TIDMBGLF
RNS Number : 9377J
Blackstone Loan Financing Limited
29 April 2022
29 APRIL 2022
FOR IMMEDIATE RELEASE
RELEASED BY BNP PARIBAS SECURITIES SERVICES S.C.A., JERSEY
BRANCH FINAL RESULTS ANNOUNCEMENT
THE BOARD OF DIRECTORS OF BLACKSTONE LOAN FINANCING LIMITED
ANNOUNCE FINAL RESULTS FOR THE YEARED 31 DECEMBER 2021
Blackstone Loan Financing Limited
Annual Report and Audited Financial Statements for the Year
Ended 31 December 2021
A Note From Our Chair
During 2021, the Company's strong performance was supported,
through its investment in BCF, by the ability to take advantage of
the technical strength in the CLO liability market to launch new
CLOs and refinance or reset existing CLO investments. Returns were
also supported by positive loan market conditions and a benign
default environment.
The Company delivered a total return per Ordinary Share of
21.82% on a published NAV basis, ending the period with a NAV of
EUR0.9407, and 16.87% on an IFRS NAV basis, ending the period with
a NAV of EUR0.9154.
The Board maintains a cautiously optimistic outlook for 2022
given the overall health of the economy and corporate fundamental
landscape, whilst being alive to potential downside risks posed by
inflation, tightening monetary conditions, the conflict in Ukraine
and the impact of the pandemic. The Board continues to gain comfort
from Blackstone's deep expertise as an active manager, which will
be key in navigating this environment.
Charlotte Valeur
Chair
29 April 2022
Key Performance Indicators
IFRS NAV Published NAV
NAV (1) EUR0.9154 EUR0.9407
(31 Dec 2020: EUR0.8557) (31 Dec 2020: EUR0.8435)
-------------------------- --- --------------------------
NAV total return 16.87% 21.82%
(1)
(31 Dec 2020: 8.85%) (31 Dec 2020: (0.22)%)
-------------------------- --- --------------------------
Discount (1) (13.43)% (15.75)%
(31 Dec 2020: (21.70)%) (31 Dec 2020: (20.57)%)
-------------------------- --- --------------------------
Dividend EUR0.08 EUR0.08
(31 Dec 2020: EUR0.07) (31 Dec 2020: EUR0.07)
-------------------------- --- --------------------------
Further information on the reconciliation between the IFRS NAV
and the Published NAV can be found below. Refer to Discount
Management in the Chair's Statement below for the latest share
price discount to the Published NAV.
Performance
Ticker IFRS Published Share Discount Discount Dividend
NAV NAV Price IFRS Published Yield
per Share per Share ( (2) NAV NAV
()
BGLF
----------- ----------- ---------- ----------------- ----------- ---------
31 Dec
2021 EUR0.9154 EUR0.9407 EUR0.7925 ( 13.43)% (15.75)% 10.09%*
----------- ----------- ---------- ----------------- ----------- ---------
31 Dec
2020 EUR0.8557 EUR0.8435 EUR0.6700 (21.70)% (20.57)% 10.45%
----------- ----------- ---------- ----------------- ----------- ---------
BGLP
----------- ----------- ---------- ----------------- ----------- ---------
31 Dec 10.07%
2021 GBP0.7697 GBP0.7608 GBP0.6750 (12.30)% (11.28)% *
----------- ----------- ---------- ----------------- ----------- ---------
31 Dec
2020 GBP0.7647 GBP0.7538 GBP0.6000 (21.54)% (20.40)% 10.47%
----------- ----------- ---------- ----------------- ----------- ---------
* Dividend Yield presented as EUR0.08 per annum, given the first
three quarterly dividends of EUR0.0175 per share and fourth quarter
dividend of EUR0.0275, and the share price as at 31 December
2021.
LTM 3-Year Annualised Cumulative
Return Annualised Since Inception Since
(1) Inception
BGLF IFRS NAV 16.87% 10.73% 8.06% 78.14%
-------- ------------ ----------------- -----------
BGLF Published NAV 21.82% 11.62% 8.45% 82.99%
-------- ------------ ----------------- -----------
BGLF Ordinary Share
Price 31.15 % 13.21% 6.72% 62.31%
-------- ------------ ----------------- -----------
European Loans 4.63% 4.00% 3.39% 28.18%
-------- ------------ ----------------- -----------
US Loans 5.40% 5.42% 4.04% 34.35%
-------- ------------ ----------------- -----------
STRATEGIC REPORT
Reconciliation of IFRS NAV to Published NAV
At 31 December 2021, there was a difference between the NAV per
Ordinary Share as disclosed in the Statement of Financial Position,
EUR0.9154 per Ordinary Share, ("IFRS NAV") and the published NAV,
EUR0.9407 per Ordinary Share, which was released to the LSE on 24
January 2022 ("Published NAV"). A reconciliation is provided in
Note 16 in the Notes to the Financial Statements. The difference
between the two valuations is entirely due to the different
valuation bases used.
Valuation Policy for the Published NAV
The Company publishes a NAV per Ordinary Share on a monthly
basis in accordance with its Prospectus. The valuation process in
respect of the Published NAV incorporates the valuation of the
Company's CSWs and underlying PPNs (held by the Lux Subsidiary).
These valuations are, in turn, based on the valuation of the
Blackstone Corporate Funding Designated Activity Company ("BCF")
(formerly Blackstone / GSO Corporate Funding Designated Activity
Company) portfolio using a CLO intrinsic calculation methodology
per the Company's Prospectus, which we refer to as a "mark to
model" approach. As documented in the Prospectus, certain "Market
Colour" (market clearing levels, market fundamentals, bids wanted
in competition ("BWIC"), broker quotes or other indications) is not
incorporated into this methodology. The Directors believe that this
valuation process is the appropriate way of valuing the Company's
holdings, and of tracking the long-term performance of the Company
as the underlying portfolio of CLOs held by BCF are comparable to
held to maturity instruments and the Company expects to receive the
benefit of the underlying cash-flows over the CLOs' entire life
cycle.
Valuation Policy for the IFRS NAV
For financial reporting purposes on an annual and semi-annual
basis, to comply with IFRS as adopted by the EU, the valuation of
BCF's portfolio is at fair value using models that incorporate
Market Colour at the period end date, which we refer to as a "mark
to market" approach. IFRS fair value is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants as at the
measurement date, and is an "exit price" e.g. the price to sell an
asset. An exit price embodies expectations about the future cash
inflows and cash outflows associated with an asset or liability
from the perspective of a market participant. IFRS fair value is a
market-based measurement, rather than an entity-specific
measurement, and so incorporates general assumptions that market
participants are applying in pricing the asset or liability,
including assumptions about risk.
Both the mark to model Published NAV and mark to market IFRS NAV
valuation bases use modelling techniques and input from third-party
valuation specialists.
The Directors, as set out in the Prospectus, will continue to
assess the performance of the Company using the Published NAV.
Additional information and commentary on Market Colour, credit risk
exposure and any material divergence from the different valuation
bases referred to above will be communicated by the Directors and
Portfolio Adviser if and when appropriate.
Dividends and Other Key Data
Whilst not forming part of the Company's investment objective or
investment policy, it is currently intended that dividends are
payable in respect of each calendar quarter, two months after the
end of that quarter.
On 22 January 2021, the Board announced that the Company had
adopted a dividend policy targeting a total 2021 annual dividend of
between EUR0.07 and EUR0.08 per Ordinary Share, to consist of
quarterly payments of EUR0.0175 per Ordinary Share for the first
three quarters and a final quarter payment of a variable amount to
be determined at that time. In accordance with the Company's
dividend policy, the Board declared dividends of EUR0.0175 per
Ordinary Share for the first three quarters of 2021 and a dividend
of EUR0.0275 per Ordinary Share for the fourth quarter.
Refer to Note 21 for an update to the dividend policy after the
year end.
Ordinary Share Dividends for the Year Ended 31 December 2021
Period in respect Date Declared Ex-dividend Payment Date Amount per
of Date Ordinary Share
EUR
-------------- -------------- ------------- ---------------
1 Jan 2021 to 31 Mar
2021 23 Apr 2021 6 May 2021 4 June 2021 0.0175
-------------- -------------- ------------- ---------------
1 Apr 2021 to 30 Jun 3 September
2021 26 Jul 2021 5 August 2021 2021 0.0175
-------------- -------------- ------------- ---------------
1 Jul 2021 to 30 Sept
2021 21 Oct 2021 28 Oct 2021 26 Nov 2021 0.0175
-------------- -------------- ------------- ---------------
1 Oct 2021 to 31 Dec
2021 24 Jan 2022 3 Feb 2022 4 Mar 2022 0.0275
-------------- -------------- ------------- ---------------
Ordinary Share Dividends For the year ended 31 December 2020
Period in respect Date Declared Ex-dividend Payment Date Amount per
of Date Ordinary Share
EUR
-------------- -------------- ------------- ---------------
1 Jan 2020 to 31 Mar
2020 23 Apr 2020 30 April 2020 29 May 2020 0.0150
-------------- -------------- ------------- ---------------
1 Apr 2020 to 30 Jun
2020 21 Jul 2020 30 Jul 2020 28 Aug 2020 0.0150
-------------- -------------- ------------- ---------------
1 Jul 2020 to 30 Sept
2020 21 Oct 2020 29 Oct 2020 27 Nov 2020 0.0150
-------------- -------------- ------------- ---------------
1 Oct 2020 to 31 Dec
2020 22 Jan 2021 4 Feb 2021 5 March 2021 0.0250
-------------- -------------- ------------- ---------------
Year Highs and Lows
2021 2021 2020 2020
High Low High Low
Published NAV per
Ordinary Share EUR0.9407 EUR0.8534 EUR0.8992 EUR0.7663
--------- --------- --------- ---------
BGLF Share Price (last
price) EUR0.8250 EUR0.6400 EUR0.8400 EUR0.4500
--------- --------- --------- ---------
BGLP Share Price (last GBP0.7300 GBP0.5700 GBP0.7200 GBP0.4200
price)
--------- --------- --------- ---------
Schedule of Investments
As at 31 December 2021
Nominal Market % of Net Asset
Holdings Value Value
EUR
----------- ----------- --------------
Investment held in the
Lux Subsidiary:
----------- ----------- --------------
CSWs 267,088,098 411,170,727 97.43
----------- ----------- --------------
Shares (2,000,000 Class
A and 1 Class B) 2,000,001 6,798,832 1.61
----------- ----------- --------------
Other Net Assets 4,030,018 0.95
----------- ----------- --------------
Net Assets Attributable
to Shareholders 421,999,577 100.00
----------- ----------- --------------
Schedule of Significant Transactions
Date of Transaction Transaction Quantity Amount Reason
Type
EUR
------------- ---------- ---------- ----------------
CSWs held by the Company - Ordinary
Share Class
---------- ----------------
23 Feb 2021 Redemption 10,287,510 13,976,360 To fund dividend
------------- ---------- ---------- ----------------
Investments
6 Apr 2021 Subscription 6,170,000 6,170,000 in PPNs
------------- ---------- ---------- ----------------
Investments
5 May 2021 Subscription 3,742,949 3,742,949 in PPNs
------------- ---------- ---------- ----------------
14 May 2021 Redemption 9,067,077 12,522,939 To fund dividend
------------- ---------- ---------- ----------------
Investments
5 Aug 2021 Subscription 3,466,233 3,466,233 in PPNs
------------- ---------- ---------- ----------------
18 Aug 2021 Redemption 8,163,737 12,017,813 To fund dividend
------------- ---------- ---------- ----------------
Investments
5 Nov 2021 Subscription 5,229,553 5,229,553 in PPNs
------------- ---------- ---------- ----------------
9 Nov 2021 Redemption 8,882,168 13,762,794 To fund dividend
------------- ---------- ---------- ----------------
C Share
Chair's Statement
Dear Shareholders ,
Company Returns and Net Asset Value ( (3) ()
The Company delivered an IFRS NAV total return per Ordinary
Share of 16.87% during 2021, ending the year with a NAV of
EUR0.9154. The return was composed of 9.05% of dividend income and
7.82% of net portfolio movement.
On a Published NAV basis, the Company delivered a total return
per Ordinary Share of 21.82% during 2021, ending the year with a
NAV of EUR0.9407. The return was composed of dividend income 9.14%
and of net portfolio movement of 12.68%.
During 2021, the Company's strong performance was supported,
through its investment in BCF, by the ability to take advantage of
favourable conditions for CLO creation and management. This
included strong demand for CLO liabilities, low CLO funding costs,
and a relatively attractive arbitrage. This supported the
origination of new CLOs, but also provided the opportunity to
refinance or reset existing transactions. Returns were also
supported by positive loan market conditions and the absence of
defaults.
The Company paid four dividends to Ordinary Shareholders during
2021, totalling EUR0.08 per share, delivering at the upper end of
the 2021 dividend policy target of EUR0.07 - EUR0.08 per share.
Details of all dividend payments can be found within the Dividend
History section at the front of this Annual Report.
The Company's dividends are funded from the cash flows generated
by the Company's underlying CLO portfolio. The Board considers
three strategic priorities when allocating these cash flows:
-- Paying a sustainable dividend sufficiently covered by cash
generated, that does not erode the capital of the Company over
time;
-- Providing funds to implement the Board's share buyback policy; and
-- Reinvesting surplus cash proceeds in order to grow the
Company's Net Asset Value over time.
The Board has adopted a framework with Blackstone Credit that
first of all considers both realised and forward-looking
expectations of underlying cash flows to derive a target range for
the dividend for the coming year, then considers the level of the
Company's share price discount to Net Asset Value per share in
order to allocate a budget for share buybacks. Surplus cash
generated in excess of these requirements is reinvested.
In light of this revised framework, the Board have once again
targeted a total annual dividend of EUR0.07 - EUR0.08 per share,
which will consist of quarterly payments of EUR0.0175 per ordinary
share for the first three quarters and a final quarter payment of a
variable amount to be determined at that time. Please see the
announcement dated 24 January 2022 for more details.
Historical BGLF NAV and Share Price
The graph shows cumulative Published NAV and Ordinary Share
price total returns and cumulative returns on European and US
loans.
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
Market Conditions
Financial markets generally performed strongly during 2021,
continuing the tone set from the end of 2020. Equity markets
reached record levels and credit spreads continued to grind tighter
in tandem with the general recovery from the COVID-19 pandemic,
which affected many of our borrowers. Ongoing monetary and fiscal
support, accommodative capital markets, the rollout of mass
vaccination programmes, and the reopening of major economies all
supported a move towards healthy economic activity throughout the
bulk of the year.
While the demand side of the economy has been remarkably stable,
supply side disruptions have been partially responsible for some of
the macroeconomic cross currents experienced later in 2021. Global
supply chain constraints and other pandemic-related dislocations,
such as soaring energy prices, have caused a spike in inflation and
moderating GDP growth expectations. This is clearly a balancing act
for central banks; however, the uncertainty over the velocity and
quantum of monetary tightening led to fixed rate assets such as
investment grade and high yield bonds, to underperform. Leveraged
loans outpaced this performance due to their floating rate nature
and therefore natural interest rate and inflation hedge. Going
forward, we expect floating rate credit to outperform and see an
attractive environment for investors within leveraged loans and
CLOs.
Discount Management
The share price discount to Published NAV narrowed from 20.57%
on 31 December 2020 to 15.75% on 31 December 2021. During 2021, the
Company repurchased 16,038,629 shares for EUR12,396,228 at an
average discount of 12.57% using available cash with the goal of
reducing the discount. As of 27 April 2022, the share price
discount to March published NAV was 19.40%. As a Board, we
regularly weigh the balance between maintaining liquidity of the
shares, the stability of any discount, and the desire of
Shareholders to see the Ordinary Shares trade as closely as
possible to their intrinsic value(4) . Please see the announcement
dated 24 January 2022 for more details.
Transition away from LIBOR
The transition away from LIBOR to SOFR mainly impacts BCF's US
CLO portfolio, which accounts for 37.8% of BCF's NAV as of
year-end. A portion of BCF's US CLO equity holdings include
ARRC-suggested fallback language, triggering a LIBOR to SOFR
liability switch when 50% of the underlying loan portfolio
transitions to SOFR. Under normal market conditions, we expect the
impact to BCF's US CLO equity to be relatively muted due to the
ability to refinance and the expectation of higher forward
rates.
Environmental, Employee, Social, Community and Human Rights
Matters
The Company is a closed ended investment company with no
employees, and therefore the Company is currently exempt from the
requirement to report against the recommendations of the Task Force
for Climate Related Disclosures ("TCFD"). The Board notes that the
Company's direct environmental impact is minimal; however, certain
companies to which BCF provides finance to (either directly or
indirectly) may have environmental and/or social impact, and that
the governance of each borrower is critical in ensuring that they
behave ethically and attach appropriate importance to environmental
and social issues. The Board believes that good governance is
critical to ensuring that ESG risks are managed appropriately.
The Board notes that BX Credit has been committed to being a
responsible investor for over 35 years and that BX Credit
understands that material ESG issues can present both risks and
opportunities to long-term investment performance and therefore,
the security of BCF's loan portfolio. This commitment to
responsible investing is affirmed across the organisation and
guides its approach to financing and investing in companies.
Governance
The Board has appointed Mr Clark as the Director responsible for
ESG matters, and he helps promote close monitoring and further
development in this area for the Company.
The Company further developed the integration of ESG and
climate-related risks into its governance structure. During 2021,
the Board:
- discussed ESG, including climate-specific matters, with the
Portfolio Adviser at various meetings with a view to understanding
how meaningful ESG analysis is being embedded in the Portfolio
Adviser's credit investment process. These discussions included,
but were not limited to, analysis of the rapidly evolving area of
measurement and disclosure, the exchange of views on
climate-related issues and topics, which led to increased awareness
of climate-related issues and disclosures;
- received climate-related policy and regulation updates from
the Company's external advisers to ensure the Company is compliant
with changes in regulations and remains cognisant of best practice
guidance;
- received an overview of the Company's service providers
diversity and ESG policies and incorporated consideration of this
overview as part of its annual service provider evaluation; and
- considered its relations with shareholders regarding
ESG-related matters. The Board has noted the governance and
environmental benefits of offering virtual participation for
shareholder meetings.
Furthermore, the Board actively discusses ESG matters with
Blackstone with the view of obtaining more meaningful information
for our Shareholders.
Strategy and Risk Management
The Company's climate-related risks and opportunities are
closely linked to those companies which BCF provides finance to.
Therefore, the extent to which climate-related disclosures can be
reported by the Company is limited to some extent. However, as part
of BX Credit's investment process, BX Credit may engage with the
companies to whom BCF provides financing on ESG related matters.
Refer to the Portfolio Adviser's Review below for further
details.
As part of the Company's engagement with BX Credit, the Board
have obtained and reviewed BX Credit's Responsible Investing Policy
and considered their perspective on climate change. The Board noted
that BX Credit is of the belief that a key component of being a
responsible investor is an active evaluation of ESG components of
its investments. Hence, a review of sector specific ESG risks is
integrated into BX Credit's investment analysis and decision-making
processes from pre-investment diligence to post-investment
monitoring. BX Credit recognizes the value that incorporating ESG
factors in investment research creates both in terms of mitigating
risk and enhancing long-term performance across investments. BX
Credit integrates review and consideration of applicable ESG
factors into its decision-making processes. Refer to the Portfolio
Adviser's Review below for further details on the Portfolio
Adviser's ESG policy.
During the period, the Directors added ESG as a Category A Risk,
given it is a continued key focus of the Board and the Portfolio
Adviser. As part of the Company's Risk Management Framework, the
Risk Committee reviews the Company's Key Risks bi-annually based on
probability and potential impact on performance, strategy,
reputation, or operations.
Metrics & Targets
As of the end of 2021, BX Credit's CLO business did not
explicitly track exposure to climate risk or monitor the carbon
footprint of an investment due to limitations of available data, as
explained below. In practice, they took the ESG factors that may
impact investment performance into consideration and incorporated
such factors into their initial evaluation of an investment and the
ongoing investment monitoring process. Evaluation criteria were
based on the materiality of the ESG risk considering:
- whether it had a current impact or a potential future impact; and
- any mitigating actions the issuer undertook to address the risk.
Looking Forward
The Company is currently exempt from the requirement to report
against the TCFD recommendations but the Board will keep this under
review as requirements and best practice evolves.
The Board fully acknowledges the importance of the TCFD
recommendations and expects the companies to which BCF provides
finance to, to be compliant in their reporting against TCFD
recommendations, as appropriate.
The Board recognises that its ability to report on BCF's
underlying portfolio of borrowers is currently very limited;
however, the Board is committed to enhancing its reporting to
investors over time, to the extent permissible, as BX Credit's
ability to provide meaningful data on BCF's portfolio evolves as
further outlined below.
The Board
Good governance remains at the heart of our work as a Board and
is taken very seriously. We believe that the Company maintains high
standards of corporate governance. The Board was very active during
the year, convening a total of 18 Board meetings and 28 Committee
meetings. The Board used these meetings to discuss various aspects
of operational risk and controls, the loan and CLO markets, and
current market conditions.
In addition, as can be seen from the corporate activity during
the year, the Board and its advisers have worked hard to ensure the
continued success and growth of the Company to put it in the best
position to take advantage of all appropriate opportunities.
The work of the Board is assisted by the Audit Committee, NAV
Review Committee, Management Engagement Committee, the Remuneration
and Nomination Committee, the Risk Committee and the Inside
Information Committee. The joint work of the Risk and Audit
committees has given valuable support to the longer-term viability
considerations of the Board as described under the Viability
Statement in Risk Overview.
The Company is a member of the AIC and adheres to the AIC Code,
which is endorsed by the FRC, and meets the Company's obligations
in relation to the UK Code.
Shareholder Communications
During 2021, using our Portfolio Adviser and Brokers, we
continued our programme of engagement with current and prospective
Shareholders. We sincerely hope that you found the monthly
factsheets, quarterly letters, quarterly update webcasts and market
commentary valuable. We are always pleased to have contact with
Shareholders, and we welcome any opportunity to meet with you and
obtain your feedback.
Prospects and Opportunities in 2022
The Board maintains a cautiously optimistic outlook for 2022
given the overall health of the economy and the corporate
fundamental landscape. That said, there are a few headwinds that
warrant attention. Whilst the uncertainty stemming from the
COVID-19 pandemic appears to have faded, this has been replaced by
concerns over rising inflation, a tightening in monetary conditions
and the conflict in Ukraine. The conflict and humanitarian
situation in Ukraine has perpetuated volatility in the economy and
financial markets, leading to increased focus on the issuers the
Company lends to, specifically identifying those most leveraged to
rising input costs and with the least ability to manage such
pressures. The Board continues to gain comfort in Blackstone's
expertise as an active manager with skill in research and credit
selection, which we believe will be key in navigating this
environment. Subject to market conditions, the Board also notes
Blackstone's ability to execute on future securitisations, given
their previous experience accessing capital markets in a variety of
environments.
The Board wishes to express its thanks for the support of the
Company's Shareholders.
Charlotte Valeur
Chair
29 April 2022
Portfolio Adviser's Review
Bank Loan Market Overview
Leveraged loan markets demonstrated remarkable strength and
resilience during 2021. With capital markets functioning well and
capitalising on the strength exhibited at the turn of the year,
borrowers took advantage of historically low borrowing rates to
refinance existing debt and issue new debt to fund corporate
growth. The vaccination rollout helped drive consumer spending and
an unravelling of pent-up demand, supporting economic growth and a
normalisation of economic activity. This was despite periodic
disruption from the emergence of new variants, with the lower
severity of the more recent Omicron strain providing optimism that
the impacts of COVID-19 were diminishing. With a broad-based
recovery reflected across credit and lower-rated assets driving
outperformance, European and US leveraged loans returned 4.63% and
5.40%, respectively, with only one negative month across both
benchmarks throughout the year(5) .
Underpinning the positive performance was a supportive
fundamental backdrop. Borrowers were able to bolster liquidity and
we saw improving leverage and debt service ratios due to robust
revenue and EBITDA performance. This resulted in a higher pace of
rating agency upgrades and lower realised defaults, reflected in
sell side default forecasts that were revised downwards throughout
the year. At the end of 2021, the US loan last-twelve-month ("LTM")
par-weighted default rate was 0.5%, down from 4.4% at the end of
2020(6) . Defaults for Europe Loans were lower at 0.2%, compared to
1.2% at the end of 2020, with both markets tracking well below
longer term averages(6) . At the year-end point, the 2022 default
rate forecast for US and European leveraged loans were 0.75% and
0.80%, respectively(7) .
Complementing improving corporate fundamentals was a
well-balanced technical backdrop. Healthy M&A and LBO activity
alongside ongoing refinancing efforts led to record breaking
issuance of European and US loans. Gross loan supply totalled
EUR130 billion and $801 billion compared to EUR65 billion and $395
billion for 2020, respectively(8) . This strong demand was easily
absorbed. Firstly, the prospect of rising interest rates and
inflation drove a significant rotation of investors into loan funds
on account of their floating rate characteristics. There were also
meaningful flows from retail investors into US loan funds, which
experienced their first inflows since 2017, expanding the retail
ownership of the US loan market to 8.7% from 5.7% at the start of
the year(9) . Most importantly, the CLO market, which accounts for
the vast majority of global loan demand, also set issuance records,
which supported the bid for leveraged loans throughout the
year.
At the end of 2021, the average price for the European and US
leveraged loan indices increased to EUR98.71 and $98.39 from
EUR97.35 and $95.73 at the end of 2020, respectively(10) .
Similarly, European and US loan spreads (represented by 3-year
discount margin) tightened by 46 bps and 47 bps over the same
period to 413 bps and 439 bps, respectively(10) . Both trends are
consistent with the fundamental and technical themes previously
described, supporting the performance of CLO equity investors.
CLO Market Overview
By many measures, the CLO market had a record year in 2021.
Issuance soared, CLO liability spreads generally tightened,
fundamentals improved, and equity returns were very strong across
the market. In fact, CLO equity was highlighted by many sell-side
research desks as one of the top picks amongst fixed income
assets(11) .
CLO liability spreads trended towards multi-year lows in the
first half of 2021 and increased confidence in both underlying
collateral quality and CLO structures themselves led to a sharp
increase in CLO activity, which is a theme that persisted
throughout the year. Whilst the weighted average cost of CLO
funding increased marginally in the second half of 2021 under the
pressure of heavy supply, the arbitrage available to equity
investors was still attractive. Combined with broad based demand
for CLO debt due to compelling relative value and its natural
interest rate and inflation hedge, there was a sharp increase in
global new issuance, but also refinancing and reset activity from
those managers aiming to reduce the cost of capital in existing
transactions or lock in longer reinvestment periods, both of which
are potentially accretive to IRR. This optionality is a key benefit
for CLO equity investors who as a result might expect higher
expected future cashflows in aggregate and an increase in equity
net asset value ("NAV") as a result.
Taking all of this into account, total CLO new issuance was a
record EUR39 billion and $187 billion for Europe and the US
respectively, with a further EUR61 billion and $245 billion
accounted for by refinancing and reset volume(12) . The CLO market
also grew beyond $1 trillion of outstanding volume globally, and
with many new entrants into the asset class, it can be argued that
CLOs are becoming accepted as a more mainstream fixed income asset
broadly owned by institutional investors.
In Europe, AAA-rated CLO spreads finished at 97 bps at the end
of 2021 after hitting lows in the high 70 bps region in March
(compared to 105 bps at the end of 2020)(13) . Similarly, US CLO
AAA-rated spreads were 113 bps as of the end of 2021 after reaching
100 bps in March (compared to 132 bps at the end of 2020)(14) .
Consistent with the healthy loan fundamentals, CLO fundamentals
also improved in 2021. In Europe, Caa-rated buckets finished 2021
at 3.6% on average, down from 6.2% at the end of 2020, and
defaulted assets remained at 0% on average. There was also an
improvement in Weighted Average Rating Factor ("WARF") by 338 to
2,910 and an increase in junior overcollateralisation ("OC")
cushions by 166bps to 414 bps. Weighted Average Asset Price ("WAP")
also increased by 1.2 to 99.1. Notably, CLO equity market value
NAVs increased by 15.5 to 66.2(14) .
In the US, Caa-rated buckets were 3.9% versus 6.8% at the end of
2021, defaulted assets fell to 0% from 0.5% and WARF metrics
declined by 331. Likewise, junior OC cushions increased by 166bps
to 448bps over the same period, and WAP also increased by 1.4 to
98.7. CLO equity NAV also posted an impressive gain of 21.3 to
65.8(14.)
As we look forward, CLO supply is expected to stay elevated,
albeit issuance will be at a slightly slower pace than experienced
in 2021. CLO liability spreads have recently widened in sympathy
with broader market volatility, partly caused by the conflict in
Ukraine, but we believe this pause in issuance activity will be
temporary as the market adjusts to higher loan and CLO liability
spreads. We believe that CLOs remain an attractive asset class
based on relative value, its floating rate and match funded nature,
and the current relatively benign default environment.
Portfolio Update
BCF
At the start of 2021, focus within BCF's loan portfolio was on
exiting tail risk names to avoid par loss and rotating out of lower
coupon names, with CLOs subsequently repositioning into market
strength as confidence around the expected recovery grew. As the
year progressed, trading activity became increasingly focussed on
relative value leveraging both healthy primary market activity and
secondary market opportunities, to rotate into higher spread assets
where valuations were attractive and in names that we had longer
term conviction. This would become an ongoing theme throughout the
year to maintain or increase portfolio weighted average spread and
ultimately support distributions to investors.
In the context of a broadly supportive market, we experienced
pockets of volatility on two fronts. Firstly, the emergence of new
COVID-19 variants led to periods of softness; however, we took this
as an opportunity to purchase names in which we had longer term
conviction and viewed as oversold. We deployed similar tactics when
navigating the market uncertainty from increased interest rate and
inflation expectations, acquiring assets at attractive valuations
that ultimately traded up as the market firmed into year end.
Reflecting 2021's trading activity, BX Credit's CLOs finished
the year in the top quartile with respect to junior OC cushion in
both Europe and the US(15) , which is consistent with our
philosophy of ensuring that investor capital is protected. BCF's
CLOs also outperformed the market with respect to defaults, with a
default loss rate of 0.00% versus 0.03% for European loans and
0.19% for US loans(16) respectively.
At the end of the year, the BCF loan portfolio remains a
well-diversified, defensively positioned portfolio of 727 issuers
across 29 sectors and 31 countries. It holds 4.4% rated CCC at the
facility level (down from 5.5% at the end of 2020), has 0.5% of
assets priced less than 80% (10 bps higher compared to the end of
2020), and has a maturity profile wrapped around 2026, reflecting
approximately one year's extension from the same time last
year.(17)
Consistent with the supportive environment for CLOs, BCF had a
record year of activity in both new issuance and optimisation of
its liability portfolio. In 2021, BCF participated in the capital
markets on 25 occasions, which includes 8 new issues, 12 resets,
and 5 refinancings. In total, the CLO portfolio spans eight vintage
years, providing ample opportunity to manage costs and reinvestment
periods.
Despite the heavy volumes of issuance in the market throughout
the year, Blackstone Credit was able to price at levels tighter
than peers on several occasions, which was recently supported with
data published by JPMorgan research (18) . Across the 17 CLOs that
were refinanced or reset during 2021, the average cost of capital
was reduced by 16 basis points(19) and reinvestment periods were
extended by 3.2yrs in the case of resets, both of which are
immediately accretive to the NAV of these CLOs.
Where a refinancing or resetting was less accretive versus other
uses of capital, BCF either redeemed CLOs or exited through a sale
where available; in total five CLOs were redeemed, and three CLO
equity positions sold in full at levels that were accretive to both
mark to model and mark to market prices(20) . Taking the portfolio
recycling all together, the average IRR on fully exited
transactions is 16.9%(21) .
As a result of financing activity in 2021, BCF's net interest
margin improved to 214 bps, up from 192 bps at the end of 2020.
Firstly, due to loan trading activity, BCF's weighted average asset
coupon increased to 378 bps from 374 bps at the end of 2020. There
was a significant reduction in BCF's weighted average cost of
capital to 164 bps from 183 bps due to CLO liability refinancing
and the refinancing of the credit facility supporting balance sheet
loan purchases. Finally, the CLO portfolio's weighted average
reinvestment period increased to 2.3 years from 1.9 years at the
end of 2020.
Whilst the impact of this activity is more immediately evident
in the NAV and less so in current income, it importantly lays the
groundwork for future distributions. As of the end of the year, the
weighted average annualised cash on cash distribution for the
current CLO portfolio was 18.3%(22) . Underpinning this are CLOs at
various life stages with distributions for many CLOs both higher
and lower than average, as one would expect with a portfolio of
this size.
Looking forward, approximately two thirds of the CLO portfolio
will have lapsed their non-call dates by the end of 2022, though
the number that will be 'in the money' candidates for refinancing
may be lower, subject to market conditions. That said, we will
continue to evaluate the relative merits of a refinancing, reset,
redemption or sale, for each CLO and also identify opportunities to
execute on new CLO securitisations in the context of the broader
market volatility experienced so far in 2022.
Within the loan portfolio, we are relatively confident around
CCC risk and expect defaults to remain below longer-term averages.
Although we expect more dynamic credit markets, corporate
fundamentals should remain relatively healthy, and we expect
individual credit selection to underpin performance in 2022. Our
attention will continue to be focused on navigating those issuers
most exposed to inflation and supply chain related headwinds,
including avoiding those issuers with deteriorating debt servicing
ability as a result of higher financing costs and margin pressure.
As always, we intend to lever our research and portfolio management
platform to forecast potential loan upgrades and downgrades, and
forward-looking valuations to help refine trading strategies to
protect invested capital.
CLO Portfolio Positions
'Current' Closing Deal Position Owned % of % of Reinvest. Current Current Current NIM
Portfolio / Size (EURM) Tranche BCF Period Asset Coupon Liability Net 3M Prior
[Expected (EURM) NAV Left (Yrs) Cost Interest Distributions
Close] Margin Through Last Payment
Date Date(23)
Ann. Cum.
