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Volta Finance Limited (AMS:VTA) NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
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Guernsey, 17 November 2008 - Volta Finance Limited (the "Company" or "Volta Finance" or "Volta") has published its October monthly report. The full report is attached to this release and is available on Volta Finance Limited's financial website (www.voltafinance.com).
Gross Asset Value
+---------------------------------------------------------+ | | At 31.10.08 | At 30.09.08 | |-----------------------------+-------------+-------------| | Gross Asset Value (GAV / €) | 89,527,470 | 111,721,711 | |-----------------------------+-------------+-------------| | GAV per share (€) | 2.98 | 3.72 | +---------------------------------------------------------+
As of the end of October 2008, the Gross Asset Value (the "GAV") of Volta Finance Limited (the "Company", "Volta Finance" or "Volta") was €89.5 m or €2.98 per share, a decrease of €0.74 from €3.72 per share at the end of September 2008.
The October mark-to-market variations* of Volta Finance's asset classes have been: -6.6% for ABS investments, -27.4% for CDO investments and -34.8% for Corporate Credit investments.
The significant decrease of the GAV in October is mainly the consequence of the scarcity of buyers relative to sellers for structured credit products as well as the deterioration of the economic situation. As an illustration, the Company's residual tranches of CDOs are priced at 28% of their nominal value as of the end of October.
The recommended dividend of €0.25 per share that will be subject to shareholder vote at the Company's Annual General Assembly on 20 November 2008 should be paid on 3 December 2008 according to the following provisional financial calendar:
20 November 2008: Annual General Meeting 24 November 2008: Ex-dividend date 26 November 2008: Record date 3 December 2008: Dividend payment date
MARKET ENVIRONMENT AND LATEST DEVELOPMENTS
In October, the financial and economic crises continued to extend their reach. Most central banks cut interest rates significantly and are expected to continue doing so. In spite of these monetary actions, economic difficulties have continued to arise and prices of risky assets have continued to spiral downward.
From the end of September to the end of October, the spread of the 5y European iTraxx index (series 10) widened significantly from 129 bps to 153 bps and its Crossover counterpart (5y iTraxx European Crossover index series 10) continued to widen from 586 bps to 777 bps. According to the CSFB Leverage Loan Index, the average price for US liquid first lien loans declined from 82.91% to 71.58%.**
VOLTA FINANCE PORTFOLIO
As regards the Company's Corporate Credit holdings, even if it seems that no significant financial institution is expected to go bankrupt in the coming months following the multiple government interventions, Volta's investments continue to remain at risk of a significant deterioration of the economic cycle that would affect the exposure of these assets to non-financial companies.
As regards Volta's six UK non-conforming residual holdings, the worsening of the economic situation in the UK will almost certainly tend to increase the difficulties of mortgage borrowers, potentially raising default rates. On the other hand, the decisive action of the BoE to cut its base rate twice over a four-week period could be a positive development for these assets.
One particular transaction, Eurosail 06-01, which was arranged by Lehman Brothers, suffers a very high and specific level of risk due to the bankruptcy filing, in October, of the Lehman Brothers' subsidiary that provide swaps for this transaction. At the time of writing this comment, no information about swaps replacement has been provided to us by the servicer. In the current market conditions, such replacement may prove expensive. Given the general economic uncertainty and the thinness of remaining expected cash flows, this additional cost may excess spread proceeds due to Volta's position. Eurosail, which represented 1.31% of the end of September GAV has been valued close to zero. The Investment Manager will continue to monitor the situation and will update the Eurosail 06-01 valuation in accordance to any positive news received.
As regards Volta's positions in residual and mezzanine debt of CDOs, the volatility of Libor and Euribor rates over October will make the payments of these structures more volatile, in addition to the uncertainties related to the economic situation. It is still assumed that, at some point in time, the particularly severe economic situation could have a negative impact on the expected cash flows of these assets. However, at the time of writing, there is still not enough information for having a clear idea about the timing and/or the magnitude of such impact.
Finally, with regard to its currency exposure, as stated in its annual report, and accordingly to the Company's policy, non-Euro investments are hedged into Euro Due to the significant appreciation of the US Dollar over the previous months, the main counterparty of Volta's currency swaps asked for a margin call relative to the hedge contracts. For the first time, on 23 October 2008, the Company posted €730,000 in its main currency swap counterparty's accounts. At the time of writing this comment, the amount posted to this counterparty amounted to €3.85m and the nominal amount of US Dollar sold forward with this counterparty amounted to USD71.4m. Part of the cash of the Company will be kept aside in order for the Company to be able to face margin calls.
In the best interest of its shareholders, the Company will continue to reinvest the cash available without precipitation, taking into account the liquidity risk inherent to its currency hedge positions. As of the end of October the cash position was €27.1m (€0.90 per share), which comprises the amount that has been put aside (€7.5m) following the recommended dividend of €0.25 per share.
In October, Volta's assets have generated the equivalent of €3.6m of cash flows (non-Euro amounts converted into Euro using end-of-month currency cross rates), bringing the total of cash flow generated since the start of the current semi-annual period that begun on the 1 August 2008 to €6.9m, compared to €9.1m for the same 3-month period in 2007.
* "Mark-to-market variation" is calculated as the Dietz-performance of the assets in each bucket, taking into account the MtM of the assets at month-end, payments received from the assets over the period, and assuming that changes in cross currency rates have no impact given that Volta Finance implements a currency hedge on non-Euro assets. Nevertheless, some residual currency effects could impact the aggregate value of the portfolio when aggregating each bucket. ** Index data source: Markit, Bloomberg
(Full monthly report in attachment or on www.voltafinance.com)
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ABOUT VOLTA FINANCE LIMITED
Volta Finance Limited is incorporated in Guernsey under the Companies (Guernsey) Laws, 1994 to 1996 (as amended) and listed on Euronext Amsterdam. Its investment objectives are to preserve capital and to provide a stable stream of income to its shareholders through dividends. For this purpose, it pursues a multi-asset investment strategy targeting various underlying assets. Volta Finance's basic approach to its underlying assets is through vehicles and arrangements that provide leveraged exposure. The exposure to those underlying assets is gained through direct and indirect investment in five principal asset classes: corporate credits, CDOs, ABS, leveraged loans, and infrastructure assets.
Volta Finance has appointed AXA Investment Managers Paris, an investment management company with a division specialised in structured credit, for the investment management of all its assets.
ABOUT AXA INVESTMENT MANAGERS
AXA Investment Managers (AXA IM) is a multi-expert asset management company within the AXA Group, a global leader in financial protection and wealth management. AXA IM is one of the largest European-based asset managers with €550 billion in assets under management as of the end of March 2007. AXA IM employs approximately 2,800 people around the world and operates out of 19 countries.
CONTACTS
Company Secretary Mourant Guernsey Limited volta.finance@mourant.com +44 (0) 1481 715601
Portfolio Administrator Deutsche Bank voltaadmin@list.db.com
For the Investment Manager AXA Investment Managers Paris Julien Laplante julien.laplante@axa-im.com +33 (0) 1 44 45 94 92
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This press release is for information only and does not constitute an invitation or inducement to acquire shares in Volta Finance. Its circulation may be prohibