basis, following a similar performance to May and taking year to date returns to +2.14%, with the volatility from certain distressed names having been substantially reduced, although with monthly returns slightly flattered by a recovery in some of these names.
New loan issuance for the month was €13.2bn, led by the €3.2bn institutional loan and €4.4bn in bank tranches for Jacobs Douwe Egberts, bringing year to date volume to €44.9bn, 12% ahead of this time last year. This deal benefited from a strong global position, double-B ratings and an existing syndicate which has been successfully invested in the DE Master Blenders business (which was merged with Mondelez's coffee business to form Jacobs Douwe Egberts). Other loan issuers included Mauser, Solenis, Iglo, Techem, Tank & Rast and Mediq.
In high yield, new-issue volume was €12bn from 29 deals, another very strong month taking YTD volume to €51.3bn, 30% up on last year3. New issues included Parex, Selecta and Wind, with Floating Rate Note ('FRN') issuance continuing on a strong trend. The Parex transaction dropped their fixed rate tranche entirely in favour of an upsized €550m FRN.
At the beginning of July, the new issue pipeline looks strong, despite the lack of announced jumbo deals, with a broader range of issuers than we have seen throughout the early part of the year. Announced deals include Generale de Sante, Continental Foods, HES Beheer, Endemol and Sebia. Although the recent downward pressure seen on new issue spreads appear to be reaching a plateau, there is continued pressure on terms, in particular several deals in the pipeline are being brought to market on a covenant lite basis.
June has also seen a meaningful increase in new CLO issuance, although this still remains significantly below the US market. European volumes increased to €2.5bn for the month, taking year to date issuance to €6.9bn. Most investment banks are now expecting a full year issuance number in the €10-15bn range, which suggests demand from loan funds for assets should remain manageable against expected full year loan issuance in the region of €100bn5. The comparable US CLO numbers for the month and year to date stand at $13.4bn and $60.2bn respectively5.
For further information please contact:
Simon Perry +44 20 7367 5272
An accompanying factsheet which includes the information above as well as wider commentary on the investments made by the Fund can be found on the Fund's website www.aefrif.com.
Alcentra European Floating Rate Income Fund Limited, a Guernsey Authorised Closed-Ended Collective Investment Scheme, regulated by the Guernsey Financial Services Commission and listed on the Main Market of the London Stock Exchange invests predominantly in senior secured loans and senior secured bonds issued by European corporates and targets returns (net of fees and expenses) of 7% to 10% per annum. The Fund targets a dividend yield of 5.5 pence per £1.00 issue price of the initial offering of shares in the Fund for the first full year of investment, paid quarterly.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
The information contained in this document is given as at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, the proposals referred to herein are tentative and are subject to verification, material updating, revision and amendment. No reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its completeness, accuracy or fairness. This document has not been approved by any competent regulatory authority.
This document is preliminary in nature and made available for information purposes only. This document does not contain any representations, does not constitute or form part of any solicitation of any offer to sell or invitation to purchase any securities of the Fund, nor shall it or any part of it or the fact of its distribution form the basis of or be relied upon in connection with any contract therefor, and does not constitute a recommendation regarding the securities of the Fund.
Alcentra Limited ("Alcentra") gives no undertaking to provide recipients of this document with access to any additional information, or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent and the distribution of this document shall not be deemed to be any form of commitment on the part of Alcentra to proceed with any transaction.
This document includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include, without limitation, statements typically containing words such as "believes", "considers", "intends", "expects", "anticipates", "targets", "estimates", "will", "may", or "should" and words of similar import. The forward-looking statements are based on Alcentra's beliefs, assumptions and expectations of future performance and market development, taking into account information currently available. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known or within Alcentra's control. If a change occurs, the Fund's business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements. Some of the factors that could cause the actual results to vary from those expressed in forward-looking statements include, but are not limited to: the rate at which the Fund deploys its capital in investment and the actual rates of return achieved by the Fund; Alcentra's ability to execute the Fund's investment strategy, including through the identification of a sufficient number of appropriate investments; the continuation of Alcentra as the Fund's investment manager; the Fund's financial condition and liquidity; changes in the values of or returns on investments that the Fund makes; changes in financial markets, interest rates or industry, general economic or political conditions; and the general volatility of the capital markets and the market price of the Fund's securities.
By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Forward-looking statements are not guarantees of future performance. Any forward-looking statements are only made as at the date of this document, and Alcentra neither intends nor assumes any obligation to update forward-looking statements included in this document, whether as a result of new information, future events, or otherwise, except as required by law or other applicable regulation. In light of these risks and uncertainties, the events described by any forward-looking statement might not occur. Alcentra qualifies any and all of the forward-looking statements by these cautionary factors. Please keep this cautionary note in mind while reading this document.
Nothing in this document should be construed as a profit or dividend forecast.
This document is issued by Alcentra Limited, which is regulated and authorised in the United Kingdom by the FCA and whose registered address is at 10 Gresham Street, London EC2V 7JD.
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