----- -------------
EUR CLO Income Note Investments
Phoenix Park Jul-14 417 23.3 51.4% 1.1% 1.3 3.60% 1.78% 1.82% 1.79% 13.9% 100.7%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Dartry Park Mar-15 427 26.6 51.1% 1.2% 3.3 3.59% 1.67% 1.92% 1.93% 13.9% 91.9%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Tymon Park Dec-15 416 22.7 51.0% 1.3% 3.6 3.66% 1.80% 1.86% 1.77% 15.7% 87.9%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Elm Park May-16 522 31.9 56.1% 1.7% 3.8 3.61% 1.70% 1.91% 1.87% 17.1% 92.1%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Griffith
Park Sep-16 456 26.0 53.4% 1.5% 1.4 3.63% 1.57% 2.06% 2.00% 10.5% 54.8%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Clarinda
Park Nov-16 417 23.1 51.2% 1.3% 3.1 3.67% 1.70% 1.97% 1.93% 11.4% 56.9%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Palmerston
Park Apr-17 399 24.0 53.3% 1.2% 0.0 3.50% 1.59% 1.91% 1.93% 13.9% 62.8%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Clontarf
Park Jul-17 385 29.0 66.9% 1.4% 0.0 3.48% 1.65% 1.82% 1.90% 14.5% 62.7%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Willow Park Nov-17 412 23.4 60.9% 1.3% 0.5 3.47% 1.58% 1.90% 1.91% 17.4% 67.2%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Marlay Park Mar-18 413 24.6 60.0% 1.4% 0.3 3.54% 1.40% 2.14% 2.10% 19.1% 67.8%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Milltown
Park Jun-18 409 24.1 65.0% 1.6% 0.5 3.62% 1.50% 2.12% 2.06% 17.9% 60.0%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Richmond
Park Jul-18 516 46.2 68.3% 1.7% 0.0 3.52% 1.59% 1.93% 1.97% 17.6% 57.1%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Sutton Park Oct-18 408 24.0 66.7% 1.6% 1.4 3.67% 1.72% 1.95% 1.86% 17.1% 48.6%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Crosthwaite
Park Feb-19 516 33.0 64.7% 1.9% 3.7 3.65% 1.75% 1.90% 1.83% 15.4% 43.1%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Dunedin Park Sep-19 423 25.3 52.9% 1.1% 4.4 3.59% 1.83% 1.75% 1.80% 26.4% 57.2%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Seapoint
Park Nov-19 404 21.6 70.5% 1.5% 2.4 3.65% 1.84% 1.81% 1.75% 14.7% 26.0%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Holland Park Nov-19 427 39.1 72.1% 1.6% 2.4 3.74% 1.90% 1.84% 1.74% 10.1% 20.3%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Vesey Park Apr-20 403 24.5 80.3% 1.9% 2.9 3.71% 1.97% 1.74% 1.67% 20.3% 31.4%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Avondale
Park Jun-20 409 22.7 63.0% 1.3% 4.2 3.68% 1.88% 1.81% 1.76% 56.5% 70.2%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Deer Park Sep-20 355 20.5 71.9% 1.4% 4.3 3.68% 2.27% 1.41% 1.32% 46.1% 51.0%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Marino Park Dec-20 323 17.0 71.4% 1.4% 2.0 3.80% 1.84% 1.95% 1.91% 21.4% 17.4%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Carysfort
Park Apr-21 406 25.1 80.7% 1.9% 3.6 3.66% 1.68% 1.98% 1.96% 17.0% 9.5%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Rockfield
Park Jul-21 404 24.0 80.0% 1.9% 3.5 3.68% 1.75% 1.93% 1.91% n/a n/a
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Dillon's
Park Sep-21 406 26.2 84.0% 1.9% 4.3 3.80% 1.83% 1.97% 1.97% n/a n/a
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Cabinteely
Park Dec-21 404 23.6 75.6% 1.7% 4.9 3.63% 1.90% 1.73% n/a n/a n/a
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
'Current' Closing Deal Position Owned % of % of Reinvest. Current Current Current NIM
Portfolio / Size ($M) Tranche BCF Period Asset Coupon Liability Net 3M Prior
[Expected ($M) NAV Left (Yrs) Cost Interest Distributions
Close] Margin Through Last Payment
Date Date(24)
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- --------------------
Ann. Cum.
---------- ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
USD CLO Income Note Investments
Grippen
Park(25) Mar-17 611 29.8 50.1% 1.5% 0.3 3.90% 1.86% 2.04% 2.00% 14.8% 68.0%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Thayer
Park(25) May-17 524 27.4 50.1% 1.3% 4.3 3.84% 1.76% 2.08% 2.08% 15.7% 69.7%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Catskill
Park(25) May-17 1,029 56.0 51.6% 2.5% 0.3 3.92% 1.70% 2.22% 2.16% 15.2% 67.2%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Dewolf
Park(25) Aug-17 614 31.7 51.6% 1.7% 0.8 3.94% 1.58% 2.36% 2.05% 15.7% 64.9%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Gilbert
Park(25) Oct-17 1,022 51.8 50.8% 2.5% 0.8 3.88% 1.80% 2.07% 2.04% 16.0% 63.6%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Long Point
Park(25) Dec-17 611 29.5 50.1% 1.5% 1.0 3.87% 1.55% 2.33% 2.31% 20.6% 78.3%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Stewart
Park(25) Jan-18 874 92.2 50.1% 1.6% 1.0 3.88% 1.59% 2.29% 2.29% 14.4% 53.8%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Cook
Park(25) Apr-18 1,025 53.6 50.1% 2.8% 1.3 3.87% 1.47% 2.40% 2.35% 18.1% 63.6%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Fillmore
Park Jul-18 561 30.2 54.3% 1.7% 1.5 3.87% 1.65% 2.22% 2.21% 15.8% 50.8%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Harbor Park Dec-18 715 39.7 50.1% 2.1% 2.1 3.85% 1.75% 2.10% 2.09% 15.8% 44.9%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Buckhorn
Park Mar-19 509 24.2 50.1% 1.4% 4.5 3.83% 1.72% 2.11% 2.05% 19.9% 51.5%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Southwick
Park(25) Aug-19 503 26.1 59.9% 1.7% 2.6 3.84% 1.73% 2.12% 1.72% 16.6% 36.0%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Beechwood
Park(25) Dec-19 810 48.9 61.1% 2.7% 3.0 3.91% 2.11% 1.80% 1.78% 15.6% 28.5%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Allegany
Park(25) Jan-20 505 30.2 66.2% 1.7% 3.0 3.88% 2.08% 1.80% 1.80% 13.4% 23.6%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Harriman
Park(25) Apr-20 503 29.2 70.0% 1.9% 4.3 3.88% 1.76% 2.12% 2.12% 33.7% 50.5%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Cayuga
Park(25) Aug-20 401 22.9 72.0% 1.5% 4.5 3.88% 1.74% 2.14% 2.11% 44.2% 52.3%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Point Au
Roche
Park(25) Jun-21 457 26.5 61.2% 1.8% 4.6 3.97% 1.74% 2.24% 2.25% n/a n/a
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Peace
Park(25) Sep-21 661 39.0 60.8% 2.4% 4.8 3.96% 1.74% 2.22% 2.22% n/a n/a
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Whetstone
Park(25) Dec-21 506 28.6 62.5% 1.8% 5.1 3.97% 1.83% 2.22% n/a n/a n/a
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
Vertical Retention Investments
Tallman
Park(26) May-21 410 2.1 5.0% 0.1% 4.3 3.98% 1.66% 2.31% 2.30% 28.9% 11.5%
------------ ------- ---------------- ---------- ---- ---------- ------------ --------- -------- --------- ----- -------------
US Warehouse Initial Investment Closing / Investment Investment Current Loan Current Asset Current Net Interest Margin
Investments Date [Expected Close] (EURM)(27) ($M)(28) Exposure(28) Coupon Liability
(29) Date ($M) Coupon
-------------------- ---------------- ---------------- ---------- ------------ ------------------- --------- --------------------
Boyce Park Sep-21 [Q1-22] 11.0 12.6 189.3 4.08% 1.31% 2.77%
-------------------- ---------------- ---------------- ---------- ------------ ------------------- --------- --------------------
Wehle Park Nov-21 [Q1-22] 2.5 2.8 74.7 4.09% 1.31% 2.78%
-------------------- ---------------- ---------------- ---------- ------------ ------------------- --------- --------------------
Saratoga Park Nov-21 [Q1-22] 1.6 1.8 74.7 4.09% 1.31% 2.78%
-------------------- ---------------- ---------------- ---------- ------------ ------------------- --------- --------------------
Redeemed Region Vintage Exit Sale/ BCF Position Current Valuation as Realised Ann. Distribution
Or Method Redemption Prior To Exit % of BCF NAV(30) IRR Through Last Payment(32)
Fully Sold Date (M) To
CLOs Date(31)
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Myers Park U.S. 2018 Sale Mar-21 $26.4 N/A 11.1%* 16.4%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Greenwood
Park U.S. 2018 Sale Mar-21 $53.9 N/A 19.0%* 19.7%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Orwell Park Europe 2015 Redemption May-21 EUR24.2 0.04% 13.4%* 26.2%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Stratus
2020-2 U.S. 2020 Redemption Jun-21 $24.2 0.01% 37.1% 114.0%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Niagara
Park U.S. 2019 Sale Aug-21 $22.1 N/A 16.6%* 14.9%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Sorrento
Park Europe 2014 Redemption Oct-21 EUR29.5 0.22% N/A 17.5%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Castle Park Europe 2014 Redemption Oct-21 EUR24.0 0.06% 10.3%* 20.9%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
Dorchester
Park U.S. 2015 Redemption Oct-21 $44.5 0.22% 10.9%* 21.5%
----------- -------- ---------------- ---------- ---------------- ----------------------- -------- -------------------------------
*Realised IRRs for redemptions are reflective of distributions
made to BCF to date, with data available in Intex as of 17 January
2022. IRRs may change as further distributions to income
noteholders are made. For fully sold CLOs, realised IRR includes
sale proceeds returned to BCF. IRRs denoted with an * are inclusive
of fee rebates.
As of 31 December 2021, the Company was invested in accordance
with its and BCF's investment policy and was diversified across 727
issuers through the directly held loans and CLO portfolio, and
across 31 countries and 29 different industries. No individual
borrower represented more than 2% of the overall portfolio at the
end of December 2021.
Key Portfolio St atistics (33)
%
of Current WA Current WA
NAV Asset Coupon Liability WA Remaining
(34) (35) Cost (35) RPs (CLOs)
EUR CLOs 38.04% 3.63% 1.74% 2.4 Years
------- ------------- ---------- ------------
US CLOs 37.78% 3.89% 1.73% 2.3 Years
------- ------------- ---------- ------------
Directly Held Loans (less
leverage) 25.33% 3.82% 1.35% n/a
------- ------------- ---------- ------------
US CLO Warehouses 1.21% 4.08% 1.31% n/a
------- ------------- ---------- ------------
Net Cash & Expenses -2.36% - - n/a
------- ------------- ---------- ------------
Subtotal 100.00% 3.78% 1.64% 2.3 years
------- ------------- ---------- ------------
Top 10 Industries (**)
Industry % of Portfolio
31 December 2021
----------------
Healthcare and Pharmaceuticals 16.49%
----------------
High Tech Industries 10.42%
----------------
Services Business 10.02%
----------------
Banking, Finance, Insurance and
Real Estate (FIRE) 7.32%
----------------
Media Broadcasting and Subscription 6.20%
----------------
Hotels, Gaming and Leisure 5.64%
----------------
Construction and Building 5.52%
----------------
Chemicals, Plastics and Rubber 5.07%
----------------
Services Consumer 4.36%
----------------
Telecommunications 4.13%
----------------
Subtotal 75.17%
----------------
Industry % of Portfolio
----------------
31 December 2020
----------------
Healthcare and Pharmaceuticals 15.21%
----------------
Services Business 10.44%
----------------
High Tech Industries 9.32%
----------------
Banking, Finance, Insurance, Real
Estate (FIRE) 8.71%
----------------
Media Broadcasting and Subscription 6.81%
----------------
Hotels, Gaming and Leisure 6.22%
----------------
Chemicals, Plastics and Rubber 6.03%
----------------
Construction and Building 5.21%
----------------
Telecommunications 4.55%
----------------
Services Consumer 3.72%
----------------
Subtotal 76.22%
----------------
Top 5 Countries (**)
Country % of Portfolio
31 December 2021
----------------
United States 48.23%
----------------
United Kingdom 10.16%
----------------
France 8.98%
----------------
Netherlands 6.86%
----------------
Germany 5.71%
----------------
Subtotal 79.94%
----------------
Country % of Portfolio
-----------------
31 December 2020
----------------
United States 52.73%
----------------
United Kingdom 9.81%
----------------
France 7.36%
----------------
Luxembourg 6.26%
----------------
Netherlands 4.52%
----------------
Subtotal 80.68%
----------------
Top 20 Issuers (**)
# Portfolio Total Moody's Country WA WA WA WA
Facilities Par(EUR) Par Industry Price Spread Coupon Maturity
Outstanding(EUR) (All-In (Years)
Rate)
Media Broadcasting
Numericable 6 182M 6,854M and Subscription France 98.4 3.27% 3.30% 4.5
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Numericable is one of the largest telecommunications operators
in France by revenues and number of subscribers, with major
positions in residential fixed, residential mobile, B2B, wholesale
and media.
Euro United
Garages 6 174M 5,864M Retail Kingdom 99.9 4.22% 4.28% 3.3
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Euro Garages is the leading global independent convenience retail
and fuel station operator with a fuel, convenience retail and
Food-to-Go offering with partnerships with leading brands such
as Esso, BP, Shell, Dunkin Donuts, Starbucks, Subway, and Pizza
Hut, among others.
Virgin Media Broadcasting United
Media 4 172M 5,545M and Subscription Kingdom 99.3 2.74% 2.78% 6.8
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Virgin Media is a British telecommunications company which provides
telephone, television, and internet services in the United Kingdom.
Virgin Media is a subsidiary of Liberty Global, an international
television and telecommunications company.
Thyssenkrupp Capital
Elevators 3 164M 4,314M Equipment Germany 100.1 3.71% 3.89% 5.6
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Thyssenkrupp is the number four player in the global market
for elevator and escalator technology. The company designs,
manufacturers, installs, services, and modernises elevators,
escalators, and platform lifts.
Media Broadcasting
Ziggo 2 163M 4,470M and Subscription Netherlands 98.8 2.87% 2.90% 6.9
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Ziggo is one of the largest cable operators in the Netherlands.
The company provides radio, television, internet, and telephone
services. The company was created as a result of the merger
between Multikabel, @Home and Casema.
Sivantos Healthcare
/ and
Siemens 2 156M 3,019M Pharmaceuticals Denmark 99.8 3.94% 3.97% 4.2
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Sivantos/Siemens was created following the completion of the
merger between Sivantos and Widex. The combined company operates
in 125 markets and holds the third position in the hearing aid
market globally.
Masmovil 4 154M 6,050M Telecommunications Spain 100.1 4.04% 4.04% 5.8
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Masmovil provides telecommunications services. The Company offers
fixed line, mobile, and Internet services.
Media Broadcasting
UPC 4 149M 3,571M and Subscription Netherlands 99.2 2.75% 2.79% 7.1
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
UPC is a cable operator in Switzerland, Poland & Slovakia. It
offers broadband, tv and mobile services.
Banking,
Finance,
Insurance
and Real
Estate United
Paysafe 3 149M 2,037M (FIRE) States 96.6 2.92% 3.08% 6.6
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Paysafe is a leading specialised payments platform, offering
services in payment processing and digital wallets.
Beverage,
Food and United
Froneri 2 144M 4,493M Tobacco Kingdom 98.4 2.33% 2.37% 5.1
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Froneri is a global ice cream manufacturer with its headquarters
in North Yorkshire, England. It is the second largest ice cream
producer by volume in the world, after Unilever. Froneri was
created in 2016 as a joint venture between Nestle and PAI Partners
to combine their ice cream activities.
Chemicals,
Plastics
AkzoNobel 2 142M 4,542M and Rubber Netherlands 99.3 3.18% 3.21% 3.8
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
AkzoNobel Specialty Chemicals represents a collection of specialty
and commodity chemical and polymer businesses split across five
divisions: Surface Chemistry (surfactants and polymers), ethylene
and sulfur derivatives, polymer chemistry (includes catalysts
and polymer additives), industrial chemicals (includes chlor-alkali
and other industrial chemicals), and pulp and performance chemicals
(includes hydrogen peroxide and other bleaching chemicals, and
variety of other chemicals).
Allied Services United
Universal 3 135M 5,160M Business States 99.2 3.73% 3.96% 6.4
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Allied Universal is a global security firm and the largest manned
guarding provider in North America, with additional operations
across Europe, the Middle East, Africa, Asia Pacific and Latin
America.
Banking,
Finance,
Insurance
and Real
ION Estate
Trading 2 130M 3,313M (FIRE) Ireland 100.4 4.49% 4.60% 6.3
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Ion Trading is a global financial software and services company
that offers mission critical trading infrastructure solutions
to banks and other financial institutions. In particular, the
company provides high performance trading solutions for electronic
fixed income markets, including support for cash, futures, repos,
money markets, interest rate swaps and credit default swaps.
The group serves 800+ customers worldwide.
BMC High Tech United
Software 3 127M 4,711M Industries States 100 3.97% 4.05% 3.8
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
BMC Software is a prominent provider of business management
software used for a variety of functions and processes. The
company's software and services are used in automation, optimisation,
performance, security, and service management, and covers everything
from mainframe to multi-cloud.
High Tech United
Veritas 2 121M 2,225M Industries States 100.3 4.88% 5.88% 3.7
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Veritas Technologies, LLC represents the legacy Information
Management division of Symantec Corporation. For over two decades
the Company has been a market leader in information management
software and solutions that help organisations protect, manage
and analyze their mission-critical enterprise data, such as
emails, documents and spreadsheets, as well as their applications,
such as financial, human resources, supply chain management
and enterprise resource planning ("ERP") systems, collaboration
tools and databases. The Company offers industry-leading backup
and recovery solutions, as either independent software or integrated
software-hardware appliances.
Chemicals,
Plastics United
Ineos 4 117M 4,300M and Rubber Kingdom 99 2.48% 2.71% 4.5
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Ineos Quattro, through its subsidiaries, manufactures chemicals
such as PVC, caustic soda, styrene plus derivatives, aromatics
and acetyls. Ineos Quattro serves customers worldwide.
Healthcare
and United
Medline 2 110M 6,828M Pharmaceuticals States 100.2 3.34% 3.66% 6.8
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Medline is the largest US-based privately held manufacturer
and distributor of healthcare supplies to hospitals, post-acute
settings, physician offices and surgery centers. The company
manufactures both Medline-branded products and distributes additional
externally sourced items from other healthcare manufacturers.
Financiere
Chopin Healthcare
(Ceva and
Santé) 1 109M 2,050M Pharmaceuticals France 100.6 4.25% 4.25% 4.3
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Ceva Santé Animale is a private global veterinary pharmaceutical
company headquartered in France that focuses on the research,
development, production and marketing of pharmaceutical products
and vaccines for poultry, swine, cattle and pets. Ceva provides
four major products (anti-infectives, vaccines, reproduction
and animal behaviour / cardiology) for all major species.
Hotels,
Hotelbeds Gaming United
Group 3 109M 1,808M and Leisure Kingdom 89.6 4.40% 4.40% 4.1
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
Hotelbeds Group is the leading global B2B distributor of accommodation
and ancillary products to the world's travel trade. Hotelbeds
Group contracts directly with hotels and other service providers
globally to provide Travel Operators (TOs), Travel agents (TAs)
and Online Travels agents (OTAs) with an inventory of hotel
rooms and ancillary travel services.
CRH
Europe Construction
Distribution 2 108M 1,650M and Building Netherlands 100.1 3.93% 3.93% 4.6
----------- ---------- ----------------- ------------------- ------------ ------ ------- -------- ---------
CRH European Distribution is a leading regional distributor
of general building products in Germany, Netherlands, Belgium,
France, Switzerland and Austria. The Company specializes in
the sale and distribution of basic building materials and sanitary,
heating and plumbing products. CRH European Distribution was
formed as a subsidiary of CRH through a series of 53 acquisitions
since 2004.
**As of 31 December 2021, calculated using internal data.
Portfolio data by Issuer, Industry, and Country, are presented
using the gross par amount of assets held directly and indirectly
by BCF. Indirect asset holdings are held within CLOs BCF has
invested in. The total par amount of all assets held within each
CLO are included on a fully consolidated basis and added to those
assets held directly by BCF. Portfolio holdings, Country, and
Industry distributions are subject to change and are not
recommendations to buy or sell any security. CLO Note and CLO
warehouse investments are excluded from all figures. Data
calculated by Blackstone Credit.
Directly Held CLOs
All outstanding positions of Rollover Assets were sold during
2021.
Regulatory Update
In Europe, Regulation (EU) 2019/2088 on sustainability-related
disclosures in the financial services sector ("SFDR") was published
on 27 November 2019. With an effective date of 10 March 2021, SFDR
required certain firms, including private banks, wealth managers
and advisers to comply with new rules on disclosure as regards
sustainable investments and sustainability risks. Asset managers,
including Blackstone Credit ("BX Credit"), have worked to implement
procedures which will allow us, where required, to comply with the
SFDR. BX Credit continues to monitor regulatory developments with
regards to SFDR, including the publication of additional Regulatory
Technical Standards (which, with regards to the SFDR reporting
requirements, are now expected to take effect on 1 January 2023,
recently extended from July 2022).
In connection with Regulation (EU) 2017/2402 (the "EU
Securitisation Regulation"), widely anticipated secondary
legislation setting out the prescribed form of reporting templates
was published on 3 September 2020 and use of these reporting
templates became mandatory to investors from 23 September 2020. BX
Credit was well positioned to transition to the use of these formal
reporting templates, and these reporting templates are used in
respect of all in-scope CLOs. On 1 April 2022, UK Securitisation
Regulation specific reporting templates, which diverge from the
reporting templates published pursuant to the EU Securitisation
Regulation, will be required for all CLO transactions seeking
compliance with the UK Securitisation Regulation. BX Credit,
working together with 3rd party service providers, is well
positioned to produce these UK Securitisation Regulation compliant
reports.
Interest limitation rules, implemented as part of the Anti-Tax
Avoidance Directive, apply to certain EU CLO issuers with respect
to their accounting periods commencing on or after 1 January 2022.
It is not expected that interest limitation rules will adversely
impact BX Credit's CLO business.
Risk Management
Given the natural asymmetry of fixed income, our experienced
credit team focuses on truncating downside risk and avoiding
principal impairment and believes that the best way to control and
mitigate risk is by remaining disciplined in all market cycles and
by making careful credit decisions while maintaining adequate
diversification.
BCF's portfolio is managed to minimise default risk and credit
related losses, which is achieved through in-depth fundamental
credit analysis and diversified portfolios in order to avoid the
risk of any one issuer or industry adversely impacting overall
performance. As outlined in the Portfolio Update section, BCF is
broadly diversified across issuers, industries, and countries.
BCF's base currency is denominated in Euro, though investments
are also made and realised in other currencies. Changes in rates of
exchange may have an adverse effect on the value, price, or income
of the investments of BCF. BCF may utilise different financial
instruments to seek to hedge against declines in the value of its
positions as a result of changes in currency exchange rates.
Through the construction of solid credit portfolios and our
emphasis on risk management, capital preservation, and fundamental
credit research, we believe the Company's investment strategy will
continue to be successful.
Blackstone Inc. Responsible Investing Approach
The Importance of Responsible Investing
For over 35 years, Blackstone Inc. has been committed to being a
responsible investor. This commitment is affirmed across our
organisation and guides our approach to investing. We believe that
adequate consideration of ESG factors for prospective investments
enhances our assessment of risk and helps us identify potential
opportunities for transformation at companies where we invest.
Consequently, we believe that a comprehensive ESG program, aside
from being the right thing to do, can drive value and enhance
returns for our investors. We also believe that considering ESG
factors helps us understand trends and how they will shape demand
and markets in years to come. Our framework can apply across
various categories of investment opportunities, though the
application varies by asset class, investment scope, and the
characteristics of a particular investment opportunity.
Objectives
Blackstone's responsible investing objectives are outlined
below:
-- Integration
Consider environmental, social, and governance issues when
evaluating investment opportunities and when managing / monitoring
portfolios and assets. Pursue high-quality sources of ESG data and
intelligence; where appropriate, integrate that data into our
research process and also use that data to enhance our
understanding of markets and consumer trends. Actively use ESG
considerations to transform our portfolio companies in ways that
both manage risk and are value accretive for our investment
portfolios. In addition, integrate ESG considerations into our
business practices outside of the investment process.
-- Engagement
Work together with our portfolio entities, managers, transaction
partners, peers, and other partners to advance principles of
responsible investment and corporate social responsibility. Share
our ESG philosophy broadly and use our leadership position to
influence others and advance the dialogue of the importance of ESG
integration in finance and for corporate actors generally.
-- Reporting
Be transparent with our investors and other stakeholders about
Blackstone's responsible investing initiatives, successes, and
goals. Blackstone reports its ESG initiatives on its website at
https://www.blackstone.com/our-impact/an-integrated-approach-to-esg/.
As of September 2021, Blackstone is a founding member of the ESG
Data Convergence Project, a collaboration between limited partners
and general partners, which aims to standardize an initial set of
metrics for ESG reporting.
Approach and Responsibilities
Across all of Blackstone's businesses, ESG is core to what we
do. Our approach includes an evaluation of ESG considerations (pre-
and post-investment decision making) as a standard part of the
investment and the asset / portfolio management processes. Primary
responsibility lies with our investment teams because these
considerations support investment decisions. Together with
Portfolio Operations and our asset management teams, the investment
teams are also expected to continue to keep these issues front of
mind through the life of the investment.
Additionally, Dr. Jean Rogers, Founder and Former CEO of the
Sustainability Accounting Standards Board (SASB), joined Blackstone
in January 2022 as Global Head of ESG. Jean oversees Blackstone's
corporate ESG team, leading strategy, integration, reporting and
engagement. She partners closely with our business unit heads of
ESG, operational and asset management teams and other functional
groups across Blackstone.
Blackstone's Chief Sustainability Officer supports the
investment and asset management teams by driving initiatives that
are aimed at improving operational and environmental performance
across the portfolio. Other functional experts within Portfolio
Operations (including Talent Management, Procurement and Healthcare
Cost Containment) may consider ESG insights in delivering operating
intervention capabilities across the portfolio.
In 2021, Blackstone also appointed various ESG leads across the
Firm and its key regions, who will help to integrate ESG
risk-mitigation practices across our investment process and asset
management. The resources include Elizabeth Lewis, Managing
Director of ESG, James Mandel, Chief Sustainability Officer, Nina
James, Head of Real Estate ESG (Asia), Caroline Hill, Head of Real
Estate ESG (Europe), and Amisha Parekh, Global Head of ESG for
Private Equity. Additionally, Devin Glenn serves as the Global Head
of Diversity, Equity, and Inclusion.
Blackstone's ESG Steering Committee coordinates ESG initiatives
across the firm to ensure consistency in approach and, with the
assistance of the Legal & Compliance department, compliance
with Blackstone's ESG policy. Additionally, BXC has an ESG Working
Group that meets monthly and discusses a variety of ESG-related
topics, including, as applicable: review of investments, investor
requests, market trends and newly adopted or pending legislation,
rules, and regulation, and revisions and/or amendments to BX Credit
ESG Policy. Below is a visual of Blackstone's ESG leadership and
integrated team approach.
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
Blackstone plans to reduce Carbon Emissions:
Blackstone set a goal of reducing carbon emissions by 15% within
the next three years (starting in 2021) across all new investments
where the Firm owns the asset and has control over energy use. This
initiative is expected to result in significant energy cost savings
for our portfolio companies.
As discussed above, Blackstone has been implementing energy
strategies at portfolio companies for years. Under the 15%
initiative, Blackstone will ask a set of standardized questions
around energy consumption when it is evaluating prospective deals.
Companies will be categorized as high-,medium- or low-touch and
inform the extent of hands-on support and opportunity for emissions
reduction. Emissions reductions could come through replacing light
fixtures, recalibrating heating and cooling systems, introducing
low-flow faucets and shower heads, and/or replacing windows to trap
hot or cool air.
Over the 11 years of Blackstone ownership, Hilton reduced carbon
emissions by 30%, waste by 32%, and energy and water consumption by
22%, saving more than $1 billion. At NYC's Stuyvesant Town - Peter
Cooper Village, Blackstone oversaw the installation of over 9,600
solar panels, the largest in the rooftop solar array in the U.S.
Where certain energy strategies have been implemented at
Blackstone's headquarters, the Firm has been able to achieve
savings of over 50% in our lighting energy consumption.
Blackstone Credit's Commitment to ESG
BX Credit's focus on ESG stems from our commitment to prudent
investing and our culture that prioritizes robust corporate
governance. Our investment team understands Blackstone's focus on
corporate governance, including ESG, and that appreciation is
reflected in the investments we make and how we engage with our
portfolio companies after an investment is made. Review of ESG
risks to investment performance is integrated into BX Credit's
investment analysis and decision-making processes from
pre-investment diligence to post-investment monitoring.
BX Credit recognises the value that incorporating ESG factors in
our investment research creates both in terms of mitigating risk
and enhancing long-term performance across our various investments.
To that end, BX Credit integrates review and consideration of
applicable ESG factors into its decision-making processes, as
summarized below:
Due Diligence
Investment teams within BX Credit consider ESG factors that may
impact investment performance during the due diligence phase of an
investment. ESG due diligence will vary based on (i) the nature of
BX Credit's investment, (ii) the transaction process and timeline,
(iii) the level of access to information, specifically as it
pertains to ESG factors, and (iv) the target portfolio company's
(the "Target") sector or business model. Investment teams will
engage with target companies, sponsor partners, and review publicly
available information to develop insights into the Target's
business and operations. External ESG experts and legal counsel may
also be engaged, as necessary. In 2020, BX Credit worked with a
third party ESG consulting firm to create a sector-specific tool
based on the Sustainability Accounting Standards Board ("SASB")
that provides a framework to conduct ESG due diligence. The
proprietary tool helps our teams identify the most material ESG
risks that may impact a company's performance.
Material ESG considerations and risks arising from diligence are
described in the appropriate investment committee materials and
discussed in the relevant investment committee forum. If material
ESG risks are identified, BXC may seek to remedy the situation via
additional due diligence, further discussions with company
management or decide not to move forward with the investment.
Investment teams monitor the performance of BX Credit's
investments, which includes, but is not limited to, assessing
financial, operational, industry-specific and ESG-related factors,
as applicable. Periodically, BX Credit investment teams will update
the investment committee on the performance of issuers and
highlight material ESG considerations or risks that warrant
investment committee discussion.
At this time, BX Credit does not explicitly track exposure to
climate risk or monitor the carbon footprint of an investments, but
we are in the process of doing diligence with third-party ESG
vendors to understand the type of data available in the market. In
practice, we take the ESG factors that may impact investment
performance into consideration and incorporate such factors into
our initial evaluation of an investment and our ongoing investment
monitoring process. Our evaluation criteria are based on the
materiality of the ESG risk considering (a) whether it has a
current impact or a potential future impact and (b) any mitigating
actions the issuer undertakes to address the risk. Blackstone did
join TCFD to help build a more resilient financial system through
better climate risk disclosures. Blackstone intends to report
aligned with TCFD recommendations in 2022.
Blackstone Ireland Limited
29 April 2022
Strategic Overview
Purpose
The Company's purpose is to provide permanent capital to BCF, a
company established by Blackstone Ireland Limited ("BIL") (formerly
Blackstone / GSO Debt Funds Management Europe Limited) as part of
its loan financing programme, with a view to generating stable and
growing total returns for Shareholders through dividends and value
growth.
The Board delivers the Company's purpose by working in line with
our values, which form the backbone of what the Company does and
are an important part of our culture.
Values
Integrity and Trust - The Company seeks to act with integrity in
everything it does and to be trustworthy. We seek to uphold the
highest standards of professionalism driven by our corporate
governance processes.
Transparency - The Company aims to ensure all of its activities
are undertaken with the utmost transparency and openness to sustain
trust.
Opportunity - The ability to see and to seize opportunities
which are in the best interests of our shareholders.
Sustainability - As an investment company, we aim to maintain
and deliver attractive and sustainable returns for our
shareholders.
Principal Activities
The Company was incorporated on 30 April 2014 as a closed-ended
investment company limited by shares under the laws of Jersey and
is authorised as a listed fund under the Collective Investment
Funds (Jersey) Law 1988. The Company continues to be registered and
domiciled in Jersey. The Company's Ordinary Shares are quoted on
the Premium Segment of the Main Market of the LSE.
The Company's authorised share capital consists of an unlimited
number of shares of any class. As at 31 December 2021, the
Company's issued share capital was 460,984,702 Ordinary Shares. The
Company also held 21,918,092 Ordinary Shares in treasury.
The Company has a wholly-owned Luxemburg subsidiary, Blackstone
/ GSO Loan Financing (Luxembourg) S.à r.l. which has an issued
share capital of 2,000,000 Class A shares and 1 Class B share. As
at 31 December 2021, all of the Class A and Class B shares were
held by the Company together with 267,088,098 Class B CSWs issued
by the Lux Subsidiary. The Lux Subsidiary invests in PPNs issued by
BCF, which in turn invests in CLOs and loans.
The Company is a self-managed company. BIL acts as Portfolio
Adviser to the Company and, pursuant to the Advisory Agreement,
provides advice and assistance to the Company in connection with
its investment in the CSWs.
BNP Paribas Securities Services S.C.A., Jersey Branch acts as
Administrator, Company Secretary, Custodian and Depositary to the
Company.
Investment Objective
As outlined in the Company's Prospectus, the Company's
investment objective is to provide Shareholders with stable and
growing income returns, and to grow the capital value of the
investment portfolio by exposure to floating rate senior secured
loans and bonds directly and indirectly through CLO Securities and
investments in Loan Warehouses. The Company seeks to achieve its
investment objective through exposure (directly or indirectly) to
one or more companies or entities established from time to time
("Underlying Companies"), such as BCF.
Investment Policy
Overview
As outlined in the Company's Prospectus, the Company's
investment policy is to invest (directly, or indirectly through one
or more Underlying Companies) in a diverse portfolio of senior
secured loans (including broadly syndicated, middle market or other
loans) (such investments being made by the Underlying Companies
directly or through investments in Loan Warehouses), bonds and CLO
Securities, and generate attractive risk-adjusted returns from such
portfolios. The Company intends to pursue its investment policy by
investing (through one or more subsidiaries) in profit
participating instruments (or similar securities) issued by one or
more Underlying Companies.
Each Underlying Company will use the proceeds from the issue of
the profit participating instruments (or similar securities),
together with the proceeds from other funding or financing
arrangements it has in place currently or may have in the future,
to invest in: (i) senior secured loans, bonds, CLO Securities and
Loan Warehouses; or (ii) other Underlying Companies which,
themselves, invest in senior secured loans, bonds, CLO Securities
and Loan Warehouses. The Underlying Companies may invest in
European or US senior secured loans, bonds, CLO Securities, Loan
Warehouses and other assets in accordance with the investment
policy of the Underlying Companies. Investments in Loan Warehouses,
which are generally expected to be subordinated to senior finance
provided by third-party banks, will typically be in the form of an
obligation to purchase preference shares or a subordinated loan.
There is no limit on the maximum US or European exposure. The
Underlying Companies do not invest substantially directly in senior
secured loans or bonds domiciled outside North America or Western
Europe.
Investment Limits and Risk Diversification
The Company's investment strategy is to implement its investment
policy by investing directly or indirectly through the Underlying
Companies, in a portfolio of senior secured loans and bonds or in
Loan Warehouses containing senior secured loans and bonds and, in
connection with such strategy, to own debt and equity tranches of
CLOs and, in the case of European CLOs and certain US CLOs, to be
the risk retention provider in each.
The Underlying Companies may periodically securitise a portion
of the loans, or a Loan Warehouse in which they invest, into CLOs
which may be managed either by such Underlying Company itself, by
BIL or BLCS (or one of their affiliates), in their capacity as the
CLO Manager.
Where compliance with the European Risk Retention Requirements
is sought (which may include both EUR and US CLOs), the Underlying
Companies will retain exposures of each CLO, which may be held
as:
-- CLO Income Notes equal to: (i) between 51% and 100% of the
CLO Income Notes issued by each such CLO in the case of European
CLOs; or (ii) CLO Income Notes representing at least 5% of the
credit risk relating to the assets collateralising the CLO in the
case of US CLOs (each of (i) and (ii), (the "horizontal strip");
or
-- Not less than 5% of the principal amount of each of the
tranches of CLO Securities in each such CLO (the "vertical
strip").
