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RNS

Interim Management Statement - 30 June 2014

Released 07:00 31-Jul-2014

RNS Number : 7681N
Alcentra European Fltng Rate Inc Fd
31 July 2014
 



 

 

ALCENTRA EUROPEAN FLOATING RATE INCOME FUND LIMITED

 

INTERIM MANAGEMENT STATEMENT

 

Alcentra European Floating Rate Income Fund Limited (the "Company") is publishing this Interim Management Statement in accordance with DTR 4.3 of the FSA Handbook.

 

This Interim Management Statement has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party or for any other purpose.

 

This Interim Management Statement relates to the period from 1 April 2014 to the date of publication of this interim management statement, unless otherwise specified. References to the "Group" below refer to the Company and its wholly-owned Luxembourg subsidiary, Alcentra European Floating Rate Income S.A.

 

Investment Policy & Objective

 

Alcentra Limited (the "Investment Manager") selects, from the primary and secondary markets, investments for the Group in the following asset classes:

 

·    secured loans, including senior loans, mezzanine loans and second lien loans;

 

·    senior secured floating-rate notes; and

 

·    senior secured and senior unsecured high-yield bonds,

 

in each case that may be considered to be non-investment grade. The Investment Manager seeks to identify investment opportunities that combine an attractive current return with a strong probability of ultimate return of capital.

 

Investment Manager Review

 

Portfolio Summary

 

As at 30 June 2014, the Company's portfolio was fully invested with exposure to 67 issuers across 100 different individual assets. The Alcentra European Floating Rate Income Fund has demonstrated robust NAV growth since its inception in March 2012 and we are pleased with the performance to date.

 

The Alcentra European Floating Rate Income Fund issued an additional 24,795,614 new ordinary shares in May at an issue price of 108.22 pence per share and has successfully invested the proceeds shortly after receipt. In June and July 2014, a further 7,100,000 new ordinary shares were issued.

 

The placing programme with J.P. Morgan Cazenove is ongoing until 21 April 2015 and we expect there to be subsequent issuance in response to market demand over this period.

 

Performance in the quarter was stable with no individual holdings moving more than 2% during the period. There were no new credit concerns in the portfolio. New primary market investments were generally strong contributors to the quarterly performance.

 

Market Environment

 

It was interesting to see the various comments from Mark Carney and other bank of England policy makers in June, 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 ELLI gained 0.85% in May, the strongest performance since October 2013. In a reversal of the trend we have seen for most of the year, the riskier assets actually outperformed the rest of the index, with CCC rated borrowers returning 2.1%. The ELLI further gained 0.57% in June on a currency adjusted basis, 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.

 

Pipeline

 

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.

 

There has also been a meaningful increase in CLO issuance, although this still remains significantly below the US market. Volumes increased to €2.5bn for June, 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 €100bn. The comparable US CLO numbers for the month and year to date stand at $13.4bn and $60.2bn respectively.

 

Material Events and Transactions

 

On 22 April 2014, the Company published a Prospectus in relation to the issue of up to 350,000,000 new redeemable Ordinary Shares in the Company in connection with: (i) the establishment of a placing programme (the "New Placing Programme"); (ii) an initial placing thereunder (the "Initial Placing"); and (iii) an offer for subscription (the "Offer for Subscription" and together, the "Issues").

 

The following issues have been made under the New Placing Programme during the period from 1 April 2014 to the date of publication of this interim management statement.

 


Date

Number of Shares

Issue Price

 

23 May 2014

24,795,614

108.22

 

23 June 2014

4,500,000

108.75

 

2 July 2014

1,600,000

108.85

 

22 July 2014

1,000,000

109.00

 


31,895,614


 

 

 

 

Dividend

 

On 15 April 2014, the Company declared a dividend of 1.14p (approximately 1.38c) per Ordinary Share, covering the period 1 January 2014 to 31 March 2014. This dividend was paid to the shareholders on 23 May 2014 and the record date was 25 April 2014.

 

On 17 July 2014, the Company declared a dividend of 1.24p (approximately 1.55c) per Ordinary Share, covering the period 1 April 2014 to 30 June 2014. This dividend will be paid to the shareholders on 15 August 2014 and the record date will be 25 July 2014.

 

Report and Accounts

 

On 18 July 2014, the Company announced its Annual Report and Audited Consolidated Financial Statements for the year ended 31 March 2014.

 

The AGM will be held in Guernsey on 25 September 2014 at 10:15 BST. 

 

Financial Highlights


24

July

2014

30

June

2014

31

March 2014

31 December 2013

30 September 2013







Estimated monthly NAV per ordinary share (€)

1.33180

1.33330

1.29063

1.28200

1.25803

Estimated monthly NAV per ordinary share (£)

1.056401

1.067302

1.065613

1.067004

1.051905

 

The rate of exchange prevailing at the NAV dates were as follows:

 

1 0.793180GBP: 1 EUR

2 0.800500GBP: 1 EUR

3 0.825650GBP: 1 EUR

4 0.832310GBP: 1 EUR

5 0.836150GBP: 1 EUR

 

The financial information for the period ended 24 July 2014, 30 June 2014, 31 December 2013 and 30 September 2013 contained within this Interim Management Statement (including the above table) has not been audited.

 

Background Information

 

The Company is a Guernsey closed-ended collective investment scheme listed on the main market of the London Stock Exchange which 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 Company targets a dividend yield of 5.5% on the £1.00 issue price of the initial offering of shares in the Company for the first full year of investment, paid quarterly.

 

The Company's share capital consists of ordinary shares denominated in Sterling.

 

By order of the Board

 

BNP Paribas Securities Services, S.C.A., Guernsey Branch, for and on behalf of

Alcentra European Floating Rate Income Fund Limited

as Company Secretary

 

The information contained in this document is given as at the date of its publication (unless otherwise marked), has not been audited and is subject to verification, 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 an offer to sell or the solicitation of an offer to acquire or subscribe for any securities of the Company.

This document is intended only for the person to whom it has been delivered. No recipient may distribute, or make available, this document (directly or indirectly) to any other person and no part of this document may be reproduced in any manner without the written permission of the Company.  This document and the information contained herein is not for release, publication or distribution (directly or indirectly) in or into the United States, Canada, Australia or Japan or to any "US person" as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act") or into any other jurisdiction where applicable laws prohibit its release, distribution or publication. It does not constitute an offer of securities for sale anywhere in the world, including in or into the United States, Canada, Australia or Japan.  Recipients of this document in jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements in their jurisdictions. In particular, the distribution of this document may in certain jurisdictions be restricted by law. Accordingly, recipients represent that they are able to receive this document without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which they reside or conduct business.

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 the Investment Manager'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 the Investment Manager's control.  If a change occurs, the Company's business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements.

 

This document has been prepared by the Company and is the sole responsibility of the Company. Alcentra Limited, the Investment Manager, is regulated and authorised in the United Kingdom by the FCA. Its registered address is at 10 Gresham Street, LondonEC2V 7JD.


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Interim Management Statement - 30 June 2014 - RNS