NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO
THE UNITED STATES
*****
Guernsey, 28 November 2011 - Volta Finance Limited (the "Company" or "Volta
Finance" or "Volta") has published its Interim Management Statement. The full
report is attached to this release and is available on Volta Finance Limited's
financial website (www.voltafinance.com).
Dear Shareholders and Investors,
Over the quarter, from the end of July 2011 to the end of October 2011, the
Gross Asset Value (the "GAV") of Volta Finance Limited (the "Company" or "Volta
Finance" or "Volta") went from €145.3m or €4.72 per share, to €134.4m or €4.36
per share.
During the same period, the Company settled the €5m investment committed at the
end of July in one Corporate Credit deal, took the opportunity of a widening of
discount margins to purchase eight assets (5 tranches of CLO and 3 Corporate
Credit deals) for €8.4m and sold one lower yielding tranche of CLO for €1.3m.
During the quarter, cash flows generated by the Company's assets, excluding
asset sales and principal payments from assets, amounted to €8.9m (non euro
amounts being translated in euro using end of month currency rate). This amount
could be compared to €7.1m for the most recent comparable 3-month period (from
the end of January 2011 to the end of April 2011). The cash generated by the
assets, during the quarter under review, is rather significant, close to an
annual rate of 26% of Volta's asset valuation, excluding cash, at the beginning
of the period (€137.2m).
As a consequence of the investments and sales made during this period and after
taking into account the settlement of some expenses, the cash position in the
Company's accounts went from €8.1m at the end of July 2011 to €3.5m at the end
of October 2011. This latest amount excluded €0.8m received for margin calls
linked to the currency hedge strategy of the Company. Since the end of October
2011 as a result of some further coupon payments and one investment of €1m, the
cash position in the Company has increased to €4.4m at the time of writing.
The decrease in the GAV during the quarter is mainly due to increases in
discount margins attached to structured credit products in conjunction with the
significant widening of corporate credit spreads. Overall, the decrease in GAV
during the 3-month period, bearing in mind the deepening of the euro sovereign
crisis and the sharp downward revision in expected growth for OECD economies,
could be considered as modest considering the highly leveraged exposure of the
Company to underlying credit exposures.
At the time of publishing this statement, considering the pace at which cash
flows are generated and the necessity to keep cash available for the next
dividend payment, Volta could be considered as fully invested.
MARKET ENVIRONMENT AND LATEST DEVELOPMENTS
From the end of July 2011 to the end of October 2011, the 5y European iTraxx
index (series 15) and the 5y iTraxx European Crossover index (series 15) widened
significantly from respectively 117 and 438 bps to respectively 160 and 598 bps.
During the same period, credit spreads in the US, as illustrated by the 5y CDX
main index (series 16), increased from 95 to 116 bps at the end of October
2011. According to the CSFB Leverage Loan Index, the average price for US liquid
first lien loans, significantly declined  from 94.89% to 92.44%.*
VOLTA FINANCE PORTFOLIO
Corporate Credit
Over the quarter, no event of default 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. Considering current market focus, it should be remembered that
the first-loss positions in Jazz III and ARIA III are exposed, through CDS, to
Republic of Greece for the same percentage (0.5% of their underlying portfolio)
and to Seat Pagine Gialle. This last name represents 0.2% of Aria III's
portfolio and 0.85% of Jazz III's portfolio and seems to have some difficulties
refinancing its debt. If such a position was to default it will have a very
limited impact on Volta's GAV as it is almost fully priced in at the end of
October. It should be remembered too that the occurrence of such defaults from
time to time is part of the normal life of such assets. For example, looking at
Aria III, the expected loss rate based on the ratings of the underlying
corporate credits in the current portfolio is 0.32% per annum. In fact, ARIA
III's underlying portfolio had recorded no default for the last 3 years (since
the Lehman default in September 2008).
Over the quarter, with the deepening of the euro sovereign crisis and the
significant widening in corporate credit spreads to which these Corporate Credit
positions are highly leveraged, the value of these two first loss positions went
from €11m to €7.4m. However they generated €2.5m of interests or coupons during
the quarter.