In the case of deals structured to be compliant with the
European Risk Retention Requirements, the applicable Underlying
Company may determine that, due to its role as an "originator" with
respect to such transaction, such Underlying Company should also
comply with the US Risk Retention Regulations. In addition, an
Underlying Company may invest in CLOs, such as middle market CLOs,
which are not exempt from the US Risk Retention Regulations and, as
a result, may be required to retain exposure to such CLOs in
accordance with such rules. In such a scenario, the Underlying
Company will retain exposures to such transactions for the purpose
of complying with the US Risk Retention Regulations, which may be
held as:
-- CLO Income Notes representing at least 5% of the fair market
value of the CLO Securities (including CLO Income Notes) issued by
such CLO (the "US horizontal strip");
-- A vertical strip; or
-- A combination of a vertical strip and US horizontal strip.
To the extent attributable to the Company, the value of the CLO
Income Notes retained by Underlying Companies in any CLO will not
exceed 25% of the Published NAV of the Company at the time of
investment.
Investments in CLO Income Notes and loan warehouses are highly
leveraged. Gains and losses relating to underlying senior secured
loans will generally be magnified. Further, to the extent
attributable to the Company, the aggregate value of investments
made by Underlying Companies in vertical strips of CLOs (net of any
directly attributable financing) will not exceed 15% of the
Published NAV of the Company at the time of investment. This
limitation shall apply to Underlying Companies in aggregate and not
to Underlying Companies individually.
Loan Warehouses may eventually be securitised into CLOs managed
either by an Underlying Company itself or by BIL or BLCS (or one of
their affiliates), in their capacity as the CLO Manager. To the
extent attributable to the Company, the aggregate value of
investments made by Underlying Companies in any single externally
financed warehouse (net of any directly attributable financing)
shall not exceed 20% of the NAV of the Company at the time of
investment, and in all externally financed warehouses taken
together (net of any directly attributable financing) shall not
exceed 30% of the NAV of the Company at the time of investment.
These limitations shall apply to Underlying Companies in aggregate
and not to Underlying Companies individually.
The following limits (the "Eligibility Criteria") apply to
senior secured loans and bonds (and, to the extent applicable,
other corporate debt instruments) directly held by any Underlying
Company (and not through CLO Securities or Loan Warehouses):
% of an Underlying Company's
Maximum Exposure Gross Asset Value
Per obligor 5
----------------------------
Per industry sector 15
(With the exception of one
industry, which may be up
to 20%)
----------------------------
To obligors with a rating lower than
B-/B3/B- 7.5
----------------------------
To second lien loans, unsecured loans,
mezzanine loans and high yield bonds 10
----------------------------
For the purposes of these Eligibility Criteria, "gross asset
value" shall mean gross assets, including any investments in CLO
Securities and any undrawn commitment amount of any gearing under
any debt facility. Further, for the avoidance of doubt, the
"maximum exposures" set out in the Eligibility Criteria shall apply
on a trade date basis.
Each of these Eligibility Criteria will be measured at the close
of each Business Day on which a new investment is made, and there
will be no requirement to sell down in the event the limits are
breached at any subsequent point (for instance, as a result of
movement in the gross asset value, or the sale or downgrading of
any assets held by an Underlying Company).
In addition, each CLO in which an Underlying Company holds CLO
Securities and each Loan Warehouse in which an Underlying Company
invests will have its own eligibility criteria and portfolio
limits. These limits are designed to ensure that: (i) the portfolio
of assets within the CLO meets a prescribed level of diversity and
quality as set by the relevant rating agencies that rate securities
issued by such CLO, or (ii) in the case of a Loan Warehouse, that
the warehoused assets will eventually be eligible for a rated CLO.
The CLO Manager will seek to identify and actively manage assets
which meet those criteria and limits within each CLO or Loan
Warehouse. The eligibility criteria and portfolio limits within a
CLO or Loan Warehouse may include the following:
-- A limit on the weighted average life of the portfolio;
-- A limit on the weighted average rating of the portfolio;
-- A limit on the maximum amount of portfolio assets with a rating lower than B-/B3/B-; and
-- A limit on the minimum diversity of the portfolio.
CLOs in which an Underlying Company may hold CLO Securities or
Loan Warehouses in which an Underlying Company may invest also have
certain other criteria and limits, which may include:
-- A limit on the minimum weighted average of the prescribed rating agency recovery rate;
-- A limit on the minimum amount of senior secured assets;
-- A limit on the maximum aggregate exposure to second lien
loans, high yield bonds, mezzanine loans and unsecured loans;
-- A limit on the maximum portfolio exposure to covenant-lite loans;
-- An exclusion of project finance loans;
-- An exclusion of structured finance securities;
-- An exclusion on investing in the debt of companies domiciled
in countries with a local currency sub-investment grade rating;
and
-- An exclusion of leases.
This is not an exhaustive list of the eligibility criteria and
portfolio limits within a typical CLO or Loan Warehouse and the
inclusion or exclusion of such limits and their absolute levels are
subject to change depending on market conditions. Any such limits
applied shall be measured at the time of investment in each CLO or
Loan Warehouse.
Changes to Investment Policy
Any material change to the investment policy of the Company
would be made only with the approval of Ordinary Shareholders.
It is intended that the investment policy of each substantial
Underlying Company will mirror the Company's investment policy,
subject to such additional restrictions as may be adopted by a
substantial Underlying Company from time to time. The Company will
receive periodic reports from each substantial Underlying Company
in relation to the implementation of such substantial Underlying
Company's investment policy to enable the Company to have oversight
of its activities.
If a substantial Underlying Company proposes to make any changes
(material or otherwise) to its investment policy, the Directors
will seek Ordinary Shareholder approval of any changes which are
either material in their own right or, when viewed as a whole
together with previous non-material changes, constitute a material
change from the published investment policy of the Company. If
Ordinary Shareholders do not approve the change in investment
policy of the Company such that it is once again materially
consistent with that of such substantial Underlying Company, the
Directors will redeem the Company's investment in such substantial
Underlying Company (either directly or, if the Company's investment
in a subsidiary is invested by such subsidiary in such substantial
Underlying Company (either directly or through one or more other
Underlying Companies), by redeeming the securities held by the
Company in such subsidiary and procuring that the subsidiary
redeems its investment in such substantial Underlying Companies
(either directly or through one or more other Underlying
Companies)), as soon as reasonably practicable but at all times
subject to the relevant legal, regulatory and contractual
obligations.
The Board considers BCF to be a substantial Underlying
Company.
Company Borrowing Limit
The Company will not utilise borrowings for investment purposes.
However, the Directors are permitted to borrow up to 10% of the
Company's Published NAV for day-to-day administration and cash
management purposes. For the avoidance of doubt, this limit only
applies to the Company and not the Underlying Companies.
In accordance with the Company's Prospectus, the Company may use
hedging or derivatives (both long and short) for the purposes of
efficient portfolio management. It is intended that up to 100% (as
appropriate) of the Company's exposure to any non-Euro assets will
be hedged, subject to suitable hedging contracts being available at
appropriate times and on acceptable terms.
The Company has exposure to non-Euro assets through its
investment in the Underlying Company which has hedging arrangements
in place to protect against unfavourable currency fluctuation.
Investment Strategy
Whether the senior secured loans, bonds or other assets are held
directly by an Underlying Company or via CLO Securities or Loan
Warehouses, it is intended that, in all cases, the portfolios will
be actively managed (by the Underlying Companies or the CLO
Manager, as the case may be) to minimise default risk and potential
loss through comprehensive credit analysis performed by the
Underlying Companies or the CLO Manager (as applicable).
Vertical strips in CLOs in which Underlying Companies may invest
are expected to be financed partly through term finance for
investment-grade CLO Securities, with the balance being provided by
the relevant Underlying Company investing in such CLO. This term
financing may be full-recourse, non-mark to market, long-term
financing which may, among other things, match the maturity of the
relevant CLO or match the reinvestment period or non-call period of
the relevant CLO. In particular, and although not forming part of
the Company's investment policy, the following levels of, or
limitations on, leverage are expected in relation to investments
made by Underlying Companies:
-- Senior secured loans and bonds may be levered up to 2.5x with term finance;
-- Investments in "first loss" positions or the "warehouse
equity" in Loan Warehouses will not be levered;
-- CLO Income Notes will not be levered;
-- Investments in CLO Securities rated B- and above at the time
of issue may be funded entirely with term finance; and
-- Investments in a vertical strip may be levered 6.0-7.0x, with
term finance as described above.
To the extent that they are financed, vertical strips are
anticipated to require less capital than horizontal strips, which
is expected to result in more efficient use of the Underlying
Companies' capital. In addition, since the return profile on
financed vertical strips is different to retained CLO Income Notes,
BX Credit believes that vertical strips may be more robust through
a market downturn, although projected IRRs may be slightly lower.
However, an investment in vertical strips is not expected to impact
the Company's stated target return.
From time to time, as part of its ongoing portfolio management,
the Underlying Companies may sell positions as and when suitable
opportunities arise. Where not bound by risk retention
requirements, it is the intention that the Underlying Companies
would seek to maintain control of the call option of any CLOs
securitised.
With respect to investments in CLO Securities, while the
Underlying Companies maintain a focus on investing in newly issued
CLOs, it will also evaluate the secondary market for sourcing
potential investment opportunities in CLO Securities.
Whilst the intention is to pursue an active, non-benchmark total
return strategy, the Company is cognisant of the positioning of the
loan portfolios against relevant indices. Accordingly, the
Underlying Companies will track the returns and volatility of such
indices, while seeking to outperform them on a consistent basis.
In-depth, fundamental credit research dictates name selection and
sector over-weighting/under-weighting relative to the benchmark,
backstopped by constant portfolio monitoring and risk oversight.
The Underlying Companies will typically look to diversify their
portfolios to avoid the risk that any one obligor or industry will
adversely impact overall returns. The Underlying Companies also
place an emphasis on loan portfolio liquidity to ensure that if
their credit outlook changes, they are free to respond quickly and
effectively to reduce or mitigate risk in their portfolio. The
Company believes this investment strategy will be successful in the
future as a result of its emphasis on risk management, capital
preservation and fundamental credit research. The Directors believe
the best way to control and mitigate risk is by remaining
disciplined in market cycles, by making careful credit decisions
and maintaining adequate diversification.
The portfolio of the Underlying Companies in which the Company
invests (through its wholly-owned subsidiary) remains broadly
divided between European CLOs and US CLOs.
The Company incorporates ESG factors as part of its investment
strategy. Refer above for further details. The Company operates
with Euro as its functional currency. A significant proportion of
the portfolio of assets held by Underlying Companies to which the
Company has exposure may, from time to time, be denominated in
currencies other than Euro. The Underlying Companies utilise
different financial instruments to seek to hedge against declines
in the value of its portfolio as a result of changes in currency
exchange rates.
Section 172(1) Statement
The Company, being a member of the AIC, complies with Provision
5 of the AIC Code and consequently voluntarily complies with
section 172(1) of the UK Companies Act 2006 to act in a way that
promotes the success of the Company for the benefit of its
shareholders as a whole, having regard to (amongst other
things):
a) the likely consequences of any decision in the long-term;
b) the need to foster the Company's business relationships with suppliers, customers and others;
c) the impact of the Company's operations on the community and the environment;
d) the desirability of the Company maintaining a reputation for
high standards of business conduct; and
e) the need to act fairly as between members of the Company.
The Board maintains a reputation for high standards of business
conduct and endeavors to act fairly as between members of the
Company by acting with integrity and establishing trust as referred
to in the Company's Values. Additionally, the Company complies with
the Principles and Provisions of the AIC Code as detailed in the
Statement of Compliance with Corporate Governance below.
Information on how the Board has engaged with its stakeholders and
promoted the success of the Company, whilst having regard to the
above, is outlined below. This covers the key decisions the Board
has taken during the year.
Stakeholder engagement
Shareholders
Why we engage How we engage
Shareholders provide the necessary The Board engages with its
capital for the Company to shareholders by:
pursue its purpose and strategy a) publishing:
as outlined in the Company's i. announcements on the LSE,
Prospectus. including:
* the Company's Published NAV performance, announced o
The Company also aims to ensure n
its long-term success and a monthly basis;
sustainability
through its shareholder relationships,
based on transparency and openness, * updated dividend guidance, as announced with regard
and thereby fostering shareholder to the Company's dividend policy on 24 January 2022;
confidence. This in-turn benefits
the liquidity of the Company's
shares and the Company's reputation ii. monthly performance reports,
as an esteemed market participant. on the Company's website, covering
the performance of the Company
and its underlying portfolio,
and including information on
the composition of the underlying
portfolio;
iii. monthly market commentary
reports issued by BX Credit
and published on the Company's
website covering US and EU
loan, high yield and CLO performance
figures with commentary, as
well as the market outlook;
iv. quarterly investor reports,
published on the Company's
website, which provide an overview
of the Company's and the Underlying
Company's quarterly results,
together with a market overview;
v. the Company's Half-Yearly
Financial Report and the Annual
Report and Audited Financial
Statements;
vi. the Company's Key Information
Document and a memorandum on
costs;
vii. ad-hoc reports, on the
Company's website, as and when
required to provide further
insights into the relevant
market situation;
----------------------------------------------------------------------------
Why we engage How we engage
----------------------------------------------------------------------------
b) the Board and representatives
of the Portfolio Adviser holding
investor calls to provide market
updates;
c) communications between Directors
and individual shareholders
during 2021, on which the matters
discussed included:
i. dividend timetable - changes
to the format of dividend RNS
announcements to reflect the
last possible date for dividend
currency election forms to
be received by the Company;
and
ii. foreign exchange - embedded
foreign exchange rate and increasing
divergence of the mid-market
prices between the Company
and BGLP;
d) the Board engaging with
its shareholders through its
Portfolio Adviser and Brokers
who communicate pertinent information
from any discussions they have
had with the Company's shareholders.
Such discussions focussed for
example on the Company's share
price discount level and CLO
performance; and
e) written communication with
shareholders in response to
queries received, as applicable.
Additionally, the Board (including
the different committee Chairs)
is available at the AGM to
answer questions in their areas
of responsibility and the Chair
encourages shareholders to
contact her or any other Director
with any queries or comments
they may have.
----------------------------------------------------------------------------
Outcome
Shareholders receive relevant information allowing them to
make informed decisions about their shareholding(s), and
to engage with the Company and its advisers on any matters
they consider relevant.
During the year, actions taken by the Board following on
from shareholder discussions include:
* the implementation and renewal of the share
repurchase programme, please refer to the Chair's
Statement above and the share repurchase programme
coverage below;
* The Board, Brokers and Portfolio Adviser discussing
liquidity and discount management on both an ongoing
and frequent basis; and
* The announcement of the final currency election date,
being the last possible date for shareholders to
submit their dividend currency election forms to the
Company's Registrar.
There was no impact on the Directors' remuneration as a result
of the above discussions.
All Directors are kept informed of shareholder engagement,
as necessary, so that they are aware of and understand the
views communicated. Any pertinent matters are followed up
on by the Board and shareholder views are considered as part
of the Directors' decision-making processes.
Service Providers
Why we engage How we engage
As an investment company with The Board engages with its
no employees, the Company is Portfolio Adviser on an on-going
reliant on its service providers basis through:
to conduct its business. The a) Regular communication with
Board considers the Portfolio representatives as required,
Adviser, the Administrator such as telephone and email
and the Registrar to be critical correspondence, discussing
to the Company's day-to-day ad-hoc matters which may arise;
operations. b) monthly meetings to receive
updates on the performance
The Board views the Company's of the portfolio;
other service providers, such c) quarterly board meetings
as brokers, auditors and lawyers to receive detailed updates
as being highly important in on, but not limited to, the
enabling the Company to meet loan and CLO markets and activity
its regulatory and legal requirements updates for the Underlying
as necessary. Company. These include discussions
about capital inflows, performance
of current investments and
return attribution;
d) an annual due diligence
meeting with senior representatives
of the Portfolio Adviser held
virtually in 2021; and
e) ad-hoc meetings to discuss
various day-to-day operational
matters or strategic matters.
The Board engages with its
Administrator on an on-going
basis including:
a) Regular communication with
representatives, such as telephone
and email correspondence, to
discuss any ad-hoc matters;
b) monthly meetings to discuss
the Published NAV as computed
by the Administrator;
c) quarterly Board meetings
at which the Board receives
accounting, company secretarial
and compliance updates and
liaises with the Administrator
on any pertinent matters;
d) production of the Company's
Half-Yearly Financial Report
and Annual Report and Audited
Financial Statements;
e) ad-hoc meetings to discuss
various day-to-day operational
matters; and
f) annual service review meetings.
The Company's Registrar is
responsible for maintaining
the Company's share register
and for processing any corporate
actions. The Registrar's reports
are available via an online
platform.
The Board receives quarterly
reports from the Company's
Registrar on key matters. The
Company otherwise engages as
necessary with the Registrar
via email and telephone.
-------------------------------------
Outcome
The Company is well managed, its operations and internal
controls are effective, efficient and compliant, and the
Board receives appropriate and timely advice and guidance,
together with responses to any queries the Board has. The
Board's engagement with its service providers enables it
to help facilitate the effective running of the Company.
This, in-turn, helps promote the Company's sustainability.
Underlying Company
Why we engage How we engage
The Board's purpose and strategy The Board engages with the
is implemented through investment Portfolio Adviser and the board
in the Underlying Company, of directors of the Underlying
BCF. Understanding the capital Company to understand their
requirements, specifically capital requirements and performance.
the timing and quantum, of It does so through the methods
the Underlying Company is important described above.
to the Board to ensure the
Company can provide capital The Board also held a virtual
as required and so that redemptions meeting with the board of BCF
of Cash Settlement Warrants during 2021.
are appropriately factored
in so as to not adversely impact
the operations of the Underlying
Company.
Additionally, understanding
the performance of the Underlying
Company is vital to ensuring
the Company can deliver on
its investment objective of
income and capital appreciation.
---------------------------------------
Outcome
The Board keeps abreast of capital requirements and the performance
of the Underlying Company. In doing so, the Board aims to
understand the Underlying Company's past performance and
contributing factors to this, together with their prospective
outlook. From this process the Board looks to help ensure
effectiveness of the Portfolio Adviser and so promote the
long-term success of the Company.
Wider Society
Why we engage How we engage
As a responsible corporate The Board welcomes the views
citizen the Company recognises of stakeholders to remain current
that its operations have an in their understanding of stakeholder
environmental footprint and views relating to environmental
an impact on wider society. and social matters.
The Board seeks to uphold the
highest standards of professionalism
and corporate governance and
embraces diversity, inclusion
and ESG. The Board expects
the same from its service providers,
and asks its service providers
to provide an overview of their
diversity and ESG policies
on an annual basis, as part
of the Company's service provider
evaluation.
Mr Clark is responsible for
ESG matters at Board-level.
During 2021, the Board liaised
with BX Credit to advance their
ESG initiatives and processes
for upholding high standards
of ESG, responsible investing
and governance; such discussions
remain ongoing as ESG procedures
and requirements evolve.
In endeavouring to exemplify
best corporate governance practice,
the Board aims to positively
influence BX Credit and the
wider corporate and economic
environment and inspire stakeholder
trust.
---------------------------------------
Outcome
The Board is conscious of the importance of good governance,
including diversity, inclusion and ESG specifically and seeks
to positively influence the wider society and its service
providers.
Regulators
Why we engage How we engage
The Board engages with its The Company primarily interacts
main regulator to ensure business with its regulator through
is conducted in line with their formal submissions of information
expectations and the evolving on a periodic basis (for example,
regulatory framework. periodic financial statements).
The Company engages more formally
with its regulator on an ad-hoc
basis, via its Compliance Officer.
The Board also receives detailed
quarterly legal, regulatory
and compliance updates.
------------------------------------
Outcome
The Company complies with regulatory and statutory rules,
maintains an open and transparent form of communication with
its regulators, and the Board receives appropriate and timely
advice and guidance, together with responses to any queries
the Board has. This, in turn, promotes the long term success
of the Company.
Corporate Activity
The principal decisions taken below are the ones that the Board
considers have the greatest impact on the Company's long-term
success. The Board considers the factors outlined under the Section
172(1) Statement and the wider interests of stakeholders as a whole
in all decisions it takes on behalf of the Company.
Dividend Policy
Description
On 22 January 2021, the Board announced that the Company had
adopted a dividend policy targeting a total 2021 annual dividend
of between EUR0.07 and EUR0.08 per Ordinary Share, to consist
of quarterly payments of EUR0.0175 per Ordinary Share for the
first three quarters and a final quarter payment of a variable
amount to be determined at that time. In accordance with the
Company's dividend policy, the Board declared dividends of EUR0.0175
per Ordinary Share for the first three quarters of 2021 and a
dividend of EUR0.0275 per Ordinary Share for the fourth quarter.
On 24 January 2022, the Board announced that the Company has
adopted a dividend policy targeting a total 2022 annual dividend
of between EUR0.07 and EUR0.08 per Ordinary Share, which will
consist of quarterly payments of EUR0.0175 per Ordinary Share
for the first three quarters and a final quarter payment of a
variable amount to be determined at that time.
Impact on long-term success Stakeholder considerations
Amending the dividend to ensure Stakeholders are provided with a
the long-term sustainability degree of certainty as to the level
of the Company. At the same of shareholder dividends and the
time, the dividend policy provides sustainability of the Company is
sufficient flexibility to pay also enhanced.
more or less for Q4 dependent
on the year's results.
---------------------------------------
Share Repurchase Programme
Description
From 1 January 2021, to 31 December 2021, the Company undertook
61 share repurchases and repurchased a total of 16,038,629 shares
at a weighted average price of EUR0.774 per share. The repurchased
shares were held in treasury during 2021 and remain in treasury.
On 7 and 11 January 2021, and on 10 March 2021, the Company's Joint
Brokers, on behalf of the Company, made three market share repurchases
for a total of 125,000 shares at a weighted average price of EUR0.65
per share (including repurchase fees).
On 12 March 2021, the Company announced that it had appointed its
Joint Brokers to manage a Share Repurchase Programme to repurchase
Ordinary Shares within certain pre-set parameters, to begin on
12 March 2021 and run until 26 May 2021.
On 1 June 2021, the Company announced that the above-described
Share Repurchase Programme had been renewed until 23 July 2021,
being the date of the Company's Annual General Meeting, and that
in order to commence the renewed Share Repurchase Programme the
Company instructed its Joint Brokers to buy up to 5 million ordinary
shares at a price of EUR0.75 per share. The Company invited any
shareholders interested in selling their shares to contact their
usual contact at Winterflood or N+1 Singer by no later than 2:00pm
on 3 June 2021.
On 26 July 2021, the Company announced that the above described
Share Repurchase Programme had been renewed until 30 September
2021.
On 27 September 2021, the Company announced that the Share Repurchase
Programme would be renewed from 1 October 2021 until 21 January
2022.
During the period 1 January 2022 to 27 April 2022, the Company
has repurchased 1,160,000 shares at a total cost of EUR1,281,400
(excluding fees and commissions).
Impact on long-term success Stakeholder considerations
The Board believes that undertaking
* Increasing the NAV per Ordinary Share; repurchases of Ordinary Shares helps
to address any imbalance between
the supply of, and demand for, the
* Reducing the discount to NAV which Ordinary Shares Ordinary Shares.
are trading; and
* Reducing Share Price Volatility.
--------------------------------------
Risk Overview
Each Director is aware of the risks inherent in the Company's
business and understands the importance of identifying, evaluating
and monitoring these risks. The Board has adopted procedures and
controls to enable it to manage these risks within acceptable
limits and to meet all of its legal and regulatory obligations.
The Board considers the process for identifying, evaluating and
managing any significant risks faced by the Company on an ongoing
basis, and these risks are reported and discussed at Board
meetings. It ensures that effective controls are in place to
mitigate these risks and that a satisfactory compliance regime
exists to ensure all applicable local and international laws and
regulations are upheld.
Risk Appetite
The Board's strategic risk appetite is to balance the amount of
income distributed by the Company by way of dividend with the
opportunity to reinvest the returns received from the underlying
CLO investments in further CLO equity through the structure. The
Board seeks to ensure that the dividend policy is sustainable
without eroding capital. Where the Company's share price is at a
material discount to the NAV per share, the Board may decide to
repurchase shares in accordance with its share buyback policy
instead of, or as well as, reinvestment into CLOs.
When considering other risks, the Board's risk appetite is
effectively governed by a cost benefit analysis when assessing
mitigation measures. However, at all times the Company will seek to
follow best practice and remain compliant with all applicable laws,
rules and regulations.
Principal Risks and Uncertainties
As recommended by the Risk Committee, the Board has adopted a
risk management framework to govern how the Board: identifies
existing and emerging risks; determines risk appetite; identifies
mitigation and controls; assesses, monitors and measures risk; and
reports on risks.
The Board reviews risks at least twice a year and receives
deep-dive reports on specific risks as recommended by the Risk
Committee. Throughout the period under review, the Board considered
a set of main risks which have a higher probability and a
significant potential impact on performance, strategy, reputation,
or operations (Category A risks). Of these, the five risks
identified below were considered the principal risks faced by the
Company where the combination of probability and impact was
assessed as being most significant. At the start of the year, there
were 15 Category A risks. During the year, ESG risk has been added,
as it is a key focus of the Board and the Portfolio Adviser. Two
other Category A risks relating to the Originator were merged so
there remained 15 Category A risks at the year-end. The Board also
considered another 14 less significant existing or emerging risks
(Category B risks) which are monitored on a watch list.
During the year, as the COVID-19 pandemic continued to take its
course, the Board and the Risk Committee considered the impact that
the situation was having on the Company's business and its service
providers. Risks relating to Reliance on Service Providers and
Business Continuity were initially heightened but then receded as
service providers demonstrated adaptability and resilience.
Principal risk Commentary
Investment performance
A key risk to the Company is unsatisfactory Credit markets, along with most other
investment performance due to an asset classes, were initially badly
economic downturn along with continued hit by the expected impact of COVID-19
political uncertainty which could on companies and markets. However,
negatively impact global credit markets as the actual impact of the pandemic
and the risk reward characteristics on specific companies and markets
for CLO structuring. This could directly became clearer, markets adjusted
impact the performance of the underlying and rebounded.
CLOs that the Company invests in,
and it could also result in a reduced During 2021, the focus switched to
number of suitable investment opportunities post-COVID-19 repercussions with
and/or lower shareholder demand. inflation and interest rates on the
rise. The Portfolio Adviser continued
to actively manage the CLO portfolios
to orientate them for this environment.
The Board takes comfort from the
pedigree of Blackstone Credit as
Portfolio Advisers and their ability
to trade and manage risk in the portfolios
in difficult circumstances, as demonstrated
in the GFC and in the height of the
COVID-19 pandemic.
---------------------------------------------
Share price discount
The price of the Company's shares Throughout 2021, the board continued
may trade at a discount relative its active share buyback programme
to the underlying net asset value to help address the discount. The
of the shares. discount did reduce to around (5.82)%
but subsequently moved out to around
(15.75)% at the year-end. There is
evidence that the share buyback programme
has reduced the volatility of the
discount.
The Board continues to refine its
approach to marketing the Company's
shares in conjunction with the Portfolio
Adviser and Brokers.
---------------------------------------------
Investment valuation The Directors use their judgement,
The investment in the Lux Subsidiary with the assistance of the Portfolio
is accounted for at fair value through Adviser, in selecting an appropriate
profit or loss, and the investment valuation technique and refer to
in PPNs issued by BCF held by the techniques commonly used by market
Lux Subsidiary are at fair value. practitioners. The board of directors
Investments in BCF (the PPNs) are of BCF likewise uses its judgement
illiquid investments, not traded in determining the valuation of investments
on an active market and are valued and underlying CLOs and equity tranches
using valuation techniques determined retained by BCF. Independent valuation
by the Directors. The underlying service providers are involved in
CLO investments held by BCF are valued determining the fair value of underlying
using modelling methodologies, described CLOs.
in the Company's Prospectus, that The Board and Portfolio Adviser have
are based upon many assumptions. paid close attention to developing
The valuation of the Company's investments, market expectations and assumptions
therefore, requires a significant through the COVID-19 pandemic, to
judgement and there is a risk that ensure that valuations reflect reasonable
they are incorrectly valued due to future scenarios.
calculation errors or incorrect assumptions. Continuing sales of equity positions
in the CLOs held by BCF, to third
parties, during the year have validated
that the Company's valuation policy
is reasonable.
---------------------------------------------
Income distribution model
The Company receives cash flows from The Directors use their judgement,
its underlying exposure to debt and with the assistance of the Portfolio
CLO investments held by BCF. Each Adviser, in setting the Company's
underlying CLO will pay out a mixture distribution policy to ensure that
of income and capital return over it is appropriate given the performance
its life with a terminal capital of the underlying CLOs.
value in the 70 to 80% range. BCF Based upon the modelling of cash
aims to distribute most of the proceeds flows provided by the Portfolio Adviser,
that it receives from CLO investments the Board was able to pay a dividend
to the Company (via PPNs) whilst of EUR0.08 per share for 2021 and
reinvesting some of the proceeds has announced a target range for
back into CLOs to maintain capital 2022 of EUR0.07 to EUR0.08 per share.
invested. In turn, the Company aims
to distribute income received to
shareholders, in accordance with
its distribution policy, without
eroding capital.
There is a risk that the distribution
policy at the Company level may be
too generous or re-investment at
the BCF level may not be sufficient,
resulting in the erosion of underlying
capital invested.
---------------------------------------------
Operational
The Company has no employees, systems The Risk Committee has reviewed the
or premises and is reliant on its arrangements put in place by key
Portfolio Adviser and service providers service providers to ensure continuity
for the delivery of its investment of service to the Company and is
objective and strategy. currently satisfied that they are
sufficient. This will be kept under
The COVID-19 pandemic meant that regular review.
the Company's service providers operated
under business continuity procedures,
with staff of service providers mainly
working from home, for long periods
of time. This increased the risk
of control breakdowns, errors and
omissions and regulatory breaches.
Service providers are now mostly
operating a hybrid model with a mixture
of office and home working.
---------------------------------------------
Ukraine/Russia Conflict
Subsequent to the year-end, Russia invaded Ukraine. The
Portfolio Adviser has reviewed the underlying portfolio of
companies that the Company is exposed to and identified a very
small number with exposure to Russian revenue which might be
impacted by the conflict. The Portfolio Adviser has closely
monitored these positions and managed their risk accordingly.
Going Concern
The Directors have considered the Company's investment
objective, risk management and capital management policies, its
assets and the expected income from its investments while factoring
in the continuing economic impact from COVID-19, the inflationary
environment, increasing interest rates and the impact of Russia's
invasion of Ukraine. The Directors are of the opinion that the
Company is able to meet its liabilities and ongoing expenses as
they fall due and they have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future. Accordingly, these financial statements
have been prepared on a going concern basis and the Directors
believe it is appropriate to continue to adopt this basis for a
period of at least 12 months from the date of approval of these
financial statements.
Viability Statement
At least once a year, the Directors carry out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency and liquidity. The Directors also assess the Company's
policies and procedures for monitoring, managing and mitigating its
exposure to these risks. In assessing viability, the Directors have
considered the principal risks of the Company as detailed above
along with the evolution of market, economic and political
conditions, the Company's current position, investment objective
and strategy and the performance of the Portfolio Adviser.
As explained above, the Company's underlying investment exposure
is to the investment portfolio of BCF. BCF's portfolio comprises
the following categories of investments: (i) CLO Debt and CLO
Income Notes securitised by BCF, (ii) a portfolio of senior secured
loans and bonds, and (iii) preference shares. The majority of CLO
investments in the portfolio have a non-call period of
approximately two years from their origination date and cannot be
redeemed until these expire. The Directors have considered each of
the principal risks of the Company that could materially affect the
cash flows derived from these investments and hence how these could
impact the cash flows received by BGLF from BCF.
The Directors continue to regularly review the Company's
dividend policy, but at present are satisfied that the outcomes
modelled by the Portfolio Adviser under extreme market scenarios
will allow the Company to generate sufficient cash flow to meet the
dividend policy and ensure that the Company is able to meet its
liabilities, as they fall due.
The Directors have assessed the prospects of the Company over
the five-year period to 30 April 2027, which the Directors have
determined constitutes an appropriate period to provide its
viability statement. The Directors regularly receive financial
forecasts from the Portfolio Adviser presented on a quarterly basis
for at least the next four to five years. The Directors believe
that financial forecasts to support its investment strategy can be
subject to changes dependent upon investment performance,
deployment of capital and regulatory, legal and tax developments
for which the impact beyond a five-year term is difficult to
assess. In addition, the extent to which macroeconomic, political,
social, technological and regulatory changes beyond a five-year
term may have a plausible impact on the Company are difficult to
envisage.
The Directors also considered other key risks. Whilst each of
these key risks could have an impact on the long-term
sustainability of the Company, the Directors concluded that each
was sufficiently mitigated and would, therefore, not impact the
viability of the Company over a five-year period.
On the basis of this assessment of the principal risks facing
the Company and the modelled extreme market scenarios by the
Portfolio Adviser, used to assess the Company's prospects, and in
the absence of any unforeseen circumstances, the Directors confirm
that they have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due over the five-year period of their assessment. However, it is
worth noting that there is no intention for the life of the Company
to be limited to this five-year period.
Performance Analysis
IFRS NAV Performance Analysis for the Years Ended 31 December
2021 And 31 December 2020 - Contributors to Change
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at https://blackstone.com/bglf ]
Further commentary on the Company's performance is contained in
the Chair's Statement and the Portfolio Adviser's Review.
Published NAV Performance Analysis for the Years Ended 31
December 2021 And 31 December 2020 - Contributors to Change
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at https://blackstone.com/bglf ]
Further commentary on the Company's performance is contained in
the Chair's Statement and the Portfolio Adviser's Review.
Other Information
Valuation Methodology
As noted above, the Published NAV and the IFRS NAV may diverge
because of different key assumptions used to determine the
valuation of the BCF portfolio. Key assumptions which are different
between the two bases as at 31 December 2021 and 31 December 2020
are detailed below:
Asset Valuation Input IFRS Published IFRS Published
Methodology NAV NAV NAV NAV
31 December 2021 31 December 2020
-------------- --------------- ------------------- -------------------
Constant
CLO Discounted default
Securities Cash Flows rate* 2.0% 2.0% 1.75% 1.83%
-------------- --------------- ------- ---------- ------- ----------
Conditional
prepayment
rate 25% 25% 23% 24%
-------------------------------------------- ------- ---------- ------- ----------
Reinvestment
spread (bps
over LIBOR) 350.04 360.32 370.00 359.23
-------------------------------------------- ------- ---------- ------- ----------
Recovery
rate loans 60.00% 60.00% 60.00% 60.00%
-------------------------------------------- ------- ---------- ------- ----------
Recovery
lag (Months) 0 0 0 12
-------------------------------------------- ------- ---------- ------- ----------
Discount
rate 12.75% 14.00% 14.55% 14.00%
-------------------------------------------- ------- ---------- ------- ----------
All of the assumptions above are based on weighted averages.
* Deal level constant default rate
Certain assumptions which underpin the year-end Published NAV,
such as reinvestment spread and the discount rate, are generally
more conservative than those underlying in the IFRS NAV. The below
table further explains the rationale regarding the differences in
the assumptions that significantly contributed to the valuation
divergence as at 31 December 2021.
Assumptions IFRS NAV Published NAV
Reinvestment Largely weighted by a Represents a normalised,
Spread CLO's current portfolio long-term view of loan
weighted average spread, spreads to be achieved
which assumes that the over the life of the CLO's
CLO investment manager remaining reinvestment
will continue to reinvest period. Initially informed
in collateral with a similar by the underwriting model
spread and rating composition at issuance, the assumption
to the existing collateral is periodically reviewed
pool. In addition, weighting and updated to the extent
may be given to primary of secular changes in
loan spreads to the extent loan spreads.
current primary market
opportunities suggest
different spreads than
the existing portfolio.
