TIDMAEFS
RNS Number : 7521V
Alcentra European Fltng Rate Inc Fd
10 April 2019
Alcentra European Floating Rate Income Fund Limited
Market Commentary
The Alcentra European Floating Rate Income Fund (the "Fund) was
up +0.54% (gross) for the month, ahead of the Credit Suisse Western
European Leveraged Loan Index ("CS WELLI") (hedged to GBP) at
+0.03% for the same period([1]) .
The marginally weaker market returns for the month were mainly
driven by weakness in USD loans and lower margin loans in the
Index, however the core market remained relatively robust. USD
loans were weaker on the back of USD Loan Market fund out-flows
(USD loans in the CS WELLI returned -0.49%)([2]) . Lower margin
loans also saw some weakness as Investors looked to reduce these
names to make room for more attractively priced primary.
Despite continued challenging CLO market conditions due to
pressure on the arbitrage, CLO issuance is now running ahead of
last year with March issuance of EUR3.4bn, +36% up on the prior
year. This leaves Q1 volumes at EUR6.9bn, +11% higher year on
year([3]) . This CLO issuance, coupled with a continued strong
pipeline, has meant demand was again strong in the month.
European Loan issuance saw a strong recovery in March with
EUR10.5bn of loans pricing, a +48% increase on the prior year.
M&A driven volumes were up +42% on prior year, while
refinancings were down -36%, so net issuance again grew([4]) . Q1
volumes overall were down -42%, however this was versus a record
quarterly issuance in the prior year, and the total issuance of
EUR20.4bn in the quarter was broadly in-line with quarterly
averages in recent years([5]) . Issuance was supported by a jumbo
deal for Power Solutions, as well as larger deals from Ceva,
Colisee and Delachaux. For the month, the average new issue spread
was 417bps at a price of 99.49, representing an attractive entry
point for investors. The S&P forward pipeline has now increased
to EUR10.5bn, demonstrating a continued positive outlook for
issuance volumes([6]) .
The S&P default rate for the 12 months ending March remained
at the record low level of 0.00% seen since January([7]) . We do
not expect default rates to remain at such low levels and would
expect a return to a more normalised 1.5% - 2.0% rate. This is
backed up by the S&P distress ratio (share of performing
issuers trading below 80) which stood at 1.39% for March([8]) .
Overall the market remains disciplined, with single B margins
holdings steady at c.400bps([9]) , while constructive discussions
on documentation terms continues. Although the market for new CLOs
remains tough, deals continue to get done and this should continue
to drive support for European loans
Portfolio Manager's Commentary
The top performing credit was a specialist financial services
business that was up +3.22% after it continued to benefit from
better sentiment around the sector and positive results from peers.
The second best performer was a software company that was up +2.80%
after reporting solid results which were better than the market
expected. Both of these businesses saw a recovery after weakness in
prior months.
The worst performing credit was a technology services business
that was -13.67% after seeing downward pressure on its loans on the
back of weaker results and selling pressure in the name. The second
weakest name was a healthcare business that was -5.72% after it
reported weaker results due to higher integration costs, leading to
higher than expected leverage.
For the month as a whole the Fund saw positive performance of
+0.54%, ahead of the index at +0.03%([10]) . As such, while two
idiosyncratic positions saw weakness on specific credit news, they
were more than offset by the positive contribution from other
holdings.
S
For further information please contact:
Alcentra Limited
Simon Perry +44 20 7367 5272
Factsheet
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.
Background Information
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
GBP1.00 issue price of the initial offering of shares in the Fund
for the first full year of investment, paid quarterly.
Important Notices
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.
This report is aimed at existing investors in the fund and has
not been approved by any competent regulatory authority.
The information contained in this document is given as at the
date of its publication (unless otherwise marked) and is based on
past performance. Past performance is not a guide to future
performance and the value of investments and investment value can
go down as well as up. The future performance of the Fund will
depend on numerous factors which are subject to uncertainty.
Including changes in market conditions and interest rates and
exchange rates and in response to other economic, political or
financial developments, investment return and principal value of
your investment will fluctuate, so that when your investment is
sold, the amount you receive could be less than what you originally
invested. Past or current yields are not indicative of future
yields.
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. Nothing in this document should be construed as a profit or
dividend forecast.
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 beliefs, assumptions and expectations of future
performance and market development of Alcentra Limited
("Alcentra"), taking into account information currently available
and made as at the date of this document. These 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. By their nature, forward-looking statements involve
known and unknown risks and uncertainties. Forward-looking
statements are not guarantees of future performance. 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.
An investment in the Fund is suitable only for investors who are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear losses (which
may equal the whole amount invested) that may result from such an
investment. An investment in the Fund should constitute part of a
diversified investment portfolio. Accordingly, typical investors in
the Fund are expected to be sophisticated and/or professional
investors who understand the risks involved in investing in the
Fund.
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 including in relation
to any forward-looking statements. 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 is issued by Alcentra Limited, which is authorised
and regulated in the United Kingdom by the Financial Conduct
Authority and whose registered address is at 160 Queen Victoria
Street, London, United Kingdom, EC4V 4LA.
BNY Mellon is the corporate brand of The Bank of New York Mellon
Corporation and may also be used as a generic term to reference the
Corporation as a whole or its various subsidiaries generally.
(c) 2019 The Bank of New York Mellon Corporation. All rights
reserved. Trademarks and logos belong to their respective
owners.
[1] Credit Suisse Western European Leveraged Loan Index, hedged
to GBP, 31 March 2019
[2] Credit Suisse Western European Leveraged Loan Index, hedged
to GBP, 31 March 2019
[3] Leveraged Finance Volume, S&P Technical Data, 4 April
2019
[4] S&P Global Market Intelligence, LCD Global Interactive
Loan Volume Report, 5 April 2019
[5] S&P Global Market Intelligence, LCD Global Interactive
Loan Volume Report, 5 April 2019
[6] S&P Global Market Intelligence, LCD European Weekly, 31
March 2019
[7] S&P Global Market Intelligence, LCD European Playbook, 2
April 2019
[8] S&P Distress Ratio, 1 April 2019
[9] Credit Suisse Western European Leveraged Loan Index, hedged
to GBP, 31 March 2019
[10] Credit Suisse Western European Leveraged Loan Index, hedged
to GBP, 31 March 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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