The Corporate Credit holdings that were all together valued at €22.7m at the end
of July 2011 generated the equivalent of €2.6m of cash flows during the quarter
and were valued at €27.8m  as at the end of October 2011 (including €10.3m for
the 4 assets settled or purchased during the quarter).
CDO
This bucket that accounted, at the end of July 2011 for 75.3% of the GAV, is
composed of residual and mezzanine debt tranches of CLOs. During the quarter,
defaults and downgrades in the underlying loan portfolios continued to occur,
albeit at a slower pace than in the more recent quarters. On average over-
collateralization tests and residual payments of these structures have improved
during this quarter relative to the previous one.
At the end of October, from a total of 53 positions in residual or mezzanine
debt of CDOs, only one residual position (Carlyle IX) is still unable to pay its
coupon due to an over-collateralisation test breach. The 52 other positions are
currently paying. No particular event materially affected the situation of these
positions.
At the end of October the 40 mezzanine debt tranches of CDOs (38 tranches of
CLOs, 1 tranche of Emerging Debt CDO and 1 tranche of CDO of ABS), totaling the
equivalent of €99.5m of principal amount, were valued at an average price of
59% of par; the 12 classic residual tranches of CLOs, totaling the equivalent of
€51.1m of principal amount, were valued at an average price of 62%; the rest of
the bucket, one loan fund, for the equivalent of €10.8m of principal amount, was
valued at 82% of par.
The positions in mezzanine debt of CLOs and in residual tranches of CLOs have
respectively generated the equivalent of €1.2m and €3.6m of interest or coupons
during the quarter.
ABS
Promise Mobility, a residual position on a very largely diversified portfolio of
small and medium German companies was representing, at the end of October
2011, 96% of this asset class. Over the quarter, nothing special affected this
main position but the other investments in this bucket (6 UK non-conforming
residual positions) generated €1m of cash flows from an end of July conservative
valuation of €0.3m. These cash flows are due to payments of arrears at the
underlying mortgages level that are particularly difficult to foresee. These 6
positions were still conservatively valued at €0.2m as of the end of October.
Promise Mobility, which was valued at €4.8m at the end of July 2011, has
generated €0.4m of cash flows during the quarter and is valued at €4.9m at the
end of October 2011.
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 as well as 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. The recent widening of discount margins has been seized upon
by the Company to invest most of the cash available. Depending on market
opportunities, the Company is also in the position to take advantage of current
volatility in prices to sell some assets in order to reinvest the sale proceeds
on assets representing, at the time of purchase, a better opportunity for the
Company.
Unless stated otherwise, the figures in this Interim Management Statement are as
at end of October 2011 as valuations are available only on a monthly basis with
some delays. Between the end of October 2011 and 25 November 2011, the date of
publication of this Interim Management Statement, the Company is not aware of
any significant event, materially affecting the Company's financial position or
the Company's controlled undertaking.
* Index data source: Markit, Bloomberg.
(Full Interim Management Statement attachment on www.voltafinance.com)
*****
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. 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; automobile loans. Volta Finance Limited's basic approach to its
underlying assets is through vehicles and arrangements that provide leveraged
exposure to some of those underlying assets.
Volta Finance Limited 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 €514
billion in assets under management as of the end of June 2011. AXA IM employs
approximately 2,389 people around the world and operates out of 21 countries.
CONTACTS
Company Secretary
State Street (Guernsey) Limited
volta.finance@ais.statestreet.com
+44 (0) 1481 715601
Portfolio Administrator
Deutsche Bank
voltaadmin@list.db.com
For the Investment Manager
AXA Investment Managers Paris
Serge Demay
serge.demay@axa-im.com
+33 (0) 1 44 45 84 47
*****
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 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 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'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.
*****
Interim Management Statement Nov 2011:
http://hugin.info/137695/R/1566977/486670.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Volta Finance Limited via Thomson Reuters ONE
[HUG#1566977]