---------------------------------- ------------------------------
Discount Intended to reflect the Based on the expected
Rate market required rate of rate of return for a newly
return for similar securities originated CLO equity
and is informed by market security on a hold to
research, BWICs, market maturity basis. The expected
colour for comparable rate of return is based
transactions, and dealer on a long-term market
runs. The discount rate average and is periodically
may vary based on underlying reviewed and updated to
loan prices, exposure the extent of secular
to distressed assets or changes in the market.
industries, manager performance,
and time remaining in
reinvestment period. Discount
rates have tightened materially
since Q1 2021 given the
recovery of the loan market
and central bank stimulus.
The Company completed
several opportunistic
trades of excess positions
in Q4 2021. The discount
rates implied by such
trades helped inform the
discount rates assumed
for mark to market valuations.
---------------------------------- ------------------------------
Source of the Company's Dividend - Ordinary Class
The Company through its investments in the Lux Subsidiary
receives income, on a quarterly basis, on the PPNs held by the
latter in BCF, which continues to generate positive cash flows from
its CLO Income Note investments and from its portfolio of directly
held and warehoused loans.
The Company redeems CSWs on a quarterly basis to transfer the
income from the Lux Subsidiary. As detailed above, the Company
redeemed 36,400,492 CSWs in the Lux Subsidiary during the year with
a fair value of EUR52,279,906 to fund the quarterly dividends.
Alternative Investment Fund Managers' Directive
The Alternative Investment Fund Managers' Directive ("AIFMD")
requires certain information to be made available to investors in
alternative investment funds ("AIFs") before they invest and
requires that material changes to this information be disclosed in
the annual report of each AIF. There have been no material changes
(other than those reflected in these financial statements) to this
information requiring disclosure.
Alternative Performance Measures
In accordance with ESMA Guidelines on APMs, the Board has
considered which APMs are included in the Annual Report and Audited
Financial Statements and require further clarification. An APM is
defined as a financial measure of historical or future financial
performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable financial
reporting framework. APMs included in the financial statements,
which are unaudited and outside the scope of IFRS, are detailed in
the table below.
Published NAV total Published NAV per (Discount) / Premium
return per Ordinary Ordinary Share** per Ordinary Share
Share**
Definition The increase in the Gross assets less BGLF's closing
Published NAV per liabilities (including share price on
Ordinary Share plus accrued but unpaid the LSE less the
the total dividends fees) determined Published NAV per
paid per Ordinary in accordance with share as at the
Share during the the section entitled period end, divided
period, with such "Net Asset Value" by the Published
dividends paid being in Part I of the NAV per share as
re-invested at NAV, Company's Prospectus, at that date
as a percentage of divided by the number
the NAV per share of Ordinary Shares
as at period end at the relevant time
------------------------- -------------------------- ---------------------
Reason NAV total return The Published NAV The discount or
summarises the Company's per share is an indicator premium per Ordinary
true growth over of the intrinsic Share is a key
time while taking value of the Company. indicator of the
into account both discrepancy between
capital appreciation the market value
and dividend yield and the intrinsic
value of the Company
------------------------- -------------------------- ---------------------
Target 11%+ Not applicable Maximum discount
of 7.5%
------------------------- -------------------------- ---------------------
Performance
------------------------- -------------------------- ---------------------
2021 21.82% 0.9407 (15.75)%
------------------------- -------------------------- ---------------------
2020 (0.22)% 0.8435 (20.57)%*
------------------------- -------------------------- ---------------------
2019 14.46% 0.9187 (10.20)%
------------------------- -------------------------- ---------------------
2018 6.70% 0.8963 (15.21)%
------------------------- -------------------------- ---------------------
2017 1.38% 0.9378 5.03%
------------------------- -------------------------- ---------------------
* Refer to details on management of the discount in the Chair's
Statement.
** Published NAV is an APM from which these metrics are
derived.
A reconciliation of the above-mentioned APMs to the most
directly reconcilable line items presented in the financial
statements for the year ended 31 December 2021 is presented
below:
Published NAV total return per Ordinary Share
31 December 2021 31 December 2020
Opening Published NAV per Ordinary
Share (A) EUR0.8435 EUR0.9187
---------------- ----------------
Adjustments per Ordinary Share (B) EUR0.0122 EUR(0.0644)
---------------- ----------------
Opening IFRS NAV per Ordinary Share
(C=A+B) EUR0.8557 EUR0.8543
---------------- ----------------
Closing Published NAV per Ordinary
Share (D) EUR0.9407 EUR0.8435
---------------- ----------------
Adjustments per Ordinary Share (E) EUR(0.0253) EUR0.0122
---------------- ----------------
Closing IFRS NAV per Ordinary Share
(F=D+E) EUR0.9154 EUR0.8557
---------------- ----------------
Dividends paid during the year (G) EUR0.0775 EUR0.0700
---------------- ----------------
Published NAV total return per Ordinary
Share
(H=(D-A+G)/A) 20.71% (0.57)%
---------------- ----------------
Impact of dividend re-investment
(I) 1.11% 0.35%
---------------- ----------------
Published NAV total return per Ordinary
Share with dividends re-invested
(J=H+I) 21.82% (0.22)%
---------------- ----------------
IFRS NAV total return per Ordinary
Share
(K=(F-C+G)/C) 16.03% 8.36%
---------------- ----------------
Impact of dividend re-investment
(L) 0.84% 0.49%
---------------- ----------------
IFRS NAV total return per Ordinary
Share with
dividends re-invested (M=K+L) 16.87% 8.85%
---------------- ----------------
Refer to Note 16 for further details on the adjustments per
Ordinary Share.
Published NAV per Ordinary Share
31 December 2021 31 December 2020
Published NAV per Ordinary Share
(A) EUR0.9407 EUR0.8435
---------------- ----------------
Adjustments per Ordinary Share (B) EUR(0.0253) EUR0.0122
---------------- ----------------
IFRS NAV per Ordinary Share (C=A+B) EUR0.9154 EUR0.8557
---------------- ----------------
Refer to Note 16 for further details on the adjustments per
Ordinary Share.
(Discount) / Premium per Ordinary Share
31 December 2021 31 December 2020
Published NAV per Ordinary Share
(A) EUR0.9407 EUR0.8435
---------------- ----------------
Adjustments per Ordinary Share (B) EUR(0.0253) EUR0.0122
---------------- ----------------
IFRS NAV per Ordinary Share (C=A+B) EUR0.9154 EUR0.8557
---------------- ----------------
Closing share price as at 31 December
per the LSE (D) EUR0.7925 EUR0.6700
---------------- ----------------
Discount to Published NAV per Ordinary
Share
(E=(D-A)/A) (15.75)% (20.57)%
---------------- ----------------
Discount to IFRS NAV per Ordinary
Share
(F=(D-C)/C) (13.43)% (21.70)%
---------------- ----------------
Refer to Note 16 for further details on the adjustments per
Ordinary Share.
Future Developments
Significant Events after the Reporting Period
Dividends
On 24 January 2022, the Board declared a dividend of EUR0.0275
per Ordinary Share in respect of the period from 1 October 2021 to
31 December 2021 with an ex-dividend date of 3 February 2022. A
total payment of EUR12,658,929 was processed on 4 March 2022.
On 25 April 2022, the Board declared a dividend of EUR0.0175 per
Ordinary Share in respect of the period from 1 January 2022 to 31
March 2022 with an ex-dividend date of 5 May 2022. The dividend
will be paid on 9 June 2022.
Share Repurchase Programme
Repurchase of Ordinary Shares
During the period from 1 January 2022 to 27 April 2022, the
Company repurchased 1,160,000 shares at a total cost of
EUR1,281,400 (excluding fees and commissions).
Outlook
It is the Board's intention that the Company will pursue its
investment objective and investment policy as detailed above.
Further comments on the outlook for the Company for the 2022
financial year and the main trends and factors likely to affects
its future development, performance and position, including the
Ukraine conflict and ongoing COVID-19 pandemic are contained within
the Chair's Statement and the Portfolio Adviser's Review.
Director Biographies
The Directors appointed to the Board as at the date of approval
of this Annual Report and Audited Financial Statements are:
Charlotte Valeur
Position: Chair of the Board (non-executive and independent director, resident in Jersey)
Date of appointment: 13 June 2014
Charlotte has over 35 years of experience in finance, primarily
as an investment banker in Capital Markets in Denmark and the U.K.
She is an experienced FTSE Chair, Non-Executive Director and
corporate governance expert. Charlotte's current appointments
include her roles as NED of listed company Digital 9 Infrastructure
Plc, NED of NTR Plc and NED of Laing O'Rourke Construction Ltd.
Charlotte previously held roles as Chair of FTSE 250 Kennedy
Wilson Europe Real Estate Plc, Chair of DW Catalyst Fund Ltd, NED
of Renewable Energy Generation Plc, NED of Phoenix Spree
Deutschland Ltd, NED of
JPMorgan Convertibles Income Fund, and NED of FTSE 250 3i
Infrastructure Plc.
Charlotte is also a Trustee of the Institute of Neurodiversity
and Chair and founder of Board Apprentice. She is a member of the
London Stock Exchange Primary Markets Group, serves on the Advisory
Board of the Moller Institute, Churchill College, University of
Cambridge and is a visiting Professor in Governance at University
of Strathclyde. Charlotte was previously the Chair of the UK
Institute of Directors.
Gary Clark, ACA
Position: Chair of the Remuneration and Nomination Committee and
NAV Review Committee; Senior Independent Director (non-executive
and independent director, resident in Jersey)
Date of appointment: 13 June 2014
Gary Clark acts as an independent non-executive director for a
number of investment managers including Emirates NBD, Aberdeen
Standard Capital and ICG. Until 1 March 2011, he was a managing
director at State Street and their head of Hedge Fund Services in
the Channel Islands. Gary Clark, a Chartered Accountant, served as
chairman of the Jersey Funds Association from 2004 to 2007 and was
managing director at AIB Fund Administrators Limited when it was
acquired by Mourant in 2006. This business was sold to State Street
in 2010. Prior to this, Gary Clark was managing director of the
futures broker, GNI (Channel Islands) Limited in Jersey.
A specialist in alternative investment funds, Gary Clark was one
of several practitioners involved in a number of significant
changes to the regulatory regime for funds in Jersey, including the
introduction of both Jersey's Expert Funds Guide and Jersey's
Unregulated Funds regime.
As a Chartered Accountant with over 30 years' experience in
financial services, including many years focused on running
fund administration businesses in alternative asset classes,
Gary Clark brings a wealth of highly relevant experience,
at both board level and as an executive, in fund / asset management
operations, including in particular valuation, accounting
and administrative controls and processes.
Heather MacCallum, CA
Position: Chair of the Audit Committee (non-executive and
independent director, resident in Jersey)
Date of appointment: 7 September 2017
Heather MacCallum is a Chartered Accountant and was a partner
of KPMG Channel Islands for 15 years before retiring from
the partnership in 2016.
Heather MacCallum now holds a portfolio of non-executive directorships
including abrdn Latin American Income Fund Limited and Invesco
Bond Income Plus Limited (formerly City Merchants High Yield
Trust Limited), both of which are investment companies listed
on the London Stock Exchange. She is the Chair of Jersey Water,
an unlisted Jersey utility company.
She is a member of the Institute of Directors and the Institute
of Chartered Accountants of Scotland (ICAS). She is also a
past president of the Jersey Society of Chartered and Certified
Accountants.
With 20 years' experience gained in a global professional
services firm, Heather MacCallum brings financial experience
including technical knowledge of accounting and auditing,
especially in the context of financial services, and in particular
the investment management sector.
Steven Wilderspin, FCA, IMC
Position: Chair of the Risk Committee (non-executive and
independent director, resident in Jersey)
Date of appointment: 11 August 2017
Steven Wilderspin, a qualified Chartered Accountant, has been
the Principal of Wilderspin Independent Governance, which
provides independent directorship services, since 2007. He
has served on a number of private equity, property and hedge
fund boards as well as commercial companies.
In February 2021, Steven Wilderspin was appointed as a director
of FTSE 250 GCP Infrastructure Investments Ltd, and he is
also a director of FTSE 250 HarbourVest Global Private Equity
Limited. Steven Wilderspin previously served as the Chairman
of the Audit and Risk Committee of FTSE 250 3i Infrastructure
plc.
From 2001 until 2007, Steven Wilderspin was a director of
fund administrator Maples Finance Jersey Limited where he
was responsible for fund and securitisation structures. Before
that, from 1997, Steven Wilderspin was Head of Accounting
at Perpetual Fund Management (Jersey) Limited.
Steven Wilderspin has significant listed corporate governance
experience, particularly in the area of risk management, so
is well placed to lead the board through the development of
its risk framework.
Mark Moffat
Position: Non-executive and independent director (resident
in UK)
Date of appointment: 8 January 2019
Mark Moffat has been involved in structuring, managing and
investing in CLOs for over 20 years. Mark Moffat left GSO
Capital Partners LP, part of the credit businesses of The
Blackstone Group L.P., in April 2015 to pursue other interests.
Whilst at GSO, Mark Moffat was a senior managing director
and the portfolio manager responsible for investing in structured
credit and co-head of the European activities of the Customised
Credit Strategies division.
Mark Moffat joined GSO in January 2012 following the acquisition
by GSO of Harbourmaster Capital Management Limited where he
was co-head. Prior to joining Harbourmaster in 2007, Mark
Moffat was head of European debt and equity capital markets
and the European CLO business of Bear Stearns. At Bear Stearns,
Mark Moffat was responsible for the origination, structuring
and execution of CLOs in Europe over a seven-year period.
Prior to Bear Stearns, Mark Moffat was global head of CLOs
at ABN AMRO and a director in the principal finance team of
Greenwich NatWest.
With over 20 years of experience structuring, managing and
investing in CLOs Mark Moffat brings a deep knowledge of how
CLO structures and markets perform over the credit cycle.
Directors
Directors' Report
The Directors present the Annual Report and Audited Financial
Statements for the Company for the year ended 31 December 2021.
Directors
The Directors of the Company on the date the financial
statements were approved are listed on below. All directors were
directors of the Company throughout the year ended 31 December
2021.
The Board and Employees
The Board currently comprises three male and two female
Directors. The Company has no employees; therefore, there is
nothing further to report in respect of gender representation
within the Company.
Full details of the Company's policy on Board Diversity can be
found in the Corporate Governance Report below.
Name Change
On 13 January 2021, the Company announced that its name had
changed from 'Blackstone / GSO Loan Financing Limited' to
'Blackstone Loan Financing Limited' with effect from and including
11 January 2021.
Share Capital
The Company's share capital consists of an unlimited number of
shares. As at 31 December 2021, the Company had 460,984,702
Ordinary Shares in issue and 21,918,092 Ordinary Shares in treasury
(31 December 2020: 477,023,331 Ordinary Shares in issue and
5,879,463 Ordinary Shares in treasury).
Share Repurchase Programme
At the 2020 AGM, held on 16 July 2020, the Directors were
granted authority to repurchase up to 14.99% of the issued share
capital as at the date of the 2020 AGM for cancellation or to be
held as treasury shares. Under this authority, during the year
ended 31 December 2020, the Company purchased 3,393,507 of its
Ordinary Shares of no par value at a total cost of EUR2,048,649.
These Ordinary Shares are being held as treasury shares.
At the 2020 AGM, the Directors were granted authority to allot,
grant options over or otherwise dispose of up to 48,041,684 Shares
(being equal to 10.00% of the Shares in issue at the date of the
AGM).
At the 2021 AGM, held on 23 July 2021, the Directors were
granted authority to repurchase up to 14.99% of the issued share
capital as at the date of the 2021 AGM for cancellation or to be
held as treasury shares. Under this authority, during the year
ended 31 December 2021, the Company purchased 7,722,373 of its
Ordinary Shares of no par value at a total cost of EUR6,101,156.
These Ordinary Share are being held as treasury shares.
At the Company's 2021 AGM, the Company received shareholder
approval to resell up to 46,880,707 Shares held by the Company in
treasury. Under this authority, these Shares are permitted to be
sold or transferred out of treasury for cash at a price
representing a discount to Net Asset Value per Share not greater
than the discount at which such Shares were repurchased by the
Company. To-date, no shares have been resold by the Company under
this authority.
Authority to Allot
At the 2021 AGM, the Directors were granted authority to allot,
grant options over, or otherwise dispose of up to 70,274,181
Ordinary Shares (being equal to 10.00% of the Shares in issue at
the date of the AGM). This authority will expire at the 2022
AGM.
Shareholders' Interests
As at 31 December 2021, the Company had been notified, in
accordance with Chapter 5 of the Disclosure Guidance and
Transparency Rules (which covers the acquisition and disposal of
major shareholdings and voting rights), of the following
Shareholders with an interest of greater than 5% in the Company's
issued share capital:
Shareholder Percentage of Voting Rights
BlackRock Inc 22.79%
---------------------------
Quilter plc 19.21%
---------------------------
Blackstone Treasury Asia Pte Ltd 9.33%
---------------------------
FIL Limited 9.68%
---------------------------
Between 31 December 2021 and 27 April 2022, no notifications
were received.
Statement of Disclosure of Information to the Auditor
The Directors who held office as at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is unaware and that they have taken the steps that they
ought to have taken as Directors to make themselves aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Modern slavery
The Company would not fall into the scope of the UK Modern
Slavery Act 2015 (as the Company does not have any turnover derived
from goods and services) if it was incorporated in the UK.
Furthermore, as a closed-ended investment company, the Company has
no employees and its supply chain is considered to be low risk
given that suppliers are typically professional advisers based in
any of the Channel Islands, Ireland or the UK. Based on these
factors, the Board have considered that it is not necessary for the
Company to make a slavery and human trafficking statement.
Gary Clark
Director
29 April 2022
Corporate Governance Report
Statement of Compliance with Corporate Governance
The Board of the Company has considered the Principles and
Provisions of the AIC Code. The AIC Code addresses the Principles
and Provisions set out in the UK Code, as well as setting out
additional Provisions on issues that are of specific relevance to
the Company, as an investment company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the FRC and
supported by the Jersey Financial Services Commission provides more
relevant information to shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code as they apply to the Company.
The AIC Code is available on the AIC website ( www.theaic.co.uk
). It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
The Board
The Board consists of five non-executive directors. Their
biographies can be found below.
The Board meets at least four times a year and is in regular
contact with the Portfolio Adviser, the Portfolio Manager, the
Administrator and the Company Secretary. Furthermore, the Board is
supplied with information in a timely manner from the Portfolio
Adviser, Portfolio Manager, the Company Secretary and other
advisers in a form and of a quality appropriate for it to be able
to discharge its duties.
Board Apprentices
The Board participates in the Board Apprentice scheme and took
on two Board Apprentices for one year from 1 April 2021, having
previously taken on two Board Apprentices for one year in October
2018. The Board consider this a valuable exercise in mentoring
already accomplished individuals to be future directors, fostering
equality and developing board culture.
Duties and Responsibilities
The Board has overall responsibility for maximising the
Company's success by directing and supervising the affairs of the
business and meeting the appropriate interests of Shareholders and
relevant stakeholders, while enhancing the value of the Company and
also ensuring the protection of investors. A summary of the Board's
responsibilities is as follows:
-- statutory obligations and public disclosure;
-- strategic matters and financial reporting;
-- risk assessment and management including reporting,
compliance, governance, monitoring and control; and
-- other matters having a material effect on the Company.
The Board is responsible to Shareholders for the overall
management of the Company. The Board has delegated certain
operational activities of the Company to the Portfolio Adviser,
Administrator and Company Secretary. The Board reserves the power
of decisions relating to the determination of investment policy,
the approval of changes in strategy, capital structure, statutory
obligations and public disclosure, and the entering into of any
material contracts by the Company.
Board Attendance
The following table shows the number of meetings held by the
Board and each committee for the year ended 31 December 2021, as
well as the Directors' and Committee Members' attendance.
Charlotte Gary Mark
Meeting Total Valeur Clark Steven Wilderspin Heather MacCallum Moffat
Quarterly Board 4 4 4 4 4 4
----- --------- ------ ----------------- ----------------- -------
Ad Hoc Board 10 8 10 10 9 8
----- --------- ------ ----------------- ----------------- -------
Ad Hoc board (Dividend
Declaration) 4 4 4 4 4 4
----- --------- ------ ----------------- ----------------- -------
Audit Committee 5 N/A 5 5 5 5
----- --------- ------ ----------------- ----------------- -------
Management Engagement
Committee 2 2 2 2 2 2
----- --------- ------ ----------------- ----------------- -------
NAV Review Committee 12 N/A 11 12 12 12
----- --------- ------ ----------------- ----------------- -------
Remuneration and
Nomination Committee 2 2 2 2 2 2
----- --------- ------ ----------------- ----------------- -------
Risk Committee 4 4 4 4 4 4
----- --------- ------ ----------------- ----------------- -------
Inside Information
Committee* 3 N/A 3 3 1 N/A
----- --------- ------ ----------------- ----------------- -------
*The Inside Information Committee is a committee of any two
Directors.
Chair
The Chair is responsible for leadership of the Board, ensuring
its effectiveness on all aspects of its role and setting its
agenda. The Chair is also responsible for ensuring that the
Directors receive accurate, timely and clear information and for
effective communication with Shareholders.
Board Independence
For the purpose of assessing compliance with principle G,
provisions 10 and 13 of the AIC Code, the Board considers all of
the current Directors to be independent.
The Directors consider that there are no factors, as set out in
provision 13 in the AIC Code, which compromise the other Directors'
independence and that all Directors contribute comprehensively to
the affairs of the Company. The Board reviews the independence of
all Directors annually. The Company Secretary acts as secretary to
the Board and Committees and, in doing so, assists the Chair in
ensuring that all Directors have full and timely access to all
relevant documentation, organises induction of new Directors, is
responsible for ensuring that the correct Board procedures are
followed and advises the Board on corporate governance matters.
Board Evaluation
During 2021, the Board conducted their own review using
BoardMetrix, a board evaluation tool. This evaluation assessed the
Board's performance in the following areas:
-- board composition/skills;
-- strategic review;
-- workings of the board;
-- risk oversight;
-- performance oversight; and
-- stakeholder management.
The performance of each Director and the Committees of the Board
were also assessed as part of this evaluation.
The evaluation concluded that the Board was strong across all of
the above areas and that the Directors and the Board's Committees
were performing effectively. No significant recommendations were
made which are required to be brought to the attention of the
Shareholders.
Committees of the Board
The Board has established six committees: an Audit Committee, a
Management Engagement Committee, a NAV Review Committee, a
Remuneration and Nomination Committee, a Risk Committee, and an
Inside Information Committee. Each committee has formally delegated
duties and responsibilities within written terms of reference.
These are available on the Company's website, blackstone.com/bglf,
under "Terms of Reference".
The current committee memberships are detailed below.
Audit Committee
The Audit Committee comprises all Directors, except Charlotte
Valeur, and is chaired by Heather MacCallum.
The terms of reference state that the Audit Committee will meet
not less than three times a year and will meet with the Auditor at
least once a year. The report on the role and activities of this
committee and its relationship with the Auditor is included in the
Audit Committee Report below.
Management Engagement Committee
The Management Engagement Committee comprises all Directors and
is chaired by Charlotte Valeur.
The terms of reference state that the Management Engagement
Committee shall meet at least once a year; will have responsibility
for monitoring and reviewing the Portfolio Adviser's performance;
and will recommend to the Board whether the continued appointment
of the Portfolio Adviser is in the best interests of the Company
and Shareholders.
NAV Review Committee
The NAV Review Committee comprises all Directors, except
Charlotte Valeur, and is chaired by Gary Clark.
The terms of reference state that the NAV Review Committee shall
meet at least once a month to review and consider the Company's NAV
calculation, fact sheet and related stock exchange
announcement(s).
Remuneration and Nomination Committee
The Remuneration and Nomination Committee comprises all
Directors and is chaired by Gary Clark.
The terms of reference state that the Remuneration and
Nomination Committee will meet not less than twice a year and shall
be responsible for all aspects of the appointment and remuneration
of Directors. The remuneration duties of the committee include
determining and agreeing with the Board the framework or broad
policy for the remuneration of the Directors and to review its
ongoing appropriateness and relevance.
The nomination duties of the committee include regularly
reviewing the structure, size and composition of the Board,
including the balance of skills, experience, independence and
knowledge, as well as identifying, nominating and recommending for
the approval of the Board, candidates to fill Board vacancies as
they arise.
Director Re-Election and Tenure
The Remuneration and Nomination Committee and the Board are
strongly committed to striking the correct balance between the
benefits of continuity and those that come from the introduction of
new perspectives to the Board.
It is the intention of the Board that each Director will retire
after no longer than nine years in their role and the Board has
adopted a policy whereby all Directors will be put up for
re-election every year. Accordingly, all Directors will be put
forward for re-election at the forthcoming AGM. Each of the
Directors has demonstrated a strong commitment to the Company and
the Board believes each Director's re-election to be in the best
interests of the Company.
The Board also maintains a succession planning matrix covering
the Directors' skills, the Board's diversity, and the Directors'
expected year of retirement should they hold office for nine years.
The matrix is used by the Remuneration and Nomination Committee to
identify any additional skills that would benefit the Board and to
help the Remuneration and Nomination Committee establish when to
begin recruiting for any new directors. The Board also keeps its
diversity under review.
Risk Committee
The Risk Committee comprises all Directors and is chaired by
Steven Wilderspin.
The terms of reference state that the Risk Committee shall meet
at least two times a year. The activities of this committee are
outlined in the Risk Committee Report below.
Inside Information Committee
The Inside Information Committee comprises any two members of
the Board.
The Inside Information Committee is responsible for considering
whether anything brought to its attention constitutes inside
information and monitoring the disclosure and control of such
information.
Board Diversity
The Board believes in and values the importance of a broad range
of skills, experience and diversity, including gender, for the
effective functioning of the Board, all of which are considered
when determining the optimum composition of the Board. The Board
has a policy that aims to have a minimum of 40% of either gender
represented on the Board, and also recognises the importance of
inclusivity in its diversity policy. The Board ensures compliance
with its policy in respect of any appointments to the Board. At 31
December 2021 and at the date of approval of these financial
statements, 60% of the Directors were male and 40% were female.
Internal Controls
The Board has applied principle O of the AIC Code by
establishing a continuous process for identifying, evaluating and
managing the principal risks that the Company faces. The Board is
responsible for the Company's system of internal controls and for
reviewing its effectiveness. Such a system is designed to manage
rather than eliminate the risk of failure to achieve business
objectives, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Board's monitoring covers all controls, including financial,
operational and compliance controls and risk management. It is
based principally on reviewing reports from the Portfolio Adviser
and BCF to consider whether significant risks are identified,
evaluated, managed and controlled and whether any significant
weaknesses are promptly remedied and indicate a need for more
extensive monitoring.
The Audit Committee assists the Board in discharging its
monitoring responsibilities.
During the course of the Board's review of the system of
internal controls, it has not identified nor been advised of any
failings or weaknesses which it has determined to be significant.
Therefore, no confirmation in respect of necessary actions has been
made.
The Board is also responsible for setting the overall investment
policy and monitors the services provided by the Portfolio Adviser
at regular Board meetings. The Board receives regular reports from
the Portfolio Adviser, together with quarterly reports from the
Administrator, the Company Secretary, the Depositary, Compliance
(including the Money Laundering Compliance Officer and Money
Laundering Reporting Officer) and from the Portfolio Adviser
covering compliance matters.
The Directors clearly define the duties and responsibilities of
their agents and advisers, whose appointments are made after due
consideration, and monitor their ongoing performance, which is done
with the assistance of the Management Engagement Committee. All of
the Company's agents and advisers maintain their own systems of
internal control on which they report to the Board. These systems
are designed to ensure effectiveness and efficient operation,
internal control and compliance with laws and regulations. In
establishing the systems of internal control, regard is paid to the
materiality of relevant risks, the likelihood of costs being
incurred and the costs of control. It follows, therefore, that the
systems of internal control can only provide reasonable but not
absolute assurance against the risk of material misstatement or
loss.
The Directors are satisfied that the continued appointment of
the relevant service providers is in the best interests of the
Shareholders.
The Board has reviewed the need for an internal audit function
and has decided that the systems and procedures employed by the
Administrator and Portfolio Adviser, including their own internal
controls and procedures, provide sufficient assurance that a sound
system of risk management and internal control, to safeguard the
Shareholders' investment and the Company's assets, is maintained.
An internal audit function specific to the Company is therefore
considered unnecessary. Full details are set out in the Audit
Committee Report below.
The Company has appointed N+1 Singer Advisory LLP and
Winterflood Securities Limited as its joint brokers. Together with
the brokers, the Portfolio Adviser assists the Board in
communicating with and understanding the views of the Company's
major Shareholders.
Risk Committee Report
Membership
The Risk Committee comprises Steven Wilderspin (Chair),
Charlotte Valeur, Heather MacCallum, Gary Clark and Mark
Moffat.
Key Objectives
The Risk Committee has been established to assist the Board in
its oversight of risk through ensuring the Company maintains a high
standard of risk identification, monitoring and management so as to
minimise investment risks and any other risks not covered by the
Audit Committee.
Responsibilities
The Risk Committee's key responsibilities are:
-- ensuring the Company's compliance with its investment
objectives, policies, restrictions and borrowing limits;
-- ensuring that appropriate policies and reporting exists for
the monitoring of the Company's key risks;
-- developing and maintaining a risk register documenting
identified risks, their mitigants, likelihood and impact, which is
reviewed regularly by the Board with action points and newly
identified risks being appropriately dealt with;
-- defining risk review activities regarding investment
decisions, transactions and exposures for approval by the Board;
and
-- ensuring due regard is given to all regulations, codes, and
laws that the Company is subject to.
Committee Meetings
In 2021, the Risk Committee met on four occasions. The specific
areas of focus for the Committee during the year included:
-- The ongoing impact of the COVID-19 pandemic. The Committee
reviewed the operational resilience of the Company's key service
providers to ensure that they could continue providing services
throughout the year, particularly during periods of lockdown. The
Committee reviewed all of the Company's risks through the lens of
the pandemic to ensure that any new or heightened risk was
identified and appropriately dealt with. Other than the heightened
operational risk, the most material increase in risk related to the
sustainability of the Company's dividend and level of the Company's
share price discount to Published NAV. These areas were addressed
by the Board as described above.
-- ESG. ESG was a major topic of discussion for the Committee
and the wider Board during the year. See further information
above.
-- LIBOR transition. The Committee reviewed the impact of the
transition of the interest reference rate for its underlying CLO
assets and liabilities from LIBOR to alternatives such as SONIA. BX
Credit has a project team that is managing this transition across
its wider business. The impact on the Company as assets and
liabilities transition over time is not expected to be
material.
-- Virtual due diligence visit. Due to the ongoing COVID-19
pandemic, the Committee carried out a virtual due diligence visit
to the Portfolio Adviser's Dublin office, including a meeting with
the BCF board. The Committee focused on governance, valuation,
compliance and risk management topics.
Risk Monitoring
Being internally managed, the Company is responsible for both
portfolio and risk management. However, due to the nature of the
investment and the limited ability to look through, traditional
market and credit risk techniques do not apply at the Company
level. That said, the Board regularly engages with the board of BCF
and discusses with them key areas of risk.
Investment risk management and monitoring, to ensure the
successful pursuance of our investment objective, is therefore
mainly through the Company's monthly NAV reporting process and the
monitoring of investment restrictions and eligibility criteria as
carried out by the Depositary.
Steven Wilderspin
Risk Committee Chair
29 April 2022
Directors' Remuneration Report
D
Directors' Remuneration
This report provides relevant information in respect of the
Directors' remuneration.
The tables below outlines the remuneration the Directors were
entitled to during the year ended 31 December 2021 for their
services.
Total fixed remuneration Total fixed remuneration
for the year ended for the year ended
31 December 2021 31 December 2020
GBP GBP
------------------------ ------------------------
Charlotte Valeur 61,000 61,000
------------------------ ------------------------
Gary Clark 46,000 46,000
------------------------ ------------------------
Heather MacCallum 49,500 46,590
------------------------ ------------------------
Steven Wilderspin 44,500 44,500
------------------------ ------------------------
Mark Moffat 38,000 38,000
------------------------ ------------------------
Total Directors' Remuneration 239,000 236,090
------------------------ ------------------------
Total Directors' Remuneration
(EUR) 284,347 263,391
------------------------ ------------------------
The Chairs of the Management Engagement Committee, NAV Review
Committee, Remuneration and Nomination Committee, Audit Committee
and Risk Committee each received additional fees, which are
included in the amounts above, for the additional responsibilities
and time commitment required in undertaking these roles.
Additionally, the Senior Independent Director received additional
fees for the additional responsibilities and time commitment
required in undertaking this role.
The Remuneration and Nomination Committee increased Heather
MacCallum's additional fee for services provided as Audit Committee
Chair by GBP5,000 effective 1 August 2020 to reflect the increased
time commitment required. The table above includes a pro-rated
amount of GBP2,010.
The Remuneration and Nomination Committee increased each of the
Directors fees for services provided by GBP750 with the exception
of the Chair's fee which was increased by GBP1,000. These changes
were effective from 1 January 2022.
Directors' remuneration is payable in Sterling quarterly in
arrears. No other remuneration (fixed or variable) or compensation
was paid or is payable by the Company during the year to any of the
Directors. There has been no change to the Company's remuneration
policy.
The Company has no employees, accordingly, there is no
difference in policy on the remuneration of Directors and the
remuneration of employees. No Director is entitled to receive any
remuneration which is performance-related.
The Remuneration and Nomination Committee reviews the
Remuneration Policy and Directors' remuneration on an annual
basis.
Remuneration Policy
Directors' fees are determined by the Remuneration and
Nomination Committee under the terms of the remuneration policy
(the "Remuneration Policy") approved on 3 November 2021, as derived
from the Company's Articles of Association. The Remuneration and
Nomination Committee also considers the remuneration levels of
similar companies and consults external remuneration consultants
where this is deemed appropriate.
The Remuneration and Nomination Committee consists of all
Directors and is involved in deciding Directors' remuneration and
ensuring that remuneration received reflects the Directors' duties,
responsibilities and the value of their time.
The Company does not provide pensions or other retirement or
superannuation benefits, death or disability benefits, or other
allowances or gratuities to the Directors or specified connected
parties. The Remuneration Policy also prohibits payments to a
Director for loss of office or as consideration for, or in
connection with, his or her retirement from office. Whilst the
Remuneration Policy permits part of their fee to be paid in the
form of fully-paid up shares in the capital of the Company, the
Directors' fees are not currently paid this way.
In addition, the Remuneration Policy allows for reasonable
travel, hotel and other expenses incurred by the Directors in the
course of performing their duties or from their performance of a
special service on behalf of the Company.
The limit for the aggregate fees payable to the Directors is
GBP300,000 per annum.
Directors' Interests
The Directors held the following number of Ordinary shares in
the Company as at the year end:
Shares Type As at 31 December As at 31 December
2021 2020
Charlotte Valeur Ordinary 11,500 11,500
--------- ----------------- -----------------
Gary Clark Ordinary 168,200 168,200
--------- ----------------- -----------------
Heather MacCallum Ordinary - -
--------- ----------------- -----------------
Steven Wilderspin Ordinary 20,000 20,000
--------- ----------------- -----------------
Mark Moffat Ordinary 771,593 771,593
--------- ----------------- -----------------
There have been no other changes to the Directors' Interests as
at the date of the approval of these financial statements.
Service Contracts and Policy on Payment of Loss of Office
No Director has a service contract with the Company. The
Directors have each entered into a letter of engagement with the
Company setting out the terms of their appointment. Directors'
appointments may be terminated at any time by giving three month's
written notice, with no compensation payable upon leaving office
for whatever reason.
Gary Clark
Remuneration and Nomination Committee Chair
29 April 2022
Audit Committee Report
Audit Committee Report
Audit Committee
The Audit Committee comprises Heather MacCallum, Mark Moffat,
Steven Wilderspin and Gary Clark and is chaired by Heather
MacCallum. Heather MacCallum has recent and relevant financial
experience in accounting and auditing, and the Audit Committee as a
whole has competence relevant to the sector in which the Company
operates.
In addition to formal meetings, the Audit Committee has worked
with the Portfolio Adviser and Auditor to assess the operations and
controls of BCF and to assess in particular what reliance the Audit
Committee can place on the control environment. The Chair has also
had a number of discussions with the Auditor, the Portfolio Adviser
and the Administrator around the annual audit and half year
financial reporting processes.
Role of the Audit Committee
The function of the Audit Committee is to ensure that the
Company maintains high standards of integrity, financial reporting
and internal controls.
The Audit Committee's main roles and responsibilities include,
but are not limited to, the following:
-- monitoring the integrity of the financial statements and any
formal announcements relating to the Company's financial
performance;
-- reviewing and reporting to the Board on any significant
financial reporting issues and judgements;
-- reviewing and monitoring the effectiveness of the Company's
risk management and internal control arrangements;
-- monitoring the statutory audit of the annual financial
statements of the Company and its effectiveness;
-- reviewing the external auditor's performance, independence and objectivity;
-- making recommendations to the Board in relation to the
appointment, reappointment and/or removal of the external auditor,
the approval of the external auditor's remuneration and the terms
of the engagement;
-- implementing policies surrounding the engagement of the
external auditor to supply non-audit services, where
appropriate;
-- reviewing and challenging where necessary significant
accounting policies and practices; and
-- reporting to the Board on how it has discharged its responsibilities.
How the Audit Committee Has Discharged Its Responsibilities
The Audit Committee met five times during the year.
Representatives of the Portfolio Adviser, Company's Auditor and the
Administrator were invited to the meetings as appropriate.
Monitoring the Integrity of the Financial Statements Including
Significant Judgements
The Audit Committee reviewed the Company's Annual Report and
Audited Financial Statements for the year ended 31 December 2020
and the Half Yearly Financial Report for the six months ended 30
June 2021 prior to discussion and approval by the Board, and the
significant financial reporting issues and judgements which they
contain. The Audit Committee also reviewed the external auditor's
reports thereon, which were discussed with the Auditor. The Audit
Committee reviewed the appropriateness of the Company's accounting
principles and policies, and monitored changes to, and compliance
with, accounting standards on an ongoing basis.
After the year end, the Audit Committee had further meetings and
reviewed, prior to making any recommendations to the Board, the
Annual Report and Audited Financial Statements for the year ended
31 December 2021. In undertaking this review, the Audit Committee
discussed with the Auditor, the Portfolio Adviser and the
Administrator the critical accounting policies and judgements that
have been applied.
The Auditor reported to the Committee on any non-trivial
misstatements that they had found during the course of their work
and confirmed that under ISA (UK) no material amounts remained
unadjusted.
As requested by the Board, the Audit Committee also reviewed the
Annual Report and are able to confirm to the Board that, in our
view, the Annual Report, taken as a whole, is fair, balanced and
understandable and provided the information necessary for
Shareholders to assess the Company's position, performance,
business model and strategy.
Significant Accounting Matters
The Committee considered the key accounting issues, matters and
judgements regarding the Company's 2021 Annual Report and Financial
Statements and disclosures including those relating to:
Significant Area How Addressed
Valuation of investments The investment in the Lux Subsidiary is accounted
for at fair value through profit or loss,
and the investment in PPNs issued by BCF
held by the Lux Subsidiary are at fair value.
Investments in BCF (the PPNs) are illiquid
investments, not traded on an active market
and are valued using valuation techniques
determined by the Directors and classified
as Level 3 under IFRS 13 "Fair Value Measurement."
Valuation is therefore considered a significant
area and is monitored by the Board, the Audit
Committee, the Portfolio Adviser and the
Administrator. The Audit Committee receives
and reviews reports on the processes for
the valuation of investments. Following discussion,
the Audit Committee was satisfied that the
judgements made and methodologies applied
were prudent and appropriate and that an
appropriate accounting treatment has been
adopted in accordance with IFRS 9.
Please see Notes 2, 6, 10 and 16 in the financial
statements for further details
----------------------------------------------------
Assessment of Risks and Uncertainties
The risks associated with the Company's financial instruments,
as disclosed in the financial statements, particularly in Note 10,
represent a key accounting disclosure. The Audit Committee and the
Risk Committee review critically, on the basis of input from the
service providers, the process of ongoing identification and
measurement of these risks disclosures.
Other Matters
During the year, the Committee considered compliance with
relevant legislation, performance metrics and related disclosures
in the Company's financial statements.
Risk Management and Internal Controls
The Board as a whole is responsible for the Company's system of
internal controls; however, the Audit Committee assists the Board
in meeting its obligations in this regard. The daily operational
activities of the Company were delegated to its service providers
and as a result, the Company has no direct internal audit function
and instead places reliance on the external and internal audit
controls of the service providers as regulated entities. However,
the Audit Committee reviews periodic reports from the service
providers to ensure that no material issues have arisen in respect
of the system of internal controls and risk management operated by
the Company's service providers. The Committee confirms that this
is an ongoing process conducted in order to manage the risks faced
by the Company. The Audit Committee deems that, to date, there are
no significant issues in this area which need to be brought to your
attention.
External Audit
It is the responsibility of the Audit Committee to monitor the
performance, independence, objectivity and re-appointment of the
Auditor. The Audit Committee met with Deloitte LLP ("Deloitte") to
consider the audit strategy and plan for the audit. The audit plan
for the reporting period was reviewed, including consideration of
the key financial statement and audit risks, to seek to ensure that
the audit was appropriately focused.
The Auditor attends the Audit Committee meetings throughout the
year, as applicable, which allows the opportunity to discuss any
matters the Auditor may wish to raise without the Portfolio Adviser
or other service providers being present. The Auditor provides
feedback at relevant Audit Committee meetings on topics such as the
key accounting matters, mandatory communications and the control
environment. The Audit Committee also discusses the performance of
the Auditor independently of the Auditor.
Deloitte was formally appointed as Auditor for the Company's
2014 period-end audit following a competitive tender process during
2014. The lead audit partner is rotated every five years to ensure
continued independence and objectivity; consequently a new lead
audit partner has been in place since the interim review to 30 June
2019.
The Audit Committee continues to be satisfied with the
performance of the Auditor. The Audit Committee has therefore
recommended to the Board that the Auditor, in accordance with
agreed terms of engagement and remuneration, should continue as the
Company's auditor after the forthcoming Annual General Meeting.
Accordingly, a resolution proposing the reappointment of Deloitte
as the Company's auditor will be put to the Shareholders at the
2022 AGM.
In advance of the commencement of the annual audit, the Audit
Committee reviewed a statement provided by the Auditor confirming
their independence as defined under relevant regulation and
professional standards. In addition, in order to satisfy itself
regarding the Auditor's independence, the Audit Committee undertook
a review of the Auditor's compensation and the balance between
audit and non-audit fees.
During 2021, the Audit Committee reviewed its policy with
respect to non-audit services and continually monitored the level
of non-audit services provided by the Auditor to ensure alignment
and compliance with best practice. The Company's policy sets out
the permitted types of non-audit services that can be provided by
Deloitte, which are consistent with the FRC's Revised Ethical
Standard (2019). All proposed non-audit services required explicit
approval from the Audit Committee. During the year, Deloitte were
contracted to review the Company's interim financial statements.
Audit fees for the year ended 31 December 2021 increased by 12.61%
compared to 2020 (refer to Note 3 for further details).
Audit-related services increased by 9.75% year on year. These items
have been given due consideration by the Audit Committee, who
reviewed inter-alia the role of the respective engagement teams and
the independence of individuals from the audit engagement team and
concluded it was satisfied the Auditor had acted in an independent
and professional manner.
Heather MacCallum
Audit Committee Chair
29 April 2022
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and Audited Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
IFRS, as adopted by the EU. Under company law the Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of the affairs of the
Company and of the profit or loss of the Company for that year. In
preparing these financial statements, International Accounting
Standard 1 requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS as adopted by the EU are insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the Company's
financial position and financial performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with The Companies (Jersey) Law
1991. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, whose names are listed below, confirms
that, to the best of that Director's knowledge and belief:
-- the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company;
-- the Strategic report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that they face; and
-- the annual report and audited financial statements, taken as
a whole, are fair, balanced and understandable and provide the
information necessary for Shareholders to assess the Company's
position and performance, business model and strategy.
Charlotte Valeur Heather MacCallum
Director Director
------------------
29 April 2022
------------------
Independent Auditor's Report to the Shareholders of
Blackstone Loan Financing Limite ndependent Auditor's Report to
the Shareholders of Blackstone Loan Financing Limited
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Blackstone Loan
Financing Limited (the 'company'):
-- give a true and fair view of the state of the company's
affairs as at 31 December 2021 and of its profit for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union; and
-- have been properly prepared in accordance with Companies (Jersey) Law, 1991.
We have audited the financial statements which comprise:
-- the statement of financial position;
-- the statement of comprehensive income;
-- the statement of changes in equity;
-- the statement of cash flows; and
-- the related notes 1 to 21.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union.
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council's
(the 'FRC's') Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. The non-audit services
provided to the company for the year are disclosed in note 3 to the
financial statements. We confirm that we have not provided any
non-audit services prohibited by the FRC's Ethical Standard to the
company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matter The key audit matter that we identified in the current
year was the valuation of investments in the Luxembourg
subsidiary.
Within this report, key audit matters are identified
as follows: Newly identified
Increased level of risk
-----------------------
Similar level of risk
-----------------------
Decreased level of risk
-----------------------
Materiality The materiality that we used in the current year
was EUR8,400,000 which was determined on the basis
of Net Assets Value of the company.
--------------------------------------------------------
Scoping All of the audit work to respond to the risks of
material misstatement was performed directly by
the audit engagement team.
--------------------------------------------------------
Significant changes There are no significant changes in our approach
in our approach in the current year.
--------------------------------------------------------
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors' assessment of the company's
ability to continue to adopt the going concern basis of accounting
included:
-- Carrying out the following on the forecasts provided by the directors':
- Testing the arithmetic accuracy and integrity of the model
used for preparation of the forecasts;
- Assessing whether the cash flows included in the forecast were
in line with relevant agreements and market expectations; and
- Assessing the other key inputs used in the forecasts for
reasonableness and consistency with prior years and industry
norms.
-- Evaluating the forecasts prepared by the directors' in prior
years to assess whether they are in line with actual results in
current year;
-- Evaluating the directors' assessment of the impact of
Covid-19 on the operations of the company and its regulatory and
liquidity requirements.
-- Assessing the appropriateness of the going concern
disclosures in the financial statements.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
In relation to the reporting on how the company has applied the
UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors' statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current year and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
5.1. Valuation of investments in the Luxembourg subsidiary
Key audit matter The investments in subsidiary are accounted at Fair
description Value Through Profit and Loss.
Investments in Blackstone / GSO Loan Financing (Luxembourg)
S.a.r.l. which total EUR 417,969,559 (2020: EUR
388,000,146), as detailed on page 88 in note 6 to
the financial statements, are illiquid investments,
not traded on an active market and are valued using
valuation techniques determined by the directors
and classified as level III under IFRS: Fair Value
Measurement ("IFRS 13"). Valuation is therefore
a key area of judgement and has a significant impact
on the Net Assets Value ("NAV") which is the most
significant Key Performance Indicator ("KPI") of
the company and has a direct effect on the recognition
of gains and losses on investments.
The investments, commitments and obligations contracted
by Blackstone Corporate Funding Designated Activity
Company ("BCF") are driving the performance of its
NAV, the valuation of the investments in BCF and
ultimately the performance of the company and its
listed shares. We consider BCF as the principal
source of risks and rewards for the company with
BCF's financial situation represented by its Net
Asset Value as the main component for the fair valuation
of the investments.
Reviewing risk monitoring, performance and the investments'
valuation for the company, requires an assessment
of the positions within BCF. BCF's investment positions
in debt instruments, related credit risk and liquidity
exposures should be compliant with the quality,
diversification and overall limitations imposed
by the Prospectus.
The directors use their judgment, with the assistance
of the Adviser, Blackstone Ireland Limited ('BIL'),
in selecting an appropriate valuation technique
and refer to techniques commonly used by market
practitioners. For investments in BCF and the underlying
collateralized loan obligations (CLOs) and the equity
tranches retained by that company, assumptions are
made based on quoted market rates adjusted for specific
features of any instrument. BCF uses Markit to price
the loan asset portfolio.
There is a risk that a third-party valuer has used
an incorrect methodology, inaccurate data is supplied
by the CLO Manager of the Originator or inappropriate
assumptions are used concerning market information.
The key assumptions include discount, prepayment,
reinvestment and default rates.
Refer to page 62 - 64 (Audit Committee Report),
pages 79 - 84 (Significant Accounting Policies)
and pages 86 - 91 (Note 6 to the Financial statements).
How the scope In response to this key audit matter:
of our audit * We obtained understanding of the relevant controls
responded to over the valuation process.
the key audit
matter
* We tested relevant controls at the company level.
* We assessed the valuation methodology for the
financial instruments issued by BCF against industry
standards and IFRS 13.
* We obtained confirmations from independent,
third-party custodians.
* We involved our financial instruments specialists to
assess the valuation of investments and related
disclosures in the financial statements.
* We involved our own CLO valuation specialists to
evaluate the test of valuations performed by the
auditors of BCF, comparing information and
assumptions used by management to information
available from external independent reliable sources
such as Bloomberg or Intex, including any impact of
discount / premium to NAV.
* We tested the calculation of the change in value of
investments for the year and its recognition in the
statement of comprehensive income.
* We assessed the appropriateness of disclosures
(including disclosures related to sensitivity) made
by the company in accordance with requirements of
IFRS 13.
-----------------------------------------------------------------
Key observations Based on the work performed we concluded that the
valuation of investments in the Luxembourg subsidiary
is appropriate.
-----------------------------------------------------------------
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality EUR8,400,000 (2020: EUR8,200,000)
Basis for 2% of the company's Net Asset Value (2020: 2% of
determining the company's Net Asset Value).
materiality
------------------------------------------------
Rationale Net Asset Value is the key performance indicator
for the for investments in the company and is therefore
benchmark selected as the appropriate benchmark.
applied
------------------------------------------------
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at https://blackstone.com/bglf]
6.2. Performance materiality
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial
statements as a whole. Performance materiality was set at 70% of
materiality for the 2021 audit (2020: 70%). In determining
performance materiality, we considered our risk assessment,
including our assessment of the company's overall control
environment including impact of Covid-19 and our past experience of
the audit, which has indicated a low number of corrected and
uncorrected misstatements identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of EUR420,000 (2020:
EUR410,000), as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds. We also
report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial
statements.
7. An overview of the scope of our audit
7.1. Scoping
Our audit was scoped by obtaining an understanding of the entity
and its environment, including internal control, and assessing the
risks of material misstatement. Audit work to respond to the risks
of material misstatement was performed directly by the audit
engagement team.
7.2. Our consideration of the control environment
A third-party administrator maintains the books and records of
the company. Our audit therefore included obtaining an
understanding of the controls at this service organisation, to the
extent that they are relevant to the company.
7.3. Our consideration of climate-related risks
In planning our audit, we considered the potential financial
impacts on the company and its financial statements of climate
change and the transition to a low carbon economy. We considered
management's own assessment of the related risks and opportunities
as described on page 11, together with our cumulative knowledge and
experience of the company and the environment in which it operates.
We assessed management's disclosures about critical accounting
judgements and estimates as outlined in note 2.13, including the
potential impact of climate change on those judgements and
estimates. We have considered whether information included in the
climate-related disclosures in the annual report is materially
consistent with our knowledge obtained in the audit and the
financial statements.
8. Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
10. Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms
part of our auditor's report.
11. Extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance with
laws and regulations, we considered the following:
-- the nature of the industry and sector, control environment
and business performance including the design of the company's
remuneration policies, key drivers for directors' remuneration,
bonus levels and performance targets;
-- results of our enquiries of management and the audit
committee about their own identification and assessment of the
risks of irregularities;
-- any matters we identified having obtained and reviewed the
company's documentation of their policies and procedures relating
to:
o identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances of
non-compliance;
o detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged fraud;
o the internal controls established to mitigate risks of fraud
or non-compliance with laws and regulations;
-- the matters discussed among the audit engagement and relevant
internal specialists, including tax, financial instruments and
valuations specialists regarding how and where fraud might occur in
the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the valuation of
investments in the Luxembourg subsidiary. In common with all audits
under ISAs (UK), we are also required to perform specific
procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory
framework that the company operates in, focusing on provisions of
those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this
context included the Companies (Jersey) Law, 1991, Listing Rules
and tax legislation.
In addition, we considered provisions of other laws and
regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the
company's ability to operate or to avoid a material penalty. These
included the Jersey Financial Services Commission (JFSC) regulatory
requirements.
11.2. Audit response to risks identified
As a result of performing the above, we identified valuation of
investments in the Luxembourg subsidiary as a key audit matter
related to the potential risk of fraud. The key audit matter
section of our report explains the matter in more detail and also
describes the specific procedures we performed in response to that
key audit matter.
In addition to the above, our procedures to respond to risks
identified included the following:
-- reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect
on the financial statements;
-- enquiring of management, the audit committee concerning
actual and potential litigation and claims;
-- performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
-- reading minutes of meetings of those charged with governance,
reviewing internal audit reports and reviewing correspondence with
the JFSC; and
-- in addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members including
internal specialists, and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the
audit.
Report on other legal and regulatory requirements
12. Corporate Governance Statement
The Listing Rules require us to review the directors' statement
in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the company's
compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
-- the directors' statement with regards to the appropriateness
of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 41;
-- the directors' explanation as to its assessment of the
company's prospects, the period this assessment covers and why the
period is appropriate set out on page 41;
-- the directors' statement on fair, balanced and understandable set out on page 65;
-- the board's confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on pages 39
to 40;
-- the section of the annual report that describes the review of
effectiveness of risk management and internal control systems set
out on page 63; and
-- the section describing the work of the audit committee set out on page 62.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies (Jersey) Law, 1991 we are required to report
to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- proper accounting records have not been kept, or proper
returns adequate for our audit have not been received from branches
not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14. Other matters which we are required to address
14.1. Auditor tenure
Following the recommendation of the audit committee, we were
appointed by the Board on 4 July 2014 to audit the financial
statements for the period ended 31 December 2014 and subsequent
financial periods. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is seven
years, covering the years ended 31 December 2014 to 31 December
2021.
14.2. Consistency of the audit report with the additional report
to the audit committee
Our audit opinion is consistent with the additional report to
the audit committee we are required to provide in accordance with
ISAs (UK).
15. Use of our report
This report is made solely to the company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law,
1991. Our audit work has been undertaken so that we might state to
the company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Marc Cleeve, BA, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Recognised Auditor
Jersey, Channel Islands
29 April 2022
Statement of Financial Position
As at 31 December 2021
As at As at
31 December 2021 31 December 2020
Notes EUR EUR
----- ----------------- -----------------
Current assets
----- ----------------- -----------------
Cash and cash equivalents 5,671,436 20,725,819
----- ----------------- -----------------
Other receivables 5 47,415 151,038
----- ----------------- -----------------
Financial assets at fair value
through profit or loss - Lux
Co 6 417,969,559 388,000,146
----- ----------------- -----------------
Financial assets at fair value
through profit or loss - CLOs 6 - 549,437
----- ----------------- -----------------
Total current assets 423,688,410 409,426,440
----- ----------------- -----------------
Non-current liabilities
----- ----------------- -----------------
Intercompany loan 7 (1,246,249) (869,988)
----- ----------------- -----------------
Total non-current liabilities (1,246,249) (869,988)
----- ----------------- -----------------
Current liabilities
----- ----------------- -----------------
Payables 8 (442,584) (351,277)
----- ----------------- -----------------
Total current liabilities (442,584) (351,277)
----- ----------------- -----------------
Total liabilities (1,688,833) (1,221,265)
----- ----------------- -----------------
Net assets 15,16 421,999,577 408,205,175
----- ----------------- -----------------
Capital and reserves
----- ----------------- -----------------
Stated capital 9 459,044,783 471,465,875
----- ----------------- -----------------
Retained loss (37,045,206) (63,260,700)
----- ----------------- -----------------
Shareholders' Equity 421,999,577 408,205,175
----- ----------------- -----------------
Net Asset Value per Share 15 0.9154 0.8557
----- ----------------- -----------------
These financial statements were authorised and approved for
issue by the Directors on 29 April 2022 and signed on their behalf
by:
Charlotte Valeur Heather MacCallum
Director Director
--------------------
The accompanying notes form an integral part of the financial
statements.
Statement of Comprehensive Income
St For the year ended 31 December 2021
Year ended Year ended
31 December 2021 31 December 2020
Notes EUR EUR
----- ----------------- -----------------
Income
----- ----------------- -----------------
Realised gain on foreign exchange 72,560 29,321
----- ----------------- -----------------
Net gain on financial assets
at fair value through profit
or loss - Lux Co 6 63,418,195 36,356,525
----- ----------------- -----------------
Net gain/ (loss) on financial
assets at fair value through
profit or loss - CLOs 6 586,087 (1,953,328)
----- ----------------- -----------------
Income distributions from
CLOs 207,431 407,376
----- ----------------- -----------------
Total income 64,284,273 34,839,894
----- ----------------- -----------------
Expenses
----- ----------------- -----------------
Operating expenses 3 (1,356,960) (1,312,505)
----- ----------------- -----------------
Loan interest expense 7 (16,909) (11,335)
----- ----------------- -----------------
Bank interest expense (99,656) (95,397)
----- ----------------- -----------------
Total expense (1,473,525) (1,419,237)
----- ----------------- -----------------
Profit before taxation 62,810,748 33,420,657
----- ----------------- -----------------
Taxation 2.11 - -
----- ----------------- -----------------
Profit after taxation 62,810,748 33,420,657
----- ----------------- -----------------
Total comprehensive income
for the year attributable
to Shareholders 62,810,748 33,420,657
----- ----------------- -----------------
Basic and diluted earnings
per Share 14 0.1334 0.0699
----- ----------------- -----------------
The Company has no items of other comprehensive income, and
therefore the profit for the year is also the total comprehensive
income.
All items in the above statement are derived from continuing
operations. No operations were discontinued during the year.
The accompanying notes form an integral part of the financial
statements.
Statement of Changes in Equity
For the year ended 31 December 2021
Notes Stated Capital Retained Earnings Total
EUR EUR EUR
----- -------------- ----------------- ------------
Shareholders' Equity
at 1 January 2021 9 471,465,875 (63,260,700) 408,205,175
----- -------------- ----------------- ------------
Total comprehensive
income for the year
attributable to Shareholders - 62,810,748 62,810,748
----- -------------- ----------------- ------------
Transactions with owners
----- -------------- ----------------- ------------
Dividends 18 - (36,595,254) (36,595,254)
----- -------------- ----------------- ------------
Ordinary Shares repurchased 9 (12,421,092) - (12,421,092)
----- -------------- ----------------- ------------
(12,421,092) (36,595,254) (49,016,346)
----- -------------- ----------------- ------------
Shareholders' Equity
at 31 December 2021 9 459,044,783 (37,045,206) 421,999,577
----- -------------- ----------------- ------------
For the year ended 31 December 2020
Notes Stated Capital Retained Earnings Total
EUR EUR EUR
----- -------------- ----------------- ------------
Shareholders' Equity
at 1 January 2020 480,304,329 (69,798,338) 410,505,991
----- -------------- ----------------- ------------
Total comprehensive
income for the year
attributable to Shareholders - 33,420,657 33,420,657
----- -------------- ----------------- ------------
Transactions with owners
----- -------------- ----------------- ------------
Conversion of C Shares (6,719,705) 6,719,705 -
----- -------------- ----------------- ------------
Dividends 18 - (33,602,724) (33,602,724)
----- -------------- ----------------- ------------
Ordinary Shares repurchased 9 (2,118,749) - (2,118,749)
----- -------------- ----------------- ------------
(8,838,454) (26,883,019) (35,721,473)
----- -------------- ----------------- ------------
Shareholders' Equity
at 31 December 2020 9 471,465,875 (63,260,700) 408,205,175
----- -------------- ----------------- ------------
The accompanying notes form an integral part of the financial
statements.
Statement of Cash Flows
For the year ended 31 December 2021
Year ended Year ended
31 December 2021 31 December 2020
Notes EUR EUR
----- ----------------- -----------------
Cash flow from operating activities
----- ----------------- -----------------
Total comprehensive income for
the year attributable to Shareholders 62,810,748 33,420,657
----- ----------------- -----------------
Adjustments to reconcile profit
after tax to net cash flows:
----- ----------------- -----------------
* Unrealised gain on financial assets at fair value
through profit and loss (50,415,131) (25,011,152)
----- ----------------- -----------------
* Realised gain on financial assets at fair value
through profit and loss (13,738,221) (9,288,389)
----- ----------------- -----------------
Purchase of financial assets at
fair value through profit or loss (18,884,567) (7,078,010)
----- ----------------- -----------------
Proceeds from sale of financial
assets at fair value through profit
or loss 53,617,941 52,413,011
----- ----------------- -----------------
Changes in working capital
----- ----------------- -----------------
Decrease in other receivables 103,625 81,436
----- ----------------- -----------------
Increase in payables 91,307 110,323
----- ----------------- -----------------
Net cash generated from operating
activities 33,585,702 44,647,876
----- ----------------- -----------------
Cash flow from financing activities
----- ----------------- -----------------
Ordinary Shares repurchased (including
costs) 9 (12,421,092) (2,118,749)
----- ----------------- -----------------
Increase in intercompany loan 17 376,261 335,328
----- ----------------- -----------------
Dividends paid 18 (36,595,254) (33,602,724)
----- ----------------- -----------------
Net cash used in financing activities (48,640,085) (35,386,145)
----- ----------------- -----------------
Net (decrease)/increase in cash
and cash equivalents (15,054,383) 9,261,731
----- ----------------- -----------------
Cash and cash equivalents at the
start of the year 20,725,819 11,464,088
----- ----------------- -----------------
Cash and cash equivalents at the
end of the year 5,671,436 20,725,819
----- ----------------- -----------------
The accompanying notes form an integral part of the financial
statements.
Notes to the Financial Statements
For the year ended 31 December 2021
1 General information
The Company is a closed-ended limited liability investment
company domiciled and incorporated under the laws of Jersey with
variable capital. It was incorporated on 30 April 2014 under
registration number 115628. The Company's Ordinary Shares are
quoted on the Premium Segment of the Main Market of the LSE and the
Company has a premium listing on the Official List of the FCA. The
Company's C Shares were quoted on the SFS of the Main Market of the
LSE until 6 January 2020. On 6 January 2021, the Company announced
that at the Extraordinary General Meeting held earlier that day a
special resolution had been duly passed to change the name of the
Company from 'Blackstone/GSO Loan Financing Limited' to 'Blackstone
Loan Financing Limited'. On 13 January 2021, the Company announced
that the name change had taken effect from and including 11 January
2021.
The Company's investment objective is to provide Shareholders
with stable and growing income returns, and to grow the capital
value of the investment portfolio by exposure to floating rate
senior secured loans and bonds directly and indirectly through CLO
Securities and investments in Loan Warehouses. The Company seeks to
achieve its investment objective through exposure (directly or
indirectly) to one or more companies or entities established from
time to time.
As at 31 December 2021, the Company's stated capital comprised
460,984,702 Ordinary Shares of no par value (31 December 2020:
477,023,331), each carrying the right to 1 vote; 21,918,092
Ordinary Shares held in treasury (31 December 2020: 5,879,463). The
Company may issue one or more additional classes of shares in
accordance with the Articles of Association.
The Company has a wholly owned Luxemburg subsidiary,
Blackstone/GSO Loan Financing (Luxembourg) S.à r.l., which has an
issued share capital of 2,000,000 Class A shares and 1 Class B
share held by the Company as at 31 December 2021 and 31 December
2020. The Company also holds 267,088,098 Class B CSWs as at 31
December 2021 (31 December 2020: 284,879,854) issued by the Lux
Subsidiary. The Company has no directly held CLO Mezzanine Notes as
at 31 December 2021 (31 December 2020: 2 directly held CLO
Mezzanine Notes).
The Company's registered address is IFC 1, The Esplanade, St
Helier, Jersey, JE1 4BP, Channel Islands.
2 Significant accounting policies
2.1 Statement of compliance
The Annual Report and Audited Financial Statements (the "Annual
Report") are prepared in accordance with the Disclosure Guidance
and Transparency Rules of the FCA and with IFRS as adopted by the
EU. The financial statements give a true and fair view of the
Company's affairs and comply with the requirements of the Companies
(Jersey) Law 1991, as amended.
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been applied consistently to the Company's financial statements for
all years presented except for the adoption of new and amended
standards as set out below.
2.2 Basis of preparation
The Company's financial statements have been prepared on a
historical cost basis, except for financial instruments measured at
fair value through profit or loss at the end of each reporting
period.
The Company's functional currency is the Euro, which is the
currency of the primary economic environment in which it operates.
The Company's performance is evaluated and its liquidity is managed
in Euro. Therefore, Euro is considered as the currency that most
faithfully represents the economic effects of the underlying
transactions, events and conditions. The financial statements are
presented in Euro, except where otherwise indicated.
The financial statements have been prepared on a going concern
basis. The disclosures with respect to the Directors' assessment on
the use of the going concern basis are provided above in the
"Strategic Report - Risk Overview" section.
Non-consolidation of BCF
To determine control, there has to be a linkage between power
and the exposure to risks and rewards. The main link from ownership
would allow a company to control the payments of returns and
operating policies and decisions of a subsidiary.
To meet the definition of a subsidiary under the single control
model of IFRS 10, the investor has to control the investee.
Control involves power, exposure to variability of returns and a
linkage between the two:
-- the investor has existing rights that give it the ability to
direct the relevant activities that significantly affect the
investee's returns;
-- the investor has exposure or rights to variable returns from
its involvement with the investee; and
-- the investor has the ability to use its power over the
investee to affect the amount of the investor's returns.
In the case of BCF, the relevant activities are the investment
decisions made by it. However, in the Lux Subsidiary's case, the
power to influence or direct the relevant activities of BCF is not
attributable to the Lux Subsidiary. The Lux Subsidiary does not
have the ability to direct or stop investments by BCF; therefore,
it does not have the ability to control the variability of returns.
Accordingly, BCF has been determined not to be a subsidiary
undertaking as defined under IFRS 10 and the Lux Subsidiary's
investment in the PPNs issued by BCF are accounted for at fair
value through profit or loss.
Non-consolidation of CLOs
The Company has concluded that CLOs, that are not subsidiaries
for financial reporting purposes, meet the definition of structured
entities because:
-- the voting rights in the CLOs are not dominant rights in
deciding who controls them, as they relate to administrative tasks
only;
-- each CLO's activities are restricted by its Prospectus; and
-- the CLOs have narrow and well-defined objectives to provide
investment opportunities to investors.
2.3 New standards, amendments and interpretations issued and
effective for the financial year beginning 1 January 2021
Amendments to existing standards effective for annual periods
beginning on or after 1 January 2021
The Company applies for the first time amendments regarding
replacement issues in the context of the LIBOR reform (Amendments
to IFRS 9, IAS 39 and IFRS 7) which all became effective on 1
January 2021.
The adoption of the amendments to standards listed do not have a
material impact on the financial statements of the Company in
future periods. Several other amendments and interpretations apply
for the first time in 2021, but these do not have an impact on the
financial statements.
2.4 New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2021 and not
early adopted
There are no standards, amendments and interpretations which
have been issued but are not yet effective and not early adopted,
that will affect the Company's financial statements.
2.5 Income
2.5a Interest income and expense
Interest income and expense is recognised under IFRS 9
separately through profit or loss in the Statement of Comprehensive
Income, on an effective interest rate yield basis.
2.5b Income distributions from CLOs
Income from the financial assets at fair value through profit or
loss - CLOs is recognised under IFRS 9 in the Statement of
Comprehensive Income as Income distributions from CLOs. Income from
the CLOs is recognised on an accruals basis.
2.6 Shares in issue
The shares of the Company are classified as equity, based on the
substance of the contractual arrangements and in accordance with
the definition of equity instruments under IAS 32 Financial
Instruments: Presentation ("IAS 32").
The proceeds from the issue of shares are recognised in the
Statement of Changes in Equity, net of the incremental issuance
costs.
Share repurchased by the Company are deducted from equity. No
gain or loss is recognised in the Statement of Comprehensive Income
on the purchase, sale or cancellation of the Company's own equity
instruments. The consideration paid or received is recognised
directly in the Statement of Changes in Equity. Shares repurchased
are recognised on the trade date.
2.7 Fees and charges
Expenses are charged through profit or loss in the Statement of
Comprehensive Income on an accruals basis.
2.8 Cash and cash equivalents
Cash comprises current deposits with banks.
Cash equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash and are subject to
an insignificant risk of changes in value. Cash equivalents are
revalued at the end of the reporting period using market rates and
any increases / decreases are recognised in the Statement of
Comprehensive Income. There were no such holdings during the year
ended 31 December 2021 (31 December 2020: Nil).
2.9 Financial instruments
Investments and other financial assets
(i) Initial recognition
The Company recognises a financial asset or a financial
liability in its Statement of Financial Position when, and only
when, the Company becomes party to the contractual provisions of
the instrument. Purchases and sales of investments are recognised
on the trade date - the date on which the Company commits to
purchase or sell the investment.
(ii) Classification
The Company classifies its financial assets in the following
measurement categories:
-- those to be measured subsequently at fair value (either
through OCI, or through profit or loss); and
-- those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses are either
to be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on
whether the company has made an irrevocable election at the time of
initial recognition to account for the equity instrument at
FVTOCI.
For the year ended 31 December 2021
2 Significant accounting policies (continued)
2.9 Financial instruments (continued)
(ii) Classification(continued)
The Company reclassifies debt instruments when and only when its
business model for managing those assets changes.
(iii) Measurement
At initial recognition, the Company measures a financial asset
at its fair value plus, in the case of a financial asset not at
FVTPL, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial
assets carried at FVTPL are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the
Company's business model for managing the asset and the cash flow
characteristics of the asset. The Company's business model is to
manage its debt instruments and to evaluate their performance on a
fair value basis. The Company's policy requires the Portfolio
Adviser and the Board to evaluate the information about these
financial assets on a fair value basis together with other related
financial information. Consequently, these debt instruments are
measured at fair value through profit or loss.
Equity instruments
The Company subsequently measures all equity investments at fair
value. Dividends from such investments are recognised in profit or
loss as other income when the Company's right to receive payments
is established.
Changes in fair value of financial assets at FVTPL are
recognised in "net gain/(loss) on financial assets at fair value
through profit or loss" in the Statement of Comprehensive
Income.
(iv) Derecognition
Financial assets are derecognised when the rights to receive
cash flows from the investments have expired or the Company has
transferred substantially all risks and rewards of ownership.
(v) Fair value estimation
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
As at 31 December 2021, the Company held 267,088,098 CSWs,
2,000,000 Class A shares and 1 Class B share issued by the Lux
Subsidiary (the "Investments") (31 December 2020: 284,879,854 CSWs,
2,000,000 Class A shares and 1 Class B share). These Investments
are not listed or quoted on any securities exchange, are not traded
regularly and, on this basis, no active market exists. The Company
is not entitled to any voting rights in respect of the Lux
Subsidiary by reason of their ownership of the CSWs, however, the
Company controls the Lux Subsidiary through its 100% holding of the
shares in the Lux Subsidiary.
The fair value of the CSWs and the Class A and Class B shares
are based on the net assets of the Lux Subsidiary which is based
substantially in turn on the fair value of the PPNs issued by
BCF.
The Company determines the fair value of the CLOs held directly
using third party valuations.
(vi) Valuation process
The Directors have held discussions with BIL in order to gain
comfort around the valuation of the CLOs, the underlying assets in
the BCF portfolio and through this, the valuation of the PPNs and
CSWs a s of the Statement of Financial Position date.
The Directors, through ongoing communication with the Portfolio
Adviser including quarterly meetings, discuss the performance of
the Portfolio Adviser and the underlying portfolio and in addition
review monthly investment performance reports. The Directors
analyse the BCF portfolio in terms of the investment mix in the
(vi) Valuation process (continued)
portfolio. The Directors also consider the impact of general
credit conditions and more specifically credit events in the US and
European corporate environment on the valuation of the CSWs, PPNs
and the BCF portfolio.
Portfolio
The Directors discuss the valuation process to understand the
methodology regarding the valuation of its underlying portfolio and
direct CLO holding, both comprising Level 3 assets. The majority of
Level 3 assets in BCF are comprised of CLOs. In reviewing the fair
value of these assets, the Directors look at the assumptions used
and any significant fair value changes during the period under
analysis.
Net Asset Value
The IFRS NAV of the Company is calculated by the Administrator
based on information from the Portfolio Adviser and is reviewed and
approved by the Directors, taking into consideration a range of
factors including the unaudited IFRS NAV of both the Lux Subsidiary
and BCF, and other relevant available information. The other
relevant information includes the review of available financial and
trading information of BCF and its underlying portfolio, advice
received from the Portfolio Adviser and such other factors as the
Directors, in their sole discretion, deem relevant in considering a
positive or negative adjustment to the valuation.
The estimated fair values may differ from the values that would
have been realised had a ready market existed and the difference
could be material.
The fair value of the CLOs held directly, CSWs and the Class A
and Class B shares are assessed on an ongoing basis by the
Board.
Financial liabilities
(vii) Classification
Financial liabilities include payables which are held at
amortised cost using the effective interest rate method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or where appropriate a shorter period, to the
net carrying amount on initial recognition.
(viii) Recognition, measurement and derecognition
Financial liabilities are measured initially at their fair value
plus any directly attributable incremental costs of acquisition or
issue.
Gains and losses are recognised in the Statement of
Comprehensive Income when the liabilities are derecognised.
The Company derecognises a financial liability when the
obligation specified in the contract is discharged, cancelled or
expires.
2.10 Foreign currency translations
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
Statement of Financial Position date are translated to Euro at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the Statement
of Comprehensive Income.
Foreign currency gains and losses are included in profit or loss
on the Statement of Comprehensive Income as part of "Realised
gain/(loss) on foreign exchange". Foreign currency gains and losses
on financial assets classified at fair value through profit or loss
- CLOs are included in profit or loss on the Statement of
Comprehensive
Income as part of "Net gain / (loss) on financial assets at fair
value through profit or loss - CLOs".
2.11 Taxation
Profit arising in the Company for the year of assessment will be
subject to Jersey tax at the standard corporate income tax rate of
0% (31 December 2020: 0%).
2.12 Dividends
Dividends to Shareholders are recorded through the Statement of
Changes in Equity when they are declared to Shareholders.
2.13 Critical accounting judgements and estimates
The preparation of the financial statements in conformity with
IFRS requires management to make judgements, estimates and
assumptions that affect items reported in the Statement of
Financial Position and Statement of Comprehensive Income. It also
requires management to exercise its judgement in the process of
applying the Company's accounting policies. Uncertainty about these
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets and
liabilities affected in future periods.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to estimates are recognised prospectively.
Estimates
(a) Fair value
For the fair value of all financial instruments held, the
Company determines fair values using appropriate techniques.
Refer to Note 2.9 and Note 12 for further details on the
significant estimates applied in the valuation of the companies'
financial instruments and the underlying financial instruments in
BCF.
Judgements
(b) Non-consolidation of the Lux Subsidiary
The Company meets the definition of an Investment Entity as
defined by IFRS 10 and is required to account for its investments
at fair value through profit or loss.
The Company has multiple unrelated investors and holds multiple
investments in the Lux Subsidiary. The Company has been deemed to
meet the definition of an Investment Entity per IFRS 10 as the
following conditions exist:
-- the Company has obtained funds for the purpose of providing
investors with investment management services;
-- the Company's business purpose, which has been communicated
directly to investors, is investing solely for returns from capital
appreciation, investment income, or both; and
-- the performance of investments made through the Lux
Subsidiary are measured and evaluated on a fair value basis.
The Company has also considered the typical characteristics of
an investment entity per IFRS 10 in assessing whether it meets the
definition of an Investment Entity.
The Company controls the Lux Subsidiary through its 100% holding
of the voting rights and ownership. The Lux Subsidiary is
incorporated in Luxembourg.
Refer to Note 11 for further disclosures relating to the
Company's interest in the Lux Subsidiary.
3 Operating expenses
Year ended Year ended
31 December 2021 31 December 2020
EUR EUR
----------------- -----------------
Professional fees 196,132 269,601
----------------- -----------------
Administration fees 344,439 329,706
----------------- -----------------
Brokerage fees 131,271 105,197
----------------- -----------------
Regulatory fees 43,897 44,914
----------------- -----------------
Directors' fees and other expenses
(see Note 4) 284,347 264,829
----------------- -----------------
Audit fees and audit related fees 206,098 196,788
----------------- -----------------
Registrar fees 33,789 53,964
----------------- -----------------
Sundry expenses 116,987 47,506
----------------- -----------------
1,356,960 1,312,505
----------------- -----------------
Administration fees
Under the administration agreement, the Administrator is
entitled to receive variable fees based on the Published NAV of the
Company for the provision of administrative and compliance
oversight services and a fixed fee for the provision of company
secretarial services. The overall charge for the above-mentioned
fees for the Company for the year ended 31 December 2021 was
EUR344,439 (31 December 2020: EUR329,706) and the amount due at 31
December 2021 was EUR83,690 (31 December 2020: EUR52,470).
Advisory fees
Under the Advisory Agreement, the Portfolio Adviser is entitled
to receive out of pocket expenses, all reasonable third-party
costs, and other expenses incurred in the performance of its
obligations. On this basis, the Portfolio Adviser recharged nil to
the Company (31 December 2020: EUR82,612). This amount has been
included under Professional fees.
Audit and non-audit fees
The Company incurred EUR206,098 (31 December 2020: EUR196,788)
in audit and audit-related fees during the year of which EUR106,003
(31 December 2020: EUR116,188) was outstanding at the year end.
The Company did not incur any non-audit fees during the year (31
December 2020: nil). The table below outlines the audit and audit
related services received during the year.
Year ended Year ended
31 December 2021 31 December
2020
EUR EUR
----------------- ------------
Audit of the Company 133,732 118,753
----------------- ------------
Audit-related services - review of
interim financial report 72,366 65,940
----------------- ------------
Additional audit fee for the year ended
31 December 2019 - 12,095
----------------- ------------
Total audit and audit-related
services 206,098 196,788
----------------- ------------
Professional fees
Professional fees comprise EUR63,503 in legal fees and
EUR132,629 in other professional fees. In 2020, professional fees
comprised EUR101,994 in legal fees and EUR167,607 in other
professional fees.
4 Directors' fees
The Company has no employees. The Company incurred EUR 284,347
(31 December 2020: EUR263,391) in Directors' fees (consisting
exclusively of short-term benefits) during the year of which
EUR71,165 (31 December 2020: EUR66,752) was outstanding at the year
end. No pension contributions were payable in respect of any of the
Directors.
Refer to the Directors' Remuneration Report above for further
details on the Directors' remuneration and their interests.
5 Other receivables
As at As at
31 December 2021 31 December 2020
EUR EUR
----------------- -----------------
Prepayments 47,415 23,190
----------------- -----------------
Interest receivable - 127,848
----------------- -----------------
47,415 151,038
----------------- -----------------
6 Financial assets at fair value through profit or loss
As at As at
31 December 2021 31 December 2020
Total Total
----------------- -----------------
EUR EUR
----------------- -----------------
Financial assets at fair value
through profit or loss - Lux
Co 417,969,559 388,000,146
----------------- -----------------
Financial assets at fair value
through profit or loss - CLOs - 549,437
----------------- -----------------
Financial assets at fair value through profit or loss - Lux Co
consists of 267,088,098 CSWs, 2,000,000 Class A shares and 1 Class
B share issued by the Lux Subsidiary (31 December 2020: 284,879,854
CSWs, 2,000,000 Class A shares and 1 Class B share issued by the
Lux Subsidiary). Financial assets at fair value through profit or
loss -CLOs consist of no CLOs as at 31 December 2021 (31 December
2020:2 directly held CLO Mezzanine Notes which formed part of the
Rollover Assets).
CSWs
The Company has the right, at any time during the exercise
period (being the period from the date of issuance and ending on
earlier of the 3 February 2046 or the date on which the liquidation
of the Lux Subsidiary is closed), to request that the Lux
Subsidiary redeems all or part of the CSWs at the redemption price
(see below), by delivering a redemption notice, provided that the
redemption price will be due and payable only if and to the extent
that (a) the Lux Subsidiary will have sufficient funds available to
settle its liabilities to all other ordinary or subordinated
creditors, whether privileged, secured or unsecured, prior in
ranking to the CSWs, after any such payment, and (b) the Lux
Subsidiary will not be insolvent after payment of the redemption
price.
The redemption price is the amount payable by the Lux Subsidiary
on the redemption of CSWs outstanding, which shall be at any time
equal to the fair market value of the ordinary shares (that would
have been issued in case of exercise of all CSWs), as determined by
the Board on a fully diluted basis on the date of redemption, less
a margin (determined by the Board on the basis of a transfer
pricing report prepared by an independent advisor), and the
redemption price for each CSW shall be obtained by dividing the
amount determined in accordance with the preceding sentence by the
actual number of CSWs outstanding.
If at the end of any financial year there is excess cash, as
determined in good faith by the Lux Subsidiary board (but for this
purpose only), the Lux Subsidiary will automatically redeem, to the
extent of such excess cash, all or part of the CSWs at the
redemption price provided the requirements in the previous
paragraph are met, unless the Company notifies the Lux Subsidiary
otherwise. For the avoidance of doubt, to the extent the
subscription price for the CSWs to be redeemed has not been paid at
the time the CSWs were issued, the subscription price for such CSWs
to be redeemed shall be deducted from the Redemption Price.
CSWs listed in an exercise notice may not be redeemed.
Class A and Class B shares held in the Lux Subsidiary
Class A and Class B shares are redeemable and have a par value
of one Euro per share. Class A and Class B Shareholders have equal
voting rights commensurate with their shareholding.
Class A and Class B Shareholders are entitled to dividend
distributions from the net profits of the Lux Subsidiary (net of an
amount equal to five per cent of the net profits of the Lux
Subsidiary which is allocated to the general reserve, until this
reserve amounts to ten per cent of the Lux Subsidiary's nominal
share capital).
Dividend distributions are paid in the following order of
priority:
-- Each Class A share is entitled to the Class A dividend, being
a cumulative dividend in an amount of not less than 0.10% per annum
of the face value of the Class A shares.
-- Each Class B share is entitled to the Class B dividend (if
any), being any income such as but not limited to interest or
revenue deriving from the receivable from the PPN's held by the Lux
Subsidiary, less any non-recurring costs attributable to the Class
B shares.
Any remaining dividend amount for allocation of the Class A
dividend and Class B dividend shall be allocated pro rata among the
Class A shares.
The Board does not expect income in the Lux Subsidiary to
significantly exceed the anticipated annual running costs of the
Lux Subsidiary and therefore does not expect that the Lux
Subsidiary will pay significant, or any, dividends although it
reserves the right to do so.
Fair value hierarchy
IFRS 13 requires an analysis of investments valued at fair value
based on the reliability and significance of information used to
measure their fair value.
The Company categorises its financial assets according to the
following fair value hierarchy detailed in IFRS 13 that reflects
the significance of the inputs used in determining their fair
values:
-- Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted
prices for identical or similar instruments in markets that are
considered less than active; or other valuation techniques where
all significant inputs are directly or indirectly observable from
market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable variable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are
valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.
31 December 2021 Level 1 Level 2 Level 3 Total
EUR EUR EUR EUR
------- ------- ----------- -----------
Financial assets at fair value
through profit or loss - Lux
Co - - 417,969,559 417,969,559
------- ------- ----------- -----------
Financial assets at fair value - - - -
through profit or loss - CLOs
------- ------- ----------- -----------
31 December 2020 Level 1 Level 2 Level 3 Total
EUR EUR EUR EUR
------- ------- ----------- -----------
Financial assets at fair value
through profit or loss - Lux
Co - - 388,000,146 388,000,146
------- ------- ----------- -----------
Financial assets at fair value
through profit or loss - CLOs - - 549,437 549,437
------- ------- ----------- -----------
The Company determines the fair value of the financial assets at
fair value through profit or loss - Lux Co using the unaudited IFRS
NAV of the Lux Subsidiary and the audited IFRS NAV of BCF.
The Company determines the fair value of any CLOs held directly
using third party valuations. The Portfolio Adviser can challenge
the marks if they appear off-market or unrepresentative of fair
value.
During the years ended 31 December 2021 and 31 December 2020,
there were no reclassifications between levels of the fair value
hierarchy.
The Company's maximum exposure to loss from its interests in the
Lux Subsidiary and indirectly in BCF is equal to the fair value of
its investments in the Lux Subsidiary.
Financial assets at fair value through profit or loss
reconciliation
The following table shows a reconciliation of all movements in
the fair value of financial assets - Lux Co categorised within
Level 3 between the start and the end of the reporting period:
31 December 2021 Total
EUR
-------------
Balance as at 1 January 2021 388,000,146
-------------
Purchases - CSWs 18,608,735
-------------
Sale proceeds - CSWs (52,057,517)
-------------
Realised gain on financial assets at fair value
through profit or loss 15,115,024
-------------
Unrealised gain on financial assets at fair value
through profit or loss 48,303,171
-------------
Balance as at 31 December 2021 417,969,559
-------------
Realised gain on financial assets at fair value
through profit or loss 15,115,024
-------------
Total change in unrealised gain on financial
assets for the year 48,303,171
-------------
Net gain on financial assets at fair value through
profit or loss - Lux Co 63,418,195
-------------
31 December 2020 Total
EUR
-------------
Balance as at 1 January 2020 396,392,271
-------------
Purchases - CSWs 6,800,000
-------------
Sale proceeds - CSWs (51,548,650)
-------------
Realised gain on financial assets at fair value
through profit or loss 9,233,413
-------------
Unrealised gain on financial assets at fair value
through profit or loss 27,123,112
-------------
Balance as at 31 December 2020 388,000,146
-------------
Realised gain on financial assets at fair value
through profit or loss 9,233,413
-------------
Total change in unrealised gain on financial
assets for the year 27,123,112
-------------
Net gain on financial assets at fair value through
profit or loss - Lux Co 36,356,525
-------------
The following table shows a reconciliation of all movements in
the fair value of financial assets - CLOs categorised within Level
3 between the start and the end of the reporting period:
31 December 2021 Total
EUR
-----------
Balance as at 1 January 2021 549,437
-----------
PIK capitalised 275,832
-----------
Sale proceeds - CLOs (1,411,356)
-----------
Realised loss on financial assets at fair
value through profit or loss - CLOs (1,525,873)
-----------
Unrealised gain on financial assets at fair
value through profit or loss - CLOs 2,111,960
-----------
Balance as at 31 December 2021 -
-----------
Realised loss on financial assets at fair
value through profit or loss - CLOs (1,525,873)
-----------
Total change in unrealised loss on financial
assets for the year - CLOs 2,111,960
-----------
Net gain on financial assets at fair value
through profit or loss - CLOs 586,087
-----------
31 December 2020 Total
-----------
EUR
-----------
Balance as at 1 January 2020 3,192,772
-----------
PIK capitalised 278,010
-----------
Sale proceeds - CLOs (864,361)
-----------
Realised gain on financial assets at fair
value through profit or loss - CLOs 54,976*
-----------
Unrealised loss on financial assets at fair
value through profit or loss - CLOs (2,111,960)
-----------
Balance as at 31 December 2020 549,437
-----------
Realised gain on financial assets at fair
value through profit or loss - CLOs 158,632*
-----------
Total change in unrealised loss on financial
assets for the year - CLOs (2,111,960)
-----------
Net loss on financial assets at fair value
through profit or loss - CLOs (1,953,328)
-----------
* The difference between these two figures of EUR103,656 relates
to a realised gain on the management fee rebate element arising
from two of the previously directly held CLOs whereby BLCS was the
CLO manager.
Refer to 'Other Information' above, and Note 2.9 and Note 12 for
valuation methodology of financial assets at fair value through
profit and loss.
The Company's investments, through the Lux Subsidiary, in BCF
are untraded and illiquid. The Board has considered these factors
and concluded that there is no further need to apply a discount for
illiquidity as at the end of the reporting period.
Quantitative information of significant unobservable inputs and
sensitivity analysis to significant changes in unobservable inputs
- Level 3
The significant unobservable inputs used in the fair value
measurement of the financial assets at fair value through profit or
loss - Lux Co within Level 3 of the fair value hierarchy together
with a quantitative sensitivity analysis as at 31 December 2021 and
31 December 2020 are as shown below:
Asset Class Fair Unobservable Ranges Weighted Sensitivity to
Value Inputs average changes in significant
unobservable inputs
EUR
------------- ---------------- ------- --------- ------------------------
CSWs 411,170,727 Undiscounted N/A N/A 20% increase/decrease
NAV of will have a fair
BCF value impact of
+/-
EUR 82,234,145
------------- ---------------- ------- --------- ------------------------
Class A 6,798,832 Undiscounted N/A N/A 20% increase/decrease
and Class NAV of will have a fair
B shares the value impact of
Lux Subsidiary +/-
EUR 1,359,767
------------- ---------------- ------- --------- ------------------------
Total as
at
31 December
2021 417,969,559
------------- ---------------- ------- --------- ------------------------
Asset Class Fair Unobservable Ranges Weighted Sensitivity to
Value Inputs average changes in significant
unobservable inputs
------------- ---------------- ------- --------- ------------------------
CSWs 381,605,063 Undiscounted N/A N/A 20% increase/decrease
NAV of will have a fair
BCF value impact of
+/-
EUR76,321,012
------------- ---------------- ------- --------- ------------------------
Class A 6,395,083 Undiscounted N/A N/A 20% increase/decrease
and Class NAV of will have a fair
B shares the value impact of
Lux Subsidiary +/-
EUR1,279,016
------------- ---------------- ------- --------- ------------------------
Total as
at
31 December
2020 388,000,146
------------- ---------------- ------- --------- ------------------------
The significant unobservable inputs used in the fair value
measurement of the financial assets at fair value through profit or
loss - CLOs, comprising directly held CLO Mezzanine Notes, within
Level 3 of the fair value hierarchy together with a quantitative
sensitivity analysis as at 31 December 2020 are as shown below. The
Company did not hold any CLO positions as at year-end and therefore
no sensitivity analysis has been presented as at 31 December
2021.
Asset Class Fair Value Unobservable Ranges* Weighted Sensitivity
Inputs average to changes
in significant
unobservable
inputs
EUR
----------- ------------- ------------- --------- ----------------------
Mezzanine Notes
------------- ------------- --------- ----------------------
20% increase/decrease
Directly will have
Held CLO Third a fair value
Mezzanine party impact of
Notes 549,437 valuations 0.1% - 23.6% 10.3% +/- EUR109,887
----------- ------------- ------------- --------- ----------------------
Total as
at
31 December
2020 549,437
----------- ------------- ------------- --------- ----------------------
*The ranges provided in the tables above refer to the highest
and lowest marks received across the range of CLOs held. The ranges
reflect the different stages of the lifecycle of each of the CLOs
on an individual basis. The low ranges in the tables above are
prices from CLOs which have been called and are in wind-down.
7 Intercompany loan
As at As at
31 December 2021 31 December 2020
Total Total
----------------- -----------------
EUR EUR
----------------- -----------------
Intercompany loan - payable to
the Lux Subsidiary 1,246,249 869,988
----------------- -----------------
The intercompany loan - payable to the Lux Subsidiary is a
revolving unsecured loan between the Company and the Lux
Subsidiary. The intercompany loan has a maturity date of 13
September 2033 and is repayable at the option of the Company up to
the maturity date. Interest is accrued at a rate of 1.6% per annum
and is payable annually only when a written request has been
provided to the Company by the Lux Subsidiary. During the year
ended 31 December 2021, loan interest expense incurred by the
Company was EUR16,909 (2020: EUR11,335).
8 Payables
As at As at
31 December 2021 31 December 2020
EUR EUR
----------------- -----------------
Professional fees 111,869 91,844
----------------- -----------------
Administration fees 83,690 52,470
----------------- -----------------
Directors' fees 71,165 66,752
----------------- -----------------
Audit fees 106,003 116,188
----------------- -----------------
Intercompany loan interest payable 35,842 18,933
----------------- -----------------
Other payables 34,015 5,090
----------------- -----------------
Total payables 442,584 351,277
----------------- -----------------
All payables are due within the next twelve months.
9 Stated capital
Authorised
The authorised share capital of the Company is represented by an
unlimited number of shares of any class at no par value.
Allotted, called up and fully-paid
Ordinary Shares Number of shares Stated capital
EUR
---------------- --------------
As at 1 January 2021 477,023,331 471,465,875
---------------- --------------
Shares repurchased during the period
and held in treasury (16,038,629) (12,421,092)
---------------- --------------
Total Ordinary Shares as at 31 December
2021 460,984,702 459,044,783
---------------- --------------
Allotted, called up and fully-paid
Ordinary Shares Number of shares Stated capital
EUR
---------------- --------------
As at 1 January 2020 402,319,490 403,034,162
---------------- --------------
Issue of Ordinary Shares upon conversion
of C Shares 78,202,348 70,550,462
---------------- --------------
Shares repurchased during the period
and held in treasury (3,498,507) (2,118,749)
---------------- --------------
Total Ordinary Shares as at 31 December
2020 477,023,331 471,465,875
---------------- --------------
Ordinary Shares
At the 2020 AGM, held on 16 July 2020, the Directors were
granted authority to repurchase up to 14.99% of the issued share
capital as at the date of the 2020 AGM for cancellation or to be
held as treasury shares. Under this authority, during the year
ended 31 December 2020, the Company purchased 3,393,507 of its
Ordinary Shares of no par value at a total cost of EUR2,048,649.
These Ordinary Shares are being held as treasury shares.
At the 2020 AGM, the Directors were granted authority to allot,
grant options over or otherwise dispose of up to 48,041,684 Shares
(being equal to 10.00% of the Shares in issue at the date of the
AGM).
At the 2021 AGM, held on 23 July 2021, the Directors were
granted authority to repurchase up to 14.99% of the issued share
capital as at the date of the 2021 AGM for cancellation or to be
held as treasury shares. Under this authority, during the year
ended 31 December 2021, the Company purchased 7,722,373 of its
Ordinary Shares of no par value at a total cost of EUR6,101,156.
These Ordinary Share are being held as treasury shares.
At the 2021 AGM, the Directors were granted authority to allot,
grant options over or otherwise dispose of up to 70,274,181 Shares
(being equal to 10.00% of the Shares in issue at the date of the
AGM). This authority will expire at the 2022 AGM.
At the Company's 2021 AGM, the Company received shareholder
approval to resell up to 46,880,707 Shares held by the Company in
treasury. Under this authority, these Shares are permitted to be
sold or transferred out of treasury for cash at a price
representing a discount to Net Asset Value per Share not greater
than the discount at which such Shares were repurchased by the
Company. To-date, no shares have been resold by the Company under
this authority.
As at 31 December 2021, the Company had 460,984,702 Ordinary
Shares in issue and 21,918,092 Ordinary Shares in treasury (31
December 2020: 477,023,331 Ordinary Shares in issue and 5,879,463
Ordinary Shares in treasury).
Refer to Note 21 for further details on repurchases of Ordinary
Shares under the 2021 AGM authority subsequent to the reporting
period. This authority will expire at the 2022 AGM. The Directors
intend to seek annual renewal of this authority from
Shareholders.
Voting rights - Ordinary Shares
Holders of Ordinary Shares have the right to receive income and
capital from assets attributable to such class. Ordinary
Shareholders have the right to receive notice of general meetings
of the Company and have the right to attend and vote at all general
meetings.
Dividends
The Company may, by resolution, declare dividends in accordance
with the respective rights of the Shareholders, but no such
dividend shall exceed the amount recommended by the Directors. The
Directors may pay fixed rate and interim dividends.
A general meeting declaring a dividend may, upon the
recommendation of the Directors, direct that payment of a dividend
shall be satisfied wholly or partly by the issue of Ordinary shares
or the distribution of assets and the Directors shall give effect
to such resolution.
Except as otherwise provided by the rights attaching to or terms
of issue of any shares, all dividends shall be apportioned and paid
pro rata according to the amounts paid on the Shares during any
portion or portions of the period in respect of which the dividend
is paid. No dividend or other monies payable in respect of any
Share shall bear interest against the Company.
The Directors may deduct from any dividend or other monies
payable to a shareholder all sums of money (if any) presently
payable by the holder to the Company on account of calls or
otherwise in relation to such shares.
Any dividend unclaimed after a period of 10 years from the date
on which it became payable shall, if the Directors so resolve, be
forfeited and cease to remain owing by the Company.
The dividends declared by the Board during the year are detailed
above.
Refer to Note 21 for dividends declared after the year end.
Repurchase of Ordinary Shares
The Board intends to seek annual renewal of this authority from
the Ordinary shareholders at the Company's AGM, to make one or more
on-market purchases of shares in the Company for cancellation or to
be held as Treasury shares.
The Board may, at its absolute discretion, use available cash to
purchase shares in issue in the secondary market at any time.
Rights as to Capital
On a winding up, the Company may, with the sanction of a special
resolution and any other sanction required by the Companies Law,
divide the whole or any part of the assets of the Company among the
shareholders in specie provided that no holder shall be compelled
to accept any assets upon which there is a liability. On return of
assets on liquidation or capital reduction or otherwise, the assets
of the Company remaining after payments of its liabilities shall
subject to the rights of the holders of other classes of shares, to
be applied to the shareholders equally pro rata to their holdings
of shares.
Capital management
The Company is closed-ended and has no externally imposed
capital requirements. The Company's capital as at 31 December 2021
comprises shareholders' equity at a total of EUR421,999,577 (31
December 2020: EUR408,205,175).
The Company's objectives for managing capital are:
-- to invest the capital in investments meeting the description,
risk exposure and expected return indicated in its prospectus;
-- to achieve consistent returns while safeguarding capital by
investing via the Lux Subsidiary in BCF and other Underlying
Companies;
-- to maintain sufficient liquidity to meet the expenses of the
Company and to meet dividend commitments; and
-- to maintain sufficient size to make the operation of the Company cost efficient.
The Board monitors the capital adequacy of the Company on an
on-going basis and the Company's objectives regarding capital
management have been met.
Refer to Note 10C Liquidity Risk for further discussion on
capital management, particularly on how the distribution policy is
managed.
10 Financial risk management
The Company is exposed to market risk (including interest rate
risk, currency risk and price risk), credit risk and liquidity risk
arising from the financial instruments it holds and the markets in
which it invests.
10A Market risk
Market risk is the current or prospective risk to earnings or
capital of the Company arising from changes in interest rates,
foreign exchange rates, commodity prices or equity prices.
The Company holds three investments, denominated in Euro, in the
Lux Subsidiary in the form of CSWs, Class A and Class B shares. The
CSWs are the main driver of the Company's performance.
Financial market disruptions may have a negative effect on the
valuations of BCF's investments and, by extension, on the NAV of
the Lux Subsidiary and the Company and/or the market price of the
Company's Euro shares, and on liquidity events involving BCF's
investments. Any non-performing assets in BCF's portfolio may cause
the value of BCF's portfolio to decrease and, by extension, the NAV
of the Lux Subsidiary and the Company. Adverse economic conditions
may also decrease the value of any security obtained in relation to
any of BCF's investments.
A sensitivity analysis is shown below disclosing the impact on
the IFRS NAV of the Company, if the fair value of the Company's
investments at the year end increased or decreased by 20%. This
level of change is considered to be reasonably possible based on
observations of past and possible market conditions.
Year ended Increase Decrease
31 December 2021 by by
20% 20%
EUR EUR EUR
----------------- ----------- -----------
Financial assets held at
fair value through
profit or loss:
----------------- ----------- -----------
CSWs 411,170,727 493,404,872 328,936,582
----------------- ----------- -----------
Class A and Class B shares 6,798,832 8,158,598 5,439,066
----------------- ----------- -----------
417,969,559
----------------- ----------- -----------
Year ended Increase Decrease
31 December 2020 by by
20% 20%
EUR EUR EUR
----------------- ----------- -----------
Financial assets held at
fair value through
profit or loss:
----------------- ----------- -----------
CSWs 381,605,063 457,926,076 305,284,050
----------------- ----------- -----------
Class A and Class B shares 6,395,083 7,674,100 5,116,066
----------------- ----------- -----------
CLOs 549,437 659,324 439,550
----------------- ----------- -----------
388,549,583
----------------- ----------- -----------
The calculations are based on the investment valuation at the
Statement of Financial Position date and are not representative of
the period as a whole, and may not be reflective of future market
conditions.
i. Interest rate risk
Interest rate movements affect the fair value of investments in
fixed interest rate securities and floating rate loans and on the
level of income receivable on cash deposits.
The interest income received by the Lux Subsidiary from
investments held at fair value through profit or loss is the
interest income on the PPNs received from BCF. Its calculation is
dependent on the profit generated by BCF as opposed to interest
rates set by the market. Interest rate sensitivity analysis is
presented for BCF in Note 12 since any potential movement in market
interest rates will impact BCF's holdings which in turn will impact
the interest income received by the Lux Subsidiary on the PPNs.
The following tables detail the Company's interest rate risk as
at 31 December 2021 and 31 December 2020:
31 December 2021 Interest bearing Non-interest Total
bearing
EUR EUR EUR
---------------- ------------ -----------
Assets
---------------- ------------ -----------
Cash and cash equivalents 5,671,436 - 5,671,436
---------------- ------------ -----------
Financial assets at fair value
through profit or loss - 417,969,559 417,969,559
---------------- ------------ -----------
Total assets 5,671,436 417,969,559 423,640,995
---------------- ------------ -----------
Liabilities
---------------- ------------ -----------
Intercompany loan (1,246,249) - (1,246,249)
---------------- ------------ -----------
Payables - (442,584) (442,584)
---------------- ------------ -----------
Total liabilities (1,246,249) (442,584) (1,688,833)
---------------- ------------ -----------
Total interest sensitivity
gap 4,425,187
---------------- ------------ -----------
31 December 2020 Interest bearing Non-interest bearing Total
EUR EUR EUR
---------------- -------------------- -----------
Assets
---------------- -------------------- -----------
Cash and cash equivalents 20,725,819 - 20,725,819
---------------- -------------------- -----------
Interest receivable - 127,848 127,848
---------------- -------------------- -----------
Financial assets at
fair value through profit
or loss 549,437 388,000,146 388,549,583
---------------- -------------------- -----------
Total assets 21,275,256 388,127,994 409,403,250
---------------- -------------------- -----------
Liabilities
---------------- -------------------- -----------
Intercompany loan (869,988) - (869,988)
---------------- -------------------- -----------
Payables - (351,277) (351,277)
---------------- -------------------- -----------
Total liabilities (869,988) (351,277) (1,221,265)
---------------- -------------------- -----------
Total interest sensitivity
gap 20,405,268
---------------- -------------------- -----------
As at 31 December 2021 and 31 December 2020, the majority of the
Company's interest rate exposure arose in the fair value of the
underlying BCF portfolio which is largely invested in senior
secured loans of companies predominantly in Western Europe or North
America. Most of the investments in senior secured loans carry
variable interest rates and various maturity dates. Refer to Note
12 which details BCF's exposure to interest rate risk.
ii. Currency risk
Foreign currency risk is the risk that the values of the
Company's assets and liabilities are adversely affected by changes
in the values of foreign currencies by reference to the Company's
base currency. The functional currency of the Company and its Lux
Subsidiary is the Euro.
The Company and the Lux Subsidiary are not subject to
significant foreign currency risk since the majority of their
investments are denominated in Euro and their share capital are
also denominated in Euro.
Refer to Note 12 which details BCF's exposure to currency risk.
BCF hedges US CLO equity exposure by reference to mark to model
valuations incorporated in the Published NAV as defined above.
The Company is exposed to currency risk on its investments in
the directly held CLOs which are denominated in USD. To reduce the
impact on the Company of currency fluctuations and the volatility
of returns which may result from currency exposure, the Company may
hedge the currency exposure of the directly held CLOs of the
Company with the use of derivatives. The Company did not have any
derivatives at the year end.
iii. Price risk
Price risk is the risk that the value of the Company's indirect
investments in BCF through its holding in the Lux Subsidiary does
not reflect the true value of BCF's underlying investment
portfolio.
BCF's portfolio may at any given time include securities or
other financial instruments or obligations which are very thinly
traded, for which a limited market exists or which are restricted
as to their transferability under applicable securities laws. These
investments may be extremely difficult to value accurately.
Further, because of overall size or concentration in particular
markets of positions held by BCF, the value of its investments
which can be liquidated may differ, sometimes significantly, from
their valuations. Third-party pricing information may not be
available for certain positions held by BCF. Investments held by
BCF may trade with significant bid-ask spreads. BCF is entitled to
rely, without independent investigation, upon pricing information
and valuations furnished to BCF by third parties, including pricing
services and valuation sources.
Absent bad faith or manifest error, valuation determinations in
accordance with BCF's valuation policy are conclusive and binding.
In light of the foregoing, there is a risk that the Company, in
redeeming all or part of its investment while BCF holds such
investments, could be paid an amount less than it would otherwise
be paid if the actual value of BCF's investment was higher than the
value designated for that investment by BCF. Similarly, there is a
risk that a redeeming BCF interest holder might, in effect, be
over-paid at the time of the applicable redemption if the actual
value of BCF's investment was lower than the value designated for
that investment by BCF, in which case the value of BCF interests to
the remaining BCF interest holders would be reduced. Refer to Note
12 for further details.
The Board monitors and reviews the Company's NAV production
process on an ongoing basis.
10B Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Board has in place
monitoring procedures in respect of credit risk which is reviewed
on an ongoing basis.
The Company's credit risk is attributable to its cash and cash
equivalents, other receivables and financial assets at fair value
through profit or loss. An allowance for impairment is made where
there is an identified loss event which, based on previous
experience, is evidence of a reduction in the recoverability of the
cash flows.
BIL monitors for the Company, the Lux Subsidiary, BCF and its
subsidiaries the creditworthiness of financial institutions with
whom cash is held, or with whom investment or derivative
transactions are entered into, on a regular basis.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the Statement of Financial Position
date. At the reporting date, the Company's financial assets exposed
to credit risk amounted to the following:
As at As at
31 December 2021 31 December 2020
EUR EUR
----------------- -----------------
Cash and cash equivalents 5,671,436 20,725,819
----------------- -----------------
Interest receivable - 127,848
----------------- -----------------
Financial assets at fair value
through profit or loss 417,969,559 388,549,583
----------------- -----------------
Total assets 423,640,995 409,403,250
----------------- -----------------
The Company is exposed to a potential material singular credit
risk in the event that it requests a repayment of the CSWs from the
Lux Subsidiary and receives an acceptance of that repayment
request. Under the CSW agreement between the Company and the Lux
Subsidiary, any payment obligation by the Lux Subsidiary to the
Company is conditional upon the receipt of an equivalent amount by
the Lux Subsidiary which is derived from the PPNs issued by BCF.
The Board is aware of this risk and the concentration risk to the
Lux Subsidiary and indirectly to BCF.
Additionally, under the Profit Participating Note Issuing and
Purchase Agreement ("PPNIPA") between the Lux Subsidiary and BCF,
if the net proceeds from a liquidation of the collateral
obligations as defined in the PPNIPA available to unsecured
creditors of BCF (the "Liquidation Funds") are less than the
aggregate amount payable by BCF in respect of its obligations to
its unsecured creditors, including to the Lux Subsidiary and the
other parties to the PPNIPA (such negative amount being referred to
as a "shortfall"), the amount payable by BCF to the Lux Subsidiary
and the other parties to the PPNIPA in respect of BCF's obligations
under the PPNs will be reduced to such amount of the Liquidation
Funds which is available in accordance with the regulatory
requirements and the senior debt restrictive covenants to satisfy
such payment obligation upon the distribution of the Liquidation
Funds among all of BCF's unsecured creditors on a pari passu and
pro rata basis, and shall be applied for the benefit of the Lux
Subsidiary and the other parties to the PPNIPA. In such
circumstances the other assets of BCF will not be available for the
payment of such shortfall, and the rights of the Lux Subsidiary and
the other parties to the PPNIPA to receive any further amounts in
respect of such obligations shall be extinguished and the
Noteholders and the other parties to the PPNIPA may not take any
further action to recover such amounts.
During the years ended 31 December 2021 and 31 December 2020 all
cash was placed with BNP Paribas Securities S.C.A, as Custodian.
The ultimate parent of BNP Paribas Securities S.C.A is BNP Paribas
which is publicly traded with a credit rating of A+ (Standard &
Poor's).
The credit risk associated with debtors is limited to other
receivables. Credit risk is mitigated by the Company's policy to
only undertake significant transactions with leading commercial
counterparties. It is the opinion of the Board that the carrying
amounts of these financial assets represent the maximum credit risk
exposure as at the reporting date.
The Board continues to monitor the Company's exposure to credit
risk.
Refer to Note 12 which details BCF's exposure to credit
risk.
10C Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulties in realising assets or otherwise raising funds to meet
financial commitments.
The Company has been established as a closed-ended vehicle.
Accordingly, there is no right or entitlement attaching to the
Company's shares that allows them to be redeemed or repurchased by
the Company at the option of the Shareholder. This significantly
reduces the liquidity risk of the Company.
Under the terms of the unsecured PPNs issued to its investors,
BCF is contractually obliged to ensure that its portfolio is
managed in accordance with the Company's investment objective and
policy. In the event that BCF fails to comply with these
contractual obligations, the Company, through the Lux Subsidiary,
could elect for the unsecured PPNs to become immediately due and
repayable to it from BCF, subject to any applicable legal,
contractual and regulatory restrictions. Given the nature of the
investments held by BCF there is no guarantee and indeed, it is
highly unlikely that the applicable legal, contractual and
regulatory restrictions would permit BCF to immediately repay the
unsecured PPNs on the Company making such an election.
If the Company were to elect for the unsecured PPNs to be
repaid, BCF's failure to fully comply with its contractual
obligations to do so or BCF being restricted from doing so by law,
regulation or contract could have a significant adverse effect on
the Company's business, financial condition, results of operations
and/or the market price of the shares.
The PPNs are unsecured obligations of BCF and amounts payable on
the PPNs will be made solely from amounts received in respect of
the assets of BCF available for distribution to its unsecured
creditors. BCF is permitted to incur leverage in the form of
secured debt by way of one or more revolving credit facilities.
Such secured debt will rank ahead of the PPNs in respect of any
distributions or payments by BCF. In an enforcement scenario under
any revolving credit facility, the provider(s) of such facilities
will have the ability to enforce their security over the assets of
BCF and to dispose of or liquidate, on their own behalf or through
a security trustee or receiver, the assets of BCF in a manner which
is beyond the control of the Company. In such an enforcement
scenario, there is no guarantee that there will be sufficient
proceeds from the disposal or liquidation of BCF's assets to repay
any amounts due and payable on the PPNs and this may adversely
affect the performance of the Company's business, financial
condition and results of operations.
Consequently, in the event of a materially adverse event
occurring in relation to BCF or the market generally, the ability
of the Company to realise its investment and prevent the
possibility of further losses could, therefore, be limited by its
restricted ability to realise its investment via the Lux Subsidiary
in BCF. This delay could materially affect the value of the PPNs
and the timing of when BCF is able to realise its investments,
which may adversely affect the Company's business, financial
condition, results of operations and/or the market price of the
shares.
The liquidity profile of BCF as at 31 December 2021 is in Note
12.
To meet the Company's target dividend, the Company will require
sufficient payments from the CSWs held and in the event these are
not received, the Board has the discretion to determine the amount
of dividends paid to shareholders.
11 Interests in other entities
Interests in unconsolidated structured entities
IFRS 12 "Disclosure of Interests in Other Entities" defines a
structured entity as an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding
who controls the entity, such as when any voting rights relate to
the administrative tasks only and the relevant activities are
directed by means of contractual agreements. A structured entity
often has some of the following features or attributes:
-- restricted activities;
-- a narrow and well-defined objective;
-- insufficient equity to permit the structured entity to
finance its activities without subordinated financial support;
and
-- financing in the form of multiple contractually linked
instruments that create concentrations of credit or other
risks.
Involvement with unconsolidated structured entities
The Directors have concluded that the CSWs and voting shares of
the Lux Subsidiary in which the Company invests, but that it does
not consolidate, meet the definition of a structured entity.
The Directors have also concluded that BCF also meets the
definition of a structured entity.
The Directors have concluded that CLOs, that are not
subsidiaries for financial reporting purposes, meet the definition
of structured entities because:
-- the voting rights in the CLOs are not dominant rights in
deciding who controls them, as they relate to administrative tasks
only;
-- each CLO's activities are restricted by its Prospectus; and
-- the CLOs have narrow and well-defined objectives to provide
investment opportunities to investors.
Interests in subsidiary
As at 31 December 2021, the Company owns 100% of the Class A and
Class B shares in the Lux Subsidiary comprising 2,000,000 Class A
shares and one Class B share (31 December 2020: 2,000,000 Class A
shares and one Class B share).
The Lux Subsidiary's principal place of business is
Luxembourg.
Other than the investments noted above, the Company did not
provide any financial support for the years ended 31 December 2021
and 31 December 2020, nor had it any intention of providing
financial or other support.
The Company has an intercompany loan payable to the Lux
Subsidiary as at 31 December 2021. Refer to Note 7 for further
details.
12 Financial and other information on BCF
The Board has provided the following information on BCF, which
has been extracted from its audited financial statements for the
year ended 31 December 2021, as it believes this will provide
further insight to the Company's Shareholders into the operations
of BCF, the asset mix in its portfolio and the risks to which BCF
is exposed.
As at 31 December 2021, the Lux Subsidiary held a 33.8% (31
December 2020: 35.4%) interest in the PPNs issued by BCF. The
disclosures have not been apportioned according to the Lux
Subsidiary's PPN holding, as the Board believes to do so would be
misleading and not an accurate representation of the Company's
investment in BCF.
Principal activities
BCF was established as an originator vehicle under European risk
retention rules for CLO securitisations. It may also invest in
senior secured loans, either directly or indirectly through CLO
warehouses, and underlying companies. BCF is funded by proceeds
from the issuance of PPNs together with other financial resources
available to it, such as the BCF Facility.
Investment policy
BCF's investment policy is to invest (directly, or indirectly
through one or more Underlying Companies) in a diverse portfolio of
senior secured loans (including broadly syndicated, middle market
or other loans) (such investments being made by the Underlying
Companies directly or through investments in Loan Warehouses) bonds
and CLO Securities, and generate attractive risk--adjusted returns
from such portfolios. BCF intends to pursue its investment policy
by using the proceeds from the issue of PPNs (together with
proceeds from other financial resources available to it) to invest
in such assets.
BCF may invest (directly or through other Underlying Companies)
predominantly in European or US senior secured loans, CLO Income
Note securities (the most subordinated tranche of debt issued by a
CLO issuer), loan warehouses and other assets. Investments in loan
warehouses will typically be in the form of an obligation to
purchase preference shares or a subordinated loan. There is no
limit on the maximum European or US exposure. BCF is not expected
to invest (directly or through other Underlying Companies) in
senior secured loans domiciled outside North America or Western
Europe.
A CLO is a pooled investment vehicle which may invest in a
diversified group of debt securities, in this case predominantly
senior secured loans. To finance its investments, the CLO vehicle
issues debt in the form of Senior Notes and CLO Income Note
securities to investors. The servicing and repayment of these notes
is linked directly to the performance of the underlying portfolio
of assets.
The portfolio of assets underlying the CLO Income Note
securities consist mainly of senior secured loans, mezzanine loans,
second lien loans and high yield bonds. The portfolio of assets
within BCF consists mainly of CLO Income Note securities.
Distributions on the CLO Income Note securities, by way of interest
payments, are payable on a quarterly basis on dates established in
the formation documents of the CLOs.
As at 31 December 2021, BCF had exposure to one CLO held as a
vertical strip (as defined in the Company's Investment Strategy),
being 0.1% of BCF NAV. As at 31 December 2020, BCF had no exposure
to CLOs held as a vertical strip (as defined in the Company's
Investment Strategy).
Subsidiaries
BCF has acquired Currency Deal Size % Subordinated Equity
the majority, (million) Notes Held
or all, of the 31 December 2021
CLO Income Note
securities issued
by a number of
European CLO issuers
(the "Direct CLO
Subsidiaries").Name
of subsidiary
Phoenix Park CLO
DAC EUR EUR417 51.4%
--------- ------------------- ---------------------
Sorrento Park
CLO DAC EUR EUR57 51.8%
--------- ------------------- ---------------------
Castle Park CLO
DAC EUR EUR46 52.2%
--------- ------------------- ---------------------
Dartry Park CLO
DAC EUR EUR426 51.1%
--------- ------------------- ---------------------
Dorchester Park
CLO DAC USD $66 67.0%
--------- ------------------- ---------------------
Orwell Park CLO
DAC EUR - 51.0%
--------- ------------------- ---------------------
Tymon Park CLO
DAC EUR EUR415 51.0%
--------- ------------------- ---------------------
Elm Park CLO DAC EUR EUR522 56.1%
--------- ------------------- ---------------------
Griffith Park
CLO DAC EUR EUR456 53.4%
--------- ------------------- ---------------------
Palmerston Park
CLO DAC EUR EUR399 53.3%
--------- ------------------- ---------------------
Clarinda Park
CLO DAC EUR EUR417 51.2%
--------- ------------------- ---------------------
Clontarf Park
CLO DAC EUR EUR385 66.9%
--------- ------------------- ---------------------
Willow Park CLO
DAC EUR EUR400 60.9%
--------- ------------------- ---------------------
Marlay Park CLO
DAC EUR EUR413 60.0%
--------- ------------------- ---------------------
Milltown Park
CLO DAC EUR EUR409 65.0%
--------- ------------------- ---------------------
Richmond Park
CLO DAC EUR EUR516 68.3%
--------- ------------------- ---------------------
Sutton Park CLO
DAC EUR EUR408 66.7%
--------- ------------------- ---------------------
Crosthwaite Park
CLO DAC EUR EUR516 64.7%
--------- ------------------- ---------------------
Dunedin Park CLO
DAC EUR EUR423 52.9%
--------- ------------------- ---------------------
Seapoint Park
CLO DAC EUR EUR404 70.5%
--------- ------------------- ---------------------
Holland Park CLO
DAC EUR EUR427 72.1%
--------- ------------------- ---------------------
Vesey Park CLO
DAC EUR EUR403 80.3%
--------- ------------------- ---------------------
Avondale Park
CLO DAC EUR EUR409 63.0%
--------- ------------------- ---------------------
Deer Park CLO
DAC EUR EUR355 71.9%
--------- ------------------- ---------------------
Marino Park CLO
DAC EUR EUR323 70.8%
--------- ------------------- ---------------------
Carysfort Park
CLO DAC (1) EUR EUR406 80.7%
--------- ------------------- ---------------------
Rockfield Park
CLO DAC (1) EUR EUR404 80.0%
--------- ------------------- ---------------------
Dillon's Park
CLO DAC (1) EUR EUR406 84.0%
--------- ------------------- ---------------------
Cabinteely Park
CLO DAC (1) EUR EUR404 75.6%
--------- ------------------- ---------------------
(1) New subsidiary for the year ended 31 December 2021.
BCF has also acquired 100% of the PPNs issued by BGCM DAC, which
was established on 1 August 2019. BGCM DAC holds 100% of the Series
2 and Series 3 interests of BCM LLC, a US manager-originator
vehicle established on 14 May 2019. The establishment of BCM LLC
created a structure capable of meeting potential demand for US CLOs
from European institutional investors requiring compliance with
European risk retention rules. BCM LLC holds CLO Income Note
securities in ten US CLOs (the "Indirect CLO Subsidiaries") as
listed below and preference shares in three warehouses, Wehle Park
warehouse, Boyce Park warehouse and Saratoga Park warehouse.
Name of subsidiary Currency Deal Size % Subordinated Equity
(million) Notes Held
31 December 2021
Southwich Park CLO
Limited USD $503 60.0%
--------- ---------- ---------------------
Point Au Roche Park
CLO Limited USD $457 61.2%
--------- ---------- ---------------------
Whetstone Park CLO
Limited USD $506 62.3%
--------- ---------- ---------------------
Peace Park CLO Limited
(1) USD $661 71.5%
--------- ---------- ---------------------
Tallman Park CLO
Limited (1) USD $410 5.0%
--------- ---------- ---------------------
Beechwood Park CLO
Limited USD $810 61.1%
--------- ---------- ---------------------
Stratus CLO 2020-2
Limited (1) USD $24 0.0% (2)
--------- ---------- ---------------------
Harriman Park CLO
Limited USD $503 70.0%
--------- ---------- ---------------------
Cayuga Park CLO
Limited USD $401 72.0%
--------- ---------- ---------------------
Allegany Park CLO
Limited USD $505 66.2%
--------- ---------- ---------------------
(1) New subsidiary for the year ended 31 December 2021.
(2) Called and redeemed during the year ended 31 December
2021.
In accordance with IFRS 10, the Direct CLO Subsidiaries, the
Indirect CLO Subsidiaries, BGCM DAC and BCM LLC, are all deemed to
be subsidiaries of BCF and are consolidated under its financial
reporting framework. As at 31 December 2021, BCM LLC held
investments in the following non-consolidated US CLOs:
Name
Gilbert Park CLO Limited
Stewart Park CLO Limited
Catskill Park CLO Limited
Dewolf Park CLO Limited
Long Point Park CLO Limited
Grippen Park CLO Limited
Thayer Park CLO Limited
Cook Park CLO Limited
BCF also directly holds CLO Income Note securities in US CLOs
which it was not responsible for originating. As at 31 December
2021, BCF had direct holdings in the following US CLOs (together
with the non-consolidated US CLOs held through BCM LLC, the
"Non-Consolidated US CLOs"):
Name
Buckhorn Park CLO Limited
Filmore Park CLO Limited
Harbor Park CLO Limited
The directors of BCF have determined that BCF did not control
the US MOA (through BGCM DAC and BCM LLC), nor does it control any
of the Non-Consolidated US CLOs or US CLO warehouses held directly
by BCF or through BCM LLC, as defined in IFRS 10. Therefore, these
entities have not been consolidated for the purposes of presenting
BCF's consolidated financial statements. These investments have
been classified as financial assets held at fair value through
profit or loss.
The directors of BCF do not anticipate any change in its
structure or investment objectives.
Valuation of financial instruments
As at 31 December 2021 and 2020, the loans held were broker
priced through Markit, and the bond investments were valued by
prices provided by IDC. The majority of these assets were
classified as Level 2 since the input into the Markit price
consisted of at least two quotes, however, a small number of
holdings priced through Markit consisted of only one quote. Such
assets were classified as Level 3. Both loans and bonds are priced
at current mid prices.
The CLO Income Notes issued by the Direct CLO Subsidiaries are
listed on Euronext Dublin and are valued by a third party. The
approach to valuing these CLO Income Notes incorporates CLO
specific information and modelling techniques. Factors include (i)
granular loan level data, such as the concentration and quality of
various loan level buckets, for example, second liens, covenant
lites and other structured product assets, as well as several other
factors including: discount rate, default rates, prepayment rates,
recovery rates, recovery lag and reinvestment spread (these factors
are highly sensitive and variations may materially affect the fair
value of the asset), and (ii) structural analysis on a deal by deal
basis. Pricing includes checks on all structural features of each
CLO, such as the credit enhancement of each bond and various
performance triggers (including over-collateralisation tests,
interest coverage and diversion tests). Furthermore, reinvestment
language specific to each CLO deal is assessed, as well as the
collateral manager's performance and capabilities.
Investments in CLO Income Notes of U.S. CLO Issuers, held
directly or indirectly, are valued using an equivalent methodology.
Similar to the above, valuation of such CLO Income Notes uses
significant unobservable inputs and accordingly are classified as
Level 3. Investments in the CLO Income Notes of the CLO
Subsidiaries and the Non-Consolidated U.S. CLOs, and in the
preference shares of the CLO warehouses are valued on the above
basis using significant unobservable inputs, and accordingly, are
classified as Level 3.
Forward purchase agreements are over-the-counter ("OTC")
contracts for delayed delivery of investments in which the buyer
agrees to buy and the seller agrees to deliver specified
investments at specified prices on a specified future date. Because
the terms are not standardised, they are not traded on organised
exchanges and generally can be terminated or closed out only by
agreement of both parties to the contract. They are valued in
accordance with the terms of the forward purchase agreement and are
categorised as Level 2.
A currency swap is an interest rate swap in which the cash flows
are in different currencies. Upon initiation of a currency swap,
the counterparties make an initial exchange of notional principals
in the two currencies. During the life of the swap, each party pays
interest (in the currency of the principal received) to the other.
At the maturity of the swap, the parties make a final exchange of
the initial principal amounts, reversing the initial exchange at
the same spot rate. Contracts are marked-to-market daily based upon
calculations using a valuation model and are categorised as Level
2.
The PPNs and debt issued by the CLO Subsidiaries are categorised
as Level 3, as they are valued using a model which is based on the
fair value of the underlying assets and liabilities of the relevant
entity.
The amortised cost of the BCF Facility equates to its fair value
due to the floating interest rates and the proximity of the
maturity dates and has been categorised as Level 2.
Receivable for investments sold and other receivables include
the contractual amounts for settlement of trades and other
obligations due to BCF. Payable for investments sold and other
payables represent the contractual amounts and obligations due by
BCF for settlement of trades and expenses. All of the receivable
and payable balances are categorised as Level 2.
The following tables analyse within the fair value hierarchy
BCF's financial instruments carried at fair value as at 31 December
2021 and 31 December 2020:
31 December 2021 Level 1 Level 2 Level 3 Total
EUR EUR EUR EUR
------- ------------ --------------- ---------------
Financial assets measured
at fair value through profit
or loss:
------- ------------ --------------- ---------------
- Investments in senior
secured loans and bonds - 521,321,556 7,924,650 529,246,206
------- ------------ --------------- ---------------
- Investments in CLO Income
Notes - - 508,931,719 508,931,719
------- ------------ --------------- ---------------
- Investment in BGCM DAC - - 391,200,403 391,200,403
------- ------------ --------------- ---------------
Total financial assets - 521,321,556 908,056,772 1,429,378,328
------- ------------ --------------- ---------------
Financial liabilities measured
at fair value through profit
or loss:
------- ------------ --------------- ---------------
- PPNs - - (1,233,581,335) (1,233,581,335)
------- ------------ --------------- ---------------
- Derivative financial
liabilities - (33,536,518) - (33,536,518)
------- ------------ --------------- ---------------
Total financial liabilities - (33,536,518) (1,233,581,335) (1,267,117,853)
------- ------------ --------------- ---------------
31 December 2020 Level 1 Level 2 Level 3 Total
EUR EUR EUR EUR
------- ----------- --------------- ---------------
Financial assets measured
at fair value through profit
or loss:
------- ----------- --------------- ---------------
- Investments in senior
secured loans and bonds - 122,982,606 12,993,749 135,976,355
------- ----------- --------------- ---------------
- Investments in CLO Income
Notes - - 520,436,700 520,436,700
------- ----------- --------------- ---------------
- Investment in BGCM DAC - - 339,404,431 339,404,431
------- ----------- --------------- ---------------
- Derivative financial
assets - 11,400,424 - 11,400,424
------- ----------- --------------- ---------------
Total financial assets - 134,383,030 872,834,880 1,007,217,910
------- ----------- --------------- ---------------
Financial liabilities measured
at fair value through profit
or loss:
------- ----------- --------------- ---------------
- PPNs - - (1,092,553,639) (1,092,553,639)
------- ----------- --------------- ---------------
Total financial liabilities - - (1,092,553,639) (1,092,553,639)
------- ----------- --------------- ---------------
The following table shows the movement in Level 3 of BCF's fair
value hierarchy for the years ended 31 December 2021 and 31
December 2020:
31 December 2021 Financial assets Financial liabilities
measured at FVTPL measured at FVTPL
EUR EUR
------------------ ---------------------
Opening balance 872,834,880 (1,092,553,639)
------------------ ---------------------
Net (loss)/gain on financial assets
and liabilities measured at fair
value through profit or loss 2,051,407 (32,418,962)
------------------ ---------------------
Purchases/Issuances 366,313,313 (108,608,734)
------------------ ---------------------
Sales/Redemptions (326,134,078) -
------------------ ---------------------
Movement out of Level 3 (7,008,750) -
------------------ ---------------------
Closing Balance 908,056,772 (1,233,581,335)
------------------ ---------------------
31 December 2020 Financial assets Financial liabilities
measured at FVTPL measured at FVTPL
EUR EUR
------------------ ---------------------
Opening balance 821,589,313 (1,056,882,313)
------------------ ---------------------
Net (loss)/gain on financial assets
and liabilities measured at fair
value through profit or loss (73,533,922) 49,525,754
------------------ ---------------------
Purchases/Issuances 244,301,339 (85,197,080)
------------------ ---------------------
Sales/Redemptions (119,521,850) -
------------------ ---------------------
Closing Balance 872,834,880 (1,092,553,639)
------------------ ---------------------
BCF's policy is to recognise transfers into and transfers out of
fair value hierarchy levels as of the last day of the accounting
period. There were no transfers between Level 1 and Level 2 of the
fair value hierarchy during the years ended 31 December 2021 or 31
December 2020.
Sensitivity of BCF Level 3 holdings to unobservable inputs
A number of holdings as at 31 December 2021 and 31 December 2020
were priced through Markit where the input into the Markit price
was only one price, so they were classified as Level 3. These loan
assets are not modelled on analysts' prices but are from dealers'
runs therefore there are no unobservable inputs into the
prices.
The CLO Income Notes were valued by a third party using a CLO
intrinsic calculation methodology and were classified as Level 3
because the valuation technique incorporates significant
unobservable inputs. The CLO prices are determined by consideration
of several factors including the following: default rates,
prepayment rates, recovery rates, recovery lag and reinvestment
spread. These factors are highly sensitive, and variations may
materially affect the fair value of the asset. These metrics are
accumulated from various market sources independent of BIL.
Additionally, valuation incorporates a review of each CLO indenture
and the latest underlying CLO loan portfolio forming various
projections based on the quality of the collateral, the collateral
manager capabilities and general macroeconomic conditions. The
sensitivity of the fair values of the CLO Notes, in particular CLO
Income Notes to the traditional risk variables measured separately
including market risk and interest rate risk may not be the most
appropriate analysis for this asset class. The sensitivity to
valuation assumptions including interest rates has an
interdependent impact with other significant market variables as
noted in the assumptions used for valuing CLO Income Notes. Given
the values are based on third party prices, the sensitivity to the
key assumptions is not required to be provided.
The assets classified as Level 3 represented 63.5% (2020: 86.7%)
of the total financial assets. If the price of the holdings
classified as Level 3 increased or decreased by 5% it would result
in an increase or decrease in the value of the financial assets of
EUR 45,402,839 (3.18% of the total financial assets) (2020: EUR
43,641,744 (4.3% of the total financial assets)). There also would
be an equal and opposite effect on the valuation of the PPNs
(3.18%) (2020: (4.3%)).
The financial liabilities at fair value through profit or loss
consist of the PPNs. The PPNs are valued using a model based on the
fair value of the underlying assets and liabilities. The amortised
cost of the BCF Facility, cash and cash equivalents, receivables
and payables included in the underlying assets and liabilities
equate to their fair value due to the floating interest rates and
short-term nature of the balances. If the value of the underlying
assets or liabilities changes then there would be an equal and
opposite effect on the valuation of the PPNs. The BCM LLC
repurchase agreement is also valued in the same manner as the BCF
Facility.
Financial instruments and associated risks
The Lux Subsidiary holds one investment in BCF in the form of
PPNs. The PPNs are the main driver of the Lux Subsidiary's
performance and consequently that of the Company. The performance
of the PPNs is driven solely by the underlying portfolio of BCF and
therefore consideration of the risks to which BCF is exposed to
have also been made.
Market risk
Market risk is the current or prospective risk to earnings or
capital of BCF arising from changes in interest rates, foreign
exchange rates, commodity prices or equity prices. Market risk
embodies the potential for both losses and gains.
Market price risk arises mainly from uncertainty about future
prices of financial instruments held. It represents the potential
loss BCF might suffer through holding market positions in the face
of price movements caused by factors specific to the individual
investment or factors affecting all instruments traded in the
market. In addition, local, regional or global events may have a
significant impact on BCF and the price of its investments.
As all of the financial instruments are carried at fair value
through profit or loss, all changes in market conditions will
directly impact the valuation of the PPNs.
(i) Currency risk
Foreign currency risk arises as the value of future
transactions, recognised monetary assets and monetary liabilities
denominated in other currencies may fluctuate due to changes in
foreign exchange rates. Foreign exchange exposure relating to
non-monetary assets and liabilities is considered to be a component
of market price risk, not foreign currency risk.
BCF's financial statements are denominated in Euro, though
investments in the US CLO warehouses, US CLOs, and senior secured
loans and bonds are made and realised in other currencies. Changes
in rates of exchange may have an adverse effect on the value, price
or income of the investments of BCF.
BIL monitors foreign currency risk on a periodic basis.
Typically, derivative contracts serve as components of BCF's asset
hedging program and are utilised primarily to reduce foreign
currency risk to BCF's investments. Foreign currency risk on
non-base currency loans and bonds is minimised by the leveraged
structure of BCF and by the use of the multi-currency BCF Facility
to draw down funds. Non-base GBP and USD investments are funded by
use of the corresponding currency leverage of the BCF Facility
which creates a matching of asset and liability currency risk and
minimising the impact of fluctuations in exchange rates. Rolling
currency forwards are used to manage the foreign currency exposure
of the preference shares of the US CLO warehouses, the CLO Income
Notes of the Indirect CLO Subsidiaries, Dorchester Park CLO DAC and
the Non-Consolidated US CLOs denominated in foreign currencies. The
market value of these USD positions is hedged by offsetting USD
forward notional amounts to ensure BCF is fully hedged.
The following table sets out BCF's total exposure to foreign
currency risk and the net exposure to foreign currencies of the
monetary assets and liabilities as at 31 December 2021 and 31
December 2020:
31 December 2021 British Pound United States Dollars
EUR EUR
------------- ---------------------
Investments in senior secured
loans and bonds 29,171,010 1,357,999
------------- ---------------------
Investments in CLO Income
Notes - 65,384,263
------------- ---------------------
Investment in BGCM DAC - 391,200,403
------------- ---------------------
BCF Facility (26,315,478) (6,418,513)
------------- ---------------------
Cash and cash equivalents 927,334 256,635
------------- ---------------------
Other assets and liabilities (4,472,153) 18,726,134
------------- ---------------------
Net position (689,287) 470,506,921
------------- ---------------------
Notional amount of currency
forwards - (465,769,847)
------------- ---------------------
Net exposure (689,287) 4,737,074
------------- ---------------------
Sensitivity 10% (68,929) 473,707
------------- ---------------------
31 December 2020 British Pound United States Dollars
EUR EUR
------------- ---------------------
Investments in senior secured
loans and bonds 1,969,655 -
------------- ---------------------
Investments in CLO Income
Notes - 101,013,068
------------- ---------------------
Investment in BGCM DAC - 339,404,431
------------- ---------------------
BCF Facility (4,291,104) (1,262,242)
------------- ---------------------
Cash and cash equivalents 3,267,348 48,403
------------- ---------------------
Other assets and liabilities (1,967,691) 15,423,445
------------- ---------------------
Net position (1,021,792) 454,627,105
------------- ---------------------
Notional amount of currency
forwards - (438,189,910)
------------- ---------------------
Net exposure (1,021,792) 16,437,195
------------- ---------------------
Sensitivity 10% (102,179) 1,643,720
------------- ---------------------
Sensitivity analysis - BCF
At 31 December 2021 and 2020, had the Euro strengthened by 10%
(2020: 10%) in relation to all currencies, with all other variables
held constant, the net asset / liability exposure would have
increased by the amounts shown above for BCF. There would be no
impact on the total comprehensive income of BCF because the fair
value movement on financial liabilities would move in the opposite
direction and cancel the effect of the foreign exchange
movement.
A 10% weakening of the base currency, against GBP and US Dollar,
would have resulted in an equal but opposite effect than that on
the tables above, on the basis that all other variables remain
constant. These calculations are based on historical data. Future
currency movements and correlations between holdings could vary
significantly from those experienced in the past.
(ii) Interest rate risk
Interest rate risk arises from the effects of fluctuations in
the prevailing levels of market interest rates on the fair value of
financial assets and liabilities and future cash flow.
The PPNs issued by BCF are limited recourse obligations and are
valued based on the fair value of the underlying assets and
liabilities. As the interest attached to the PPNs is based on the
income earned by BCF, any fluctuations in the prevailing level of
market interest rates that negatively affect the fair value of the
underlying financial assets will result in an offsetting decrease
in the fair value of the PPNs.
The interest rate risk associated with cash and cash equivalents
is deemed to be insignificant due to negligible interest rates and
no expected movement.
The following table details BCF's exposure to interest rate risk
as at 31 December 2021. It includes the carrying value of BCF's
assets and liabilities at fair values, categorised by the type of
interest rate attached to the assets and liabilities, whether it be
floating rate, fixed or non-interest bearing:
31 December 2021 Floating Fixed rate Non-interest Total
rate bearing
EUR EUR EUR EUR
--------------- ---------- ------------- ---------------
Financial assets measured
at fair value through profit
or loss:
--------------- ---------- ------------- ---------------
- Investments in senior
secured loans and bonds 460,964,746 68,281,460 - 529,246,206
--------------- ---------- ------------- ---------------
- Investments in CLO Income
Notes 508,931,719 - - 508,931,719
--------------- ---------- ------------- ---------------
- Investment in BGCM DAC 391,200,403 - - 391,200,403
--------------- ---------- ------------- ---------------
Receivable for investments
sold - - 1,002,083,571 1,002,083,571
--------------- ---------- ------------- ---------------
Other receivables - - 34,873,626 34,873,626
--------------- ---------- ------------- ---------------
Cash and cash equivalents 144,288,470 - - 144,288,470
--------------- ---------- ------------- ---------------
Total assets 1,505,385,338 68,281,460 1,036,957,197 2,610,623,995
--------------- ---------- ------------- ---------------
Financial liabilities measured
at fair value through profit
or loss:
--------------- ---------- ------------- ---------------
- PPNs (1,233,581,335) - - (1,233,581,335)
--------------- ---------- ------------- ---------------
- Derivative financial
liabilities (33,536,518) (33,536,518)
--------------- ---------- ------------- ---------------
BCF Facility (449,213,745) - - (449,213,745)
--------------- ---------- ------------- ---------------
Payable for investments
purchased - - (889,975,427) (889,975,427)
--------------- ---------- ------------- ---------------
Other payables and accrued
expenses - - (4,309,810) (4,309,810)
--------------- ---------- ------------- ---------------
Total liabilities (1,682,795,080) - (927,821,755) (2,610,616,835)
--------------- ---------- ------------- ---------------
Total interest sensitivity
gap (177,409,742) 68,281,460
--------------- ---------- ------------- ---------------
The following table details BCF's exposure to interest rate risk
as at 31 December 2020. It includes the carrying value of BCF's
assets and liabilities at fair values, categorised by the type of
interest rate attached to the assets and liabilities, whether it be
floating rate, fixed or non-interest bearing:
31 December 2020 Floating Fixed rate Non-interest Total
rate bearing
EUR EUR EUR EUR
--------------- ---------- ------------- ---------------
Financial assets measured
at fair value through profit
or loss:
--------------- ---------- ------------- ---------------
- Investments in senior
secured loans and bonds 130,988,193 4,988,162 - 135,976,355
--------------- ---------- ------------- ---------------
- Investments in CLO Income
Notes 520,436,700 - - 520,436,700
--------------- ---------- ------------- ---------------
- Investment in BGCM DAC 339,404,431 - - 339,404,431
--------------- ---------- ------------- ---------------
- Derivative financial
assets 11,400,424 - - 11,400,424
--------------- ---------- ------------- ---------------
Receivable for investments
sold - - 349,344,373 349,344,373
--------------- ---------- ------------- ---------------
Other receivables - - 32,837,068 32,837,068
--------------- ---------- ------------- ---------------
Cash and cash equivalents 102,502,515 - - 102,502,515
--------------- ---------- ------------- ---------------
Total assets 1,104,732,263 4,988,162 382,181,441 1,491,901,866
--------------- ---------- ------------- ---------------
Financial liabilities measured
at fair value through profit
or loss:
--------------- ---------- ------------- ---------------
- PPNs (1,092,553,639) - - (1,092,553,639)
--------------- ---------- ------------- ---------------
BCF Facility (103,633,100) - - (103,633,100)
--------------- ---------- ------------- ---------------
Payable for investments
purchased - - (292,363,103) (292,363,103)
--------------- ---------- ------------- ---------------
Other payables and accrued
expenses - - (3,345,764) (3,345,764)
--------------- ---------- ------------- ---------------
Total liabilities (1,196,186,739) - (295,708,867) (1,491,895,606)
--------------- ---------- ------------- ---------------
Total interest sensitivity
gap (91,454,476) 4,988,162
--------------- ---------- ------------- ---------------
Sensitivity analysis
At 31 December 2021, had the base interest rates
strengthened/weakened by 2% (2020: 2%) in relation to all holdings
subject to interest with all other variables held constant, the
finance income would increase/decrease by EUR 2,182,566 (2020: EUR
1,729,326 ) which would subsequently impact the amount available
for distribution as finance expense. There would be no impact on
the total comprehensive income of BCF. The interest rate
sensitivity information is a relative estimate of risk and is not
intended to be a precise and accurate number. The calculations are
based on historical data. Future price movements and correlations
between securities could vary significantly from those experienced
in the current financial year.
(iii) Price risk
Price risk is the risk that the value of investments will
fluctuate as a result of changes in market prices (other than those
arising from currency risk and interest rate risk) whether caused
by factors specific to an individual investment, its issuer or all
factors affecting all investments traded in the market.
BCF attempts to mitigate asset pricing risk by using external
pricing and valuation sources and by permitting the collateral
manager, subject to certain requirements, to sell collateral
obligations and reinvest the proceeds. The CLO manager actively
monitors the assets within each CLO to ensure that they do not
breach the collateral quality tests and portfolio profile tests.
Where possible, prices are received from brokers on a monthly
basis. Broker prices for loans are sourced from Markit, a composite
price provider, and broker prices for bonds are sourced from
IDC.
Credit risk
Credit risk is the current or prospective risk to earnings and
capital arising from a counterparty's failure to meet the terms of
any contract with BCF, or otherwise fail to perform as agreed. The
receipt of monies owed will be subject to and dependent on the
counterparty's ability to pay such monies.
BCF is therefore open to risks relating to the creditworthiness
of the counterparty. If the counterparty fails to make any cash
payments required to settle an investment, BCF may lose principal
as well as any anticipated benefit from the transaction.
Credit risk in financial instruments arises from cash and cash
equivalents and investments in debt securities, as well as credit
exposures of transactions with brokers related to transactions
awaiting settlement (i.e. receivable for investment sold and other
receivables).
BIL, through its investment strategy, will endeavor to avoid
losses relating to defaults on the underlying assets. In-house
credit research is used to identify asset allocation opportunities
amongst potential borrowers and industry segments and to take
advantage of episodes of market mis-pricing. Segments and themes
that are likely to be profitable are subjected to rigorous analysis
and risk is allocated to these opportunities consistent with
investment objectives. All transactions involve credit research
analysts with relevant industry sector experience.
The credit analysis performed involves developing a full
understanding of the business and associated risk of the loan or
bond issuer and a full analysis of the financial risk, which leads
to an overall assessment of credit risk. BIL analyses credit
concentration risk based on the counterparty, country and industry
of the financial assets that BCF holds.
At the reporting date, BCF's financial assets exposed to credit
risk are as follows:
31 December 31 December
2021 2020
EUR EUR
------------- -------------
Financial assets measured at fair value
through profit or loss 1,429,378,328 995,817,486
------------- -------------
Derivative financial assets - 11,400,424
------------- -------------
Receivables for investments sold 1,002,083,571 349,344,373
------------- -------------
Other receivables 34,873,626 32,837,068
------------- -------------
Cash at bank 144,288,470 102,502,515
------------- -------------
Total 2,610,623,995 1,491,901,866
------------- -------------
Amounts in the above tables are based on the carrying value of
the financial assets as at the reporting date.
Financial assets measured at fair value through profit or
loss
BCF's investment policy is to invest predominantly in:
(i) a diverse portfolio of senior secured loans (including
broadly syndicated, middle market or other loans);
(ii) CLO Income Notes issued by the Issuer CLOs whose
investments will be focused predominantly in European and US senior
secured loans; and
(iii) US CLO Income Notes (held directly or indirectly) whose
investments are focused predominantly in US senior secured
loans.
Financial assets measured at fair value through profit or loss
(continued)
The investments in senior secured loans and bonds held directly
by BCF had the following credit quality as rated by Moody's:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
The senior secured loans and bonds held directly by BCF are
concentrated in the following industries:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
Financial assets measured at fair value through profit or loss
(continued)
In addition to the senior secured loans and bonds held directly,
BCF invests in CLO Income Notes issued by European and US CLO
Issuers whose investments are focused predominantly in European and
US senior secured loans. Each CLO's investment activities are
restricted by its prospectus and the CLOs have narrow and
well-defined objectives to provide investment opportunities to
investors. In order to avoid excessive concentration of risk, the
policies and procedures of each CLO include specific guidelines to
focus on maintaining a diversified portfolio. As CLO Income
Noteholder in the CLOs, BCF is exposed to the credit risk on the
underlying senior secured loans and bonds held by the CLOs. In
addition, the CLO Income Notes are limited recourse obligations of
the CLOs which are payable solely out of amounts received by the
CLO in respect of the financial assets held.
The underlying investments in senior secured loans and bonds
recognised as financial assets of BCF's Direct CLO Subsidiaries had
the following credit quality as rated by Moody's:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
The senior secured loans and bonds held by the Direct CLO
Subsidiaries of BCF are concentrated in the following
industries
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
The underlying investments in senior secured loans and bonds
recognised as financial assets of the Indirect CLO Subsidiaries of
BCF had the following credit quality as rated by Moody's:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
The senior secured loans and bonds held by the Indirect CLO
Subsidiaries are concentrated in the following industries:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
During the year, the Parent Company held (directly, and
indirectly through BCM LLC) CLO Income Notes in U.S. CLOs which are
not consolidated as subsidiaries. Accordingly, the Parent Company
is exposed to the credit risk on the underlying U.S. senior secured
loans and bonds held by such U.S. CLOs. In addition, the CLO Income
Notes are limited recourse obligations of the U.S. CLOs which are
payable solely out of amounts received by the U.S. CLO in respect
of the financial assets held.
The underlying investments in senior secured loans and bonds
recognised as financial assets of the U.S. CLOs (whose Income Notes
are held directly and indirectly by the Parent Company) had the
following credit quality as rated by Moody's:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
The underlying financial assets of the US CLOs ( whose Income
Notes are held directly and indirectly by BCF) ) exposed to credit
risk were concentrated in the following industries:
[Graphs and charts are included in the published Annual Report
and Audited Financial Statements which is available on the
Company's website at http://blackstone.com/bglf ]
Liquidity risk
Liquidity is the risk that BCF may not be able to meet its
financial obligations as they fall due. The ability of BCF to meet
its obligations is dependent on the receipt of interest and
principal from the underlying collateral portfolios. Obligations
may arise from: financial liabilities at fair value, payable for
investments purchased, BCF Facility, interest payable on CLO Income
Notes, derivative financial liabilities, other payables and accrued
expenses.
At the reporting date, the financial obligations exposed to
liquidity risk are as follows:
Financial liabilities measured at fair value through profit or
loss
Financial liabilities at fair value comprise PPNs issued by
BCF.
All PPNs issued are limited recourse. The recourse of the
noteholders, which includes BGLF through the Lux Subsidiary, is
limited to the proceeds available to unsecured creditors at such
time from the debt obligations, CLO Income Notes and other
obligations which comply with the investment policy. Therefore,
from the perspective of BCF, the associated liquidity risk of the
PPNs is reduced.
13 Segmental reporting
As required by IFRS 8 Operating Segments, the information
provided to the Board, who are the chief operating
decision--makers, can be classified into one segment for the years
ended 31 December 2021 and 31 December 2020. The only share class
in issue during the years ended 31 December 2021 and 31 December
2020 is the Euro Ordinary share class. For the years ended 31
December 2021 and 31 December 2020, the Company's primary exposure
was to the Lux Subsidiary in Europe. The Lux Subsidiary's primary
exposure is to BCF, an Irish entity. BCF's primary exposure is to
the US and Europe.
14 Basic and diluted earnings per Share
As at As at
31 December 31 December
2021 2020
EUR EUR
------------ ------------
Total comprehensive income for the
year 62,810,748 33,420,657
------------ ------------
Weighted average number of shares
during the year 470,866,902 478,307,769
------------ ------------
Basic and diluted earnings per Ordinary
Share 0.1334 0.0699
------------ ------------
15 Net asset value per Ordinary Share
As at As at
31 December 2021 31 December 2020
EUR EUR
----------------- -----------------
IFRS Net asset value 421,999,577 408,205,175
----------------- -----------------
Number of Ordinary Shares at year
end 460,984,702 477,023,331
----------------- -----------------
IFRS Net asset value per Ordinary
Share 0.9154 0.8557
----------------- -----------------
16 Reconciliation of Published NAV to IFRS NAV per the financial statements
As at As at
31 December 2021 31 December 2020
NAV NAV per share NAV NAV per share
------------- ------------- ------------- -------------
EUR EUR EUR EUR
------------- ------------- ------------- -------------
Published NAV attributable
to Shareholders 433,632,455 0.9407 402,369,392 0.8435
------------- ------------- ------------- -------------
Adjustment - valuation (11,632,878) (0.0253) 5,835,783 0.0122
------------- ------------- ------------- -------------
IFRS NAV 421,999,577 0.9154 408,205,175 0.8557
------------- ------------- ------------- -------------
As noted above, there can be a difference between the Published
NAV and the IFRS NAV per the financial statements, mainly because
of the different bases of valuation. The above table reconciles the
Published NAV to the IFRS NAV per the financial statements.
17 Reconciliation of liabilities arising from financing activities
As at As at
31 December 2021 31 December 2020
EUR EUR
----------------- -----------------
Opening balance 869,988 534,660
----------------- -----------------
Increase in intercompany loan 376,261 335,328
----------------- -----------------
Closing balance 1,246,249 869,988
----------------- -----------------
18 Dividends
The Company declared and paid the following dividends on
Ordinary Shares during the year ended 31 December 2021.
Period in respect Date Declared Ex-dividend Payment Amount per Amount paid
of Date Date Ordinary
Share
EUR EUR
-------------- ------------ ------------ ---------- -----------
1 Oct 2020 to 31
Dec 2020 21 Jan 2021 4 Feb 2021 5 Mar 2021 0.0250 11,923,083
-------------- ------------ ------------ ---------- -----------
1 Jan 2021 to 31 04 June
Mar 2021 23 Apr 2021 6 May 2021 2021 0.0175 8,345,721
-------------- ------------ ------------ ---------- -----------
1 Apr 2021 to 30 05 Aug
Jun 2021 21 Jul 2021 2021 03 Sep 2021 0.0175 8,202,374
-------------- ------------ ------------ ---------- -----------
1 Jul 2021 to 30 28 Oct
Sept 2021 21 Oct 2021 2021 26 Nov 2021 0.0175 8,124,076
-------------- ------------ ------------ ---------- -----------
Total 36,595,254
---------- -----------
For the year ended 31 December 2021
The Company declared and paid the following dividends on
Ordinary Shares during the year ended 31 December 2020:
Period in respect Date Declared Ex-dividend Payment Amount per Amount paid
of Date Date Ordinary
Share
EUR EUR
-------------- ------------ ------------ ---------- -----------
1 Oct 2019 to 31 30 Jan
Dec 2020 21 Jan 2020 2020 28 Feb 2020 0.0250 12,013,045
-------------- ------------ ------------ ---------- -----------
1 Jan 2020 to 31 30 Apr
Mar 2020 23 Apr 2020 2020 29 May 2020 0.0150 7,207,827
-------------- ------------ ------------ ---------- -----------
1 Apr 2020 to 30 30 Jul
Jun 2020 21 Jul 2020 2020 28 Aug 2020 0.0150 7,205,127
-------------- ------------ ------------ ---------- -----------
1 Jul 2020 to 30 29 Oct
Sept 2020 21 Oct 2020 2020 27 Nov 2020 0.0150 7,176,725
-------------- ------------ ------------ ---------- -----------
Total 33,602,724
---------- -----------
19 Related party transactions
All transactions between related parties were conducted on terms
equivalent to those prevailing in an arm's length transaction. In
accordance with IAS 24 "Related Party Disclosures", the related
parties and related party transactions during the year
comprised:
Transactions with entities with significant influence
As at 31 December 2021, Blackstone Asia Treasury Pte held
43,000,000 Ordinary Shares in the Company (31 December 2020:
43,000,000).
Transactions with key management personnel
The Directors are the key management personnel as they are the
persons who have the authority and responsibility for planning,
directing and controlling the activities of the Company. The
Directors are entitled to remuneration for their services. Refer to
Note 4 for further detail.
Transactions with other related parties
At 31 December 2021, current employees of the Portfolio Adviser
and its affiliates, and accounts managed or
advised by them, hold 24,875 Ordinary Shares (31 December 2020:
24,875) which represents 0.005% (31
December 2020: 0.005%) of the issued shares of the Company.
The Company has exposure to the CLOs originated by BCF, through
its investment in the Lux Subsidiary. BIL is also appointed as a
service support provider to BCF and as the collateral manager to
the Direct CLO Subsidiaries. BLCS has been appointed as the
collateral manager to BCM LLC, Dorchester Park CLO Designated
Activity Company and the Indirect CLO Subsidiaries.
Transactions with Subsidiaries
The Company held 267,088,098 CSWs as at 31 December 2021 (31
December 2020: 284,879,854) following the issuance of 18,608,735
and redemption of 36,400,492 CSWs by the Lux Subsidiary. Refer to
Note 6 for further details.
As at 31 December 2021, the Company held 2,000,000 Class A
shares and 1 Class B share in the Lux Subsidiary with a nominal
value of EUR2,000,001 (31 December 2020: 2,000,000 Class A shares
and 1 Class B share in the Lux Subsidiary with a nominal value of
EUR2,000,001).
As at 31 December 2021, the Company held an intercompany loan
payable to the Lux Subsidiary amounting to EUR1,246,249 (31
December 2020: EUR869,988).
20 Controlling party
In the Directors' opinion, the Company has no ultimate
controlling party.
21 Events after the reporting period
The Board has evaluated subsequent events for the Company
through to 29 April 2022, the date the financial statements are
available to be issued, and, other than those listed below,
concluded that there are no material events that require disclosure
or adjustment to the financial statements.
Dividends
On 24 January 2022, the Board declared a dividend of EUR0.0275
per Ordinary Share in respect of the period from 1 October 2021 to
31 December 2021 with an ex-dividend date of 3 February 2022. A
total payment of EUR12,658,929 was processed on 4 March 2022.
The Board also confirmed that it would again be targeting an
annual dividend of between EUR0.07 and EUR0.08 per ordinary share
for 2022, to consist of quarterly payments of EUR0.0175 per
ordinary share for the first three quarters and a final quarter
payment of a variable amount to be determined at that time.
On 25 April 2022, the Board declared a dividend of EUR0.0175 per
Ordinary Share in respect of the period from 1 January 2022 to 31
March 2022 with an ex-dividend date of 5 May 2022. The dividend
will be paid on 9 June 2022.
Repurchase of Ordinary Shares
During the period from 1 January 2022 to 27 April 2022, the
Company repurchased, under the 2021 AGM authority, 1,160,000 of its
Ordinary Shares of no par value at a total cost of EUR1,281,400
(excluding fees and commissions).
Ukraine Conflict
As detailed in the Chair's Statement above, the Ukraine conflict
has adversely impacted the economy and has contributed to
volatility in financial markets.
The Portfolio Adviser has reviewed the underlying portfolio of
companies that the Company is exposed to and identified a very
small number with exposure to Ukrainian or Russian revenue which
might be impacted by the conflict or associated sanctions.
The Board considered the Ukraine conflict to be a non-adjusting
event and, therefore, no further adjustments were necessary to
these financial statements.
Company Information
Directors Registered Office
Ms Charlotte Valeur (Chair) IFC 1
Mr Gary Clark The Esplanade
Ms Heather MacCallum St Helier
Mr Steven Wilderspin Jersey
Mr Mark Moffat JE1 4BP, Channel Islands
All c/o the Company's registered
office
---------------------------------
Portfolio Adviser Registrar
---------------------------------
Blackstone Ireland Limited Link Asset Services (Jersey)
(formerly known as Blackstone Limited
/ GSO Debt Funds Management 12 Castle Street
Europe Limited) St Helier
30 Herbert Street Jersey, JE2 3RT, Channel
2 (nd) Floor Islands
Dublin 2, Ireland
---------------------------------
Administrator / Company Secretary Auditor
/ Custodian / Depositary
---------------------------------
BNP Paribas Securities Services Deloitte LLP
S.C.A. PO Box 403, Gaspé House
IFC 1 66-72 Esplanade
The Esplanade St Helier
St Helier JE4 8WA
Jersey Channel Islands
JE1 4BP, Channel Islands
---------------------------------
Legal Adviser to the Company Legal Adviser to the Company
(as to Jersey Law) (as to English Law)
---------------------------------
Carey Olsen Herbert Smith Freehills LLP
47 Esplanade Exchange House
St Helier Primrose Street
Jersey London
JE1 0BD, Channel Islands EC2A 2EG
United Kingdom
---------------------------------
Joint Broker Joint Broker
---------------------------------
Nplus1 Singer Advisory LLP Winterflood Securities Limited
1 Bartholomew Lane The Atrium Building
London, EC2N 2AX , United Cannon Bridge House, 25 Dowgate
Kingdom Hill
London, EC4R 2GA, United
Kingdom
---------------------------------
Glossary
Glossary
AGM Glossary Annual General Meeting
-----------------------------------------------
AIC the Association of Investment Companies,
of which the Company is a member
-----------------------------------------------
AIC Code AIC Code of Corporate Governance 2019
-----------------------------------------------
APMs Alternative Performance Measures
ARRC Alternative Reference Rates Committee
-----------------------------------------------
Articles the Articles of Incorporation of the
Company
-----------------------------------------------
BCF Blackstone Corporate Funding Designated
Activity Company (formerly known as
Blackstone / GSO Corporate Funding Designated
Activity Company)
-----------------------------------------------
BCF Facility BCF entered into a facility agreement
dated 1 June 2017, as amended between
(1) BCF (as borrower), (2) Citibank
Europe plc, UK Branch (as administration
agent), (3) Bank of America N.A. London
Branch (as an initial lender), (4) BNP
Paribas (as an initial lender), (5)
Deutsche Bank AG, London Branch (as
initial lender), (6) Citibank N.A. London
Branch (as account bank, custodian and
trustee) and (7) Virtus Group LP (as
collateral administrator)
-----------------------------------------------
BCM LLC Blackstone CLO Management LLC (formerly
known as Blackstone / GSO CLO Management
LLC)
-----------------------------------------------
BGCM DAC BGCM Designated Activity Company
-----------------------------------------------
BGLC Ticker for the Company's C Share Quote
-----------------------------------------------
BGLF or the Company Blackstone Loan Financing Limited (formerly
known as Blackstone / GSO Loan Financing
Limited)
-----------------------------------------------
BGLP Ticker for the Company's Sterling Quote
-----------------------------------------------
BIL or the Portfolio Blackstone Ireland Limited (formerly
Adviser known as Blackstone / GSO Debt Funds
Management Europe Limited)
-----------------------------------------------
BLCS or the Portfolio Blackstone Liquid Credit Strategies
Manager or the Rollover LLC (formerly known as GSO / Blackstone
Portfolio Manager Debt Funds Management LLC)
-----------------------------------------------
Board the Board of Directors of the Company
-----------------------------------------------
BWIC Bids Wanted In Competition
-----------------------------------------------
BX Credit Blackstone Alternative Credit Advisors
LP or Blackstone Credit (formerly known
as GSO Capital Partners LP)
-----------------------------------------------
CSWs Cash Settlement Warrants
-----------------------------------------------
CLO Collateralised Loan Obligation
-----------------------------------------------
DTC Depositary Trust Company
-----------------------------------------------
DTR Disclosure Guidance and Transparency
Rules
-----------------------------------------------
Discount / Premium calculated as the NAV per share as at
a particular date less BGLF's closing
share price on the London Stock Exchange,
divided by the NAV per share as at that
date
-----------------------------------------------
Dividend yield calculated as the last four quarterly
dividends declared divided by the share
price as at the relevant date
-----------------------------------------------
ECB European Central Bank
-----------------------------------------------
ESG Environmental, social and governance
-----------------------------------------------
EU European Union
-----------------------------------------------
FAFVTPL Financial assets at fair value through
profit or loss
-----------------------------------------------
FCA Financial Conduct Authority (United
Kingdom)
-----------------------------------------------
Fed Federal Reserve
-----------------------------------------------
FRC Financial Reporting Council (United
Kingdom)
-----------------------------------------------
FVTPL Fair value through profit or loss
-----------------------------------------------
FVTOCI Fair value through other comprehensive
income
-----------------------------------------------
GFC Global Financial Crisis
-----------------------------------------------
IDC International Data Corporation
-----------------------------------------------
IFRS International Financial Reporting Standards
-----------------------------------------------
IFRS 10 IFRS 10 Consolidated Financial Statements
-----------------------------------------------
IFRS 13 IFRS 13 Fair Value Measurement
-----------------------------------------------
IFRS NAV Gross assets less liabilities (including
accrued but unpaid fees) determined
in accordance with IFRS as adopted by
the EU
-----------------------------------------------
IMF International Monetary Fund
IRR Internal Rate of Return
-----------------------------------------------
LCD S&P Global Market Intelligence's Leveraged
Commentary & Data provides in-depth
coverage of the leveraged loan market
through real-time news, analysis, commentary,
and proprietary loan data
-----------------------------------------------
LIBOR London Inter-Bank Offered Rate
Loan Warehouse A special purpose vehicle incorporated
for the purposes of warehousing US and/or
European floating rate senior secured
loans and bonds
-----------------------------------------------
LSE London Stock Exchange
-----------------------------------------------
LTM Last twelve months
-----------------------------------------------
Lux Subsidiary Blackstone / GSO Loan Financing (Luxembourg)
S.à r.l.
-----------------------------------------------
MoM Month-over-month
-----------------------------------------------
NAV Net asset value
-----------------------------------------------
NAV total return per Calculated as the increase / decrease
Ordinary share in the NAV per Ordinary share plus the
total dividends paid per Ordinary share
during the period, with such dividends
paid being re-invested at NAV, as a
percentage of the NAV per Ordinary share
-----------------------------------------------
NIM Net interest margin
-----------------------------------------------
OC Overcollateralization
-----------------------------------------------
OCI Other Comprehensive Income
-----------------------------------------------
PMIs Purchasing Managers' Indices
-----------------------------------------------
PPNs Profit Participating Notes
-----------------------------------------------
Published NAV Gross assets less liabilities (including
accrued but unpaid fees) determined
in accordance with the section entitled
"Net Asset Value" in Part I of the Company's
Prospectus and published on a monthly
basis
-----------------------------------------------
Return Calculated as the increase /decrease
in the NAV per Euro Ordinary share plus
the total dividends paid per Euro Ordinary
share, with such dividends paid being
re-invested at NAV, as a percentage
of the NAV per Euro Ordinary share.
LTM return is calculated over the period
January 2021 to December 2021.
-----------------------------------------------
Rollover Assets The assets attributable to the Carador
Income Fund plc Rollover Shares - a
pool of CLO assets from Carador Income
Fund plc
-----------------------------------------------
Rollover Offer As announced by the Board on 28 August
2018, a rollover proposal to offer newly
issued C Shares to electing shareholders
of Carador Income Fund plc, in consideration
for the transfer of a pool of CLO assets
from Carador Income Fund plc to the
Company
-----------------------------------------------
RP Reinvestment period
-----------------------------------------------
SFS Specialist Fund Segment
SOFR Secured Overnight Financing Rate
-----------------------------------------------
UK Code UK Corporate Governance Code 2018
-----------------------------------------------
USD United States Dollar
-----------------------------------------------
US MOA United States Majority Owned Affiliate
- Blackstone / GSO US Corporate Funding
Limited
-----------------------------------------------
Underlying Company A company or entity to which the Company
has a direct or indirect exposure for
the purpose of achieving its investment
objective, which is established to,
among other things, directly or indirectly,
purchase, hold and/or provide funding
for the purchase of CLO Securities
-----------------------------------------------
WA Weighted Average
WACC Weighted Average Cost of Capital
-----------------------------------------------
WAP Weighted Average Asset Price
-----------------------------------------------
WARF Weighted Average Rating Factor
-----------------------------------------------
WAS Weighted Average Spread
-----------------------------------------------
(1) Refer to the Glossary for an explanation of the terms used
above and elsewhere within this report
(2) Bloomberg closing price at period end
(3) Past performance is not necessarily indicative of future
results, and there can be no assurance that the Company will
achieve comparable results, will meet its target returns, achieve
its investment objectives, or be able to implement its investment
strategy.
(4) Represents the BGLF Euro share price.
(5) Credit Suisse Leveraged Loan Indices, as of 31 December
2021.
(6) Credit Suisse Default Report, as of 31 December 2021.
(7) US Loans default rate forecast from JP Morgan research;
European loan default rate forecast from Credit Suisse
research.
(8) S&P LCD, as of 31 Dec 2021.
(9) Morningstar and S&P ELLI, as of 31 December 2021.
(10) Credit Suisse, as of 31 December 2021.
(11) J.P. Morgan, Deutsche Bank, Morgan Stanley research, as of Q1 2021.
(12) S&P LCD CLO databank, as of 31 December 2021.
(13) Barclays, as of 31 December 2021. Data reflects generic
top-tier manager CLO discount margins from longer reinvestment
period CLOs.
(14) Paragraph data source: Barclays, as of 31 December 2021.
Data reflects median observations. Deal-defined rating exposure,
data as of latest trustee report at month-end, only reinvesting
deals, derived WAC includes bond coupons. Underlying data from
Kanerai, Intex, Markit, Barclays Research.
(15) Morgan Stanley CLO factbook as of December 2021. Market
peer group based on largest ten managers of European CLOs and
largest 15 managers of US CLOs per Creditflux AUM balances as of 31
December 2021.
(16) Sources: Blackstone Credit for BCF calculated on a look
through basis and Credit Suisse for US / European loans. BCF
defaults defined as (a) missed a payment, (b) filed bankruptcy, or
(c) were downgraded by Moody's, Fitch, or S&P to D.
(17) Portfolio data by presented using the gross par amount of
assets held directly and indirectly by BCF. The total par amount of
all assets held within each CLO and CLO warehouses are included on
a fully consolidated basis and added to those assets held directly
by BCF. Subject to change and not a recommendation to buy or sell
any security. Data as of end December 2021 using internal
Blackstone Credit data calculated on 19 January 2022.
(18) JPMorgan CLO FAQs, 16 December 2021.
(19) WACC (weighted average cost of capital) calculation uses
the coupon's spread component for each liability tranche and
includes the full coupon on fixed rate tranches, if any. Original
WACC reflective of pre-pricing, refinanced WACC reflective of
post-pricing. WACC calculation excludes X-notes. Average reduction
is arithmetic.
(20) Based on mark to model modified bid prices as of the most
recent month end prior to the transaction trade date and mark to
market bid prices as of the day prior to transaction date. Modelled
marks are only available on a mid basis, therefore a modified bid
is calculated by incorporating the basis between mark to market bid
and mid prices.
(21) Realised IRRs for redemptions are reflective of
distributions made to BCF to date, with data available in Intex as
of 17 January 2022. IRRs may change as further distributions to
income noteholders are made. For fully sold CLOs, realised IRR
includes sale proceeds returned to BCF. Some IRRs are inclusive of
fee rebates. Sorrento Park data not available in Intex as of the
above date.
(22) Based on the 'current' portfolio and excludes CLOs in the
process of being redeemed. Cash-on-cash distributions presented
based on cost, sourced from Intex.
(23) Data for EUR and US CLOs calculated based on data available
on Intex as of 17 January 2022 for non-redeemed or sold CLOs.
Global CLO NIM is a weighted average measure. Data for US CLO
Warehouses and Directly Held Loans calculated by Blackstone
Credit.
(24) Data for EUR and US CLOs calculated based on data available
on Intex as of 17 January 2022 for non-redeemed or sold CLOs.
Global CLO NIM is a weighted average measure. Data for US CLO
Warehouses and Directly Held Loans calculated by Blackstone
Credit.
(25) Position as a percent of tranche represents the percentage
ownership of Blackstone CLO Management LLC ("BCM"), in which BCF is
invested and owns 100% of Series 2 and Series 3 of BCM through its
PPN investment in BCM. On 1 July 2020, Blackstone/GSO US Corporate
Funding Ltd. ("BGUCF") was merged into the BCM, at which time
86.02%, the BCM's ownership of BGUCF, of each asset was transferred
to BCM. As this resulted in BCM holding less than the majority of
certain CLO positions, BGM has since purchased a small amount of
these CLOs in order to maintain a majority economic position in
each CLO investment.
(26) The vertical retention investment in Tallman Park CLO is
financed by a repurchase agreement. BCF owns 5% of each tranche
(including equity). The total position owned is reflective of the
gross exposure less the financed amount.
(27) Warehouse Investment is calculated as the cumulative trade
date USD proceeds and equivalent EUR proceeds utilised to fund each
warehouse.
(28) The Current Loan Exposure for the CLO Warehouse Investments
is reflected on a trade date basis while the Investment amount is
reflected on a settlement date basis.
(29) US CLO Warehouses may have an additional third party first
loss provider invested alongside of BCF.
(30) As of 31 December 2021. Orwell Park, Stratus 2020-2, Castle
Park, Sorrento Park, and Dorchester Park are all in the process of
being redeemed. The residual valuation as a % of BCF NAV is
reflective of remaining distributions to be made. Once fully
redeemed, valuation will appear as "N/A"
(31) Realised IRRs for redemptions are reflective of
distributions made to BCF to date, with data available in Intex as
of 17 January 2022. IRRs may change as further distributions to
income noteholders are made. For fully sold CLOs, realised IRR
includes sale proceeds returned to BCF. IRRs denoted with an * are
inclusive of fee rebates. Sorrento Park data not available in Intex
as of the above date. Past performance is not necessarily
indicative of future results, and there can be no assurance that a
fund will continue to achieve comparable results or that a fund
will be able to implement its investment strategy or achieve its
investment objectives or avoid substantial losses.
(32) Source: Intex, with data available as of 17 January 2022.
Cumulative distributions for redeemed CLOs include return of
principal; cumulative distributions for fully sold CLOs do not
include sale proceeds.
(33) As of 31 December 2021.
(34) Calculated on BCF's net assets as of 31 December 2021.
(35) Data for EUR and US CLOs calculated based on data available
on Intex as of 17 January 2022 for non-redeemed or sold CLOs.
Global CLO NIM is a weighted average measure. Data for US CLO
Warehouses and Directly Held Loans calculated by Blackstone
Credit.
A copy of the Company's Annual Financial Report will shortly be
available on the Company's website http://blackstone.com/bglf , on
the National Storage Mechanism
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and will
also be posted to shareholders.
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.
NOTE: PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
PERFORMANCE RESULTS AND THERE CAN BE NO ASSURANCE THAT BGLF WILL
ACHIEVE COMPARABLE RESULTS.
IMPORTANT INFORMATION
Any reference herein to future returns or distributions is a
target and not a forecast and there can be no guarantee or
assurance that it will be achieved.
This document has been issued by Blackstone Loan Financing
Limited (the "Company"), and should not be taken as an offer,
invitation or inducement to engage in any investment activity and
is solely for the purpose of providing information about the
Company. This document does not constitute or form part of, and
should not be construed as, any offer for sale or subscription of,
or solicitation of any offer to buy or subscribe for, any share in
the Company or securities in any other entity, in any jurisdiction,
including the United States, Canada, Japan or South Africa nor
shall it, or any part of it, or the fact of its distribution, form
the basis of, or be relied on in connection with, any contract or
investment decision whatsoever, in any jurisdiction.
This document, and the information contained therein, is not for
viewing, release, distribution or publication in or into the United
States, Canada, Japan, South Africa or any other jurisdiction where
applicable laws prohibit its release, distribution or publication,
and will not be made available to any national, resident or citizen
of the United States, Canada, Japan or South Africa. The
distribution of this document in other jurisdictions may be
restricted by law and persons into whose possession this document
comes must inform themselves about, and observe, any such
restrictions. Any failure to comply with the restrictions may
constitute a violation of the federal securities law of the United
States and the laws of other jurisdictions.
The Company has not been and will not be registered under the US
Investment Company Act of 1940, as amended (the "Investment Company
Act") and, as such, holders of the Shares will not be entitled to
the benefits of the Investment Company Act. The shares issued by
the Company (the "Shares") have not been and will not be registered
under the US Securities Act of 1933, as amended (the "Securities
Act"), or with any securities regulatory authority of any state or
other jurisdiction of the United States. The Shares may not be
offered, sold, resold, pledged, taken up, exercised, renounced,
delivered, distributed or otherwise transferred, directly or
indirectly, into or within the United States, or to, or for the
account or benefit of, US persons (as defined in Regulation S under
the Securities Act) except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and in compliance with any applicable securities
laws of any state or other jurisdiction of the United States and in
a manner which would not require the Company to register under the
Investment Company Act. No public offering of the Shares is being
made in the United States.
In addition, the Shares are subject to restrictions on
transferability and resale in certain jurisdictions and may not be
transferred or resold except as permitted under applicable
securities laws and regulations. Investors may be required to bear
the financial risks of their investment in the Shares for an
indefinite period of time. Any failure to comply with these
restrictions may constitute a violation of the securities laws of
any such jurisdictions.
This document may contain forward-looking statements that
represent the Company's opinions, expectations, beliefs,
intentions, estimates or projections. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will" or "should" or,
in each case, their negative or other variations or comparable
terminology. Any statement other than a statement of historical
fact is a forward-looking statement. By their nature,
forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors because they relate to
events and depend on circumstances that will occur in the future
whether or not outside the control of the Company. Actual results
may differ materially from those expressed or implied by any
forward-looking statement and even if the results of the Company
are consistent with such forward-looking statement, those results
may not be indicative of results in subsequent periods. The Company
does not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. Recipients of this document should not
place undue reliance on any forward-looking statement, which speaks
only as of the date of its issuance.
No liability whatsoever (whether in negligence or otherwise)
arising directly or indirectly from the use of this document is
accepted and no representation, warranty or undertaking, express or
implied, is or will be made by the Company, or any of its
directors, officers, employees, advisers, representatives or other
agents ("Agents") for any information or any of the opinions
contained herein or for any errors, omissions or misstatements.
None of the Agents makes or has been authorised to make any
representation or warranties (express or implied) in relation to
the Company or as to the truth, accuracy or completeness of this
document, or any other written or oral statement provided. In
particular, no representation or warranty is given as to the
achievement or reasonableness of, and no reliance should be placed
on any projections, targets, estimates or forecasts contained in
this document and nothing in this document is or should be relied
on as a promise or representation as to the future.
Unless otherwise indicated, the information provided herein is
based on matters as they exist as of the date of preparation and
not as of any future date. Recipients of this document are
encouraged to contact the Company's representatives to discuss the
procedures and methodologies used to make the projections and other
information provided herein.
All investments are subject to risk, including the loss of the
principal amount invested. Past performance is not necessarily
indicative of future results, and there can be no assurance that
BGLF will achieve comparable results, will meet its target returns,
achieve its investment objectives or be able to implement its
investment strategy. Certain countries have been susceptible to
epidemics, most recently COVID-19, which may be designated as
pandemics by world health authorities. The outbreak of such
epidemics, together with any resulting restrictions on travel or
quarantines imposed, has had and will continue to have a negative
impact on the economy and business activity globally (including in
the countries in which the Company invests), and thereby is
expected to adversely affect the performance of the Company's
Investments. Furthermore, the rapid development of epidemics could
preclude prediction as to their ultimate adverse impact on economic
and market conditions, and, as a result, presents material
uncertainty and risk with respect to the Company and the
performance of its Investments. All investments to be held by the
Company involve a substantial degree of risk, including the risk of
total loss. The value of shares and the income from them is not
guaranteed and can fall as well as rise due to stock market and
currency movements. When you sell your investment you may get back
less than you originally invested. You should always seek expert
legal, financial, tax and other professional advice before making
any investment decision.
Blackstone Loan Financing Limited is a self-managed Jersey
registered alternative investment fund, and is regulated by the
Jersey Financial Services Commission as a 'listed fund' under the
Collective Investment Funds (Jersey) Law 1988 (the "Funds Law") and
the Jersey Listed Fund Guide published by the Jersey Financial
Services Commission. The Jersey Financial Services Commission is
protected by the Funds Law against liability arising from the
discharge of its functions thereunder. The Jersey Financial
Services Commission has neither reviewed nor approved the issue of
this document.
This information is provided by RNS, the news service of the
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END
FR BKCBNPBKDPQB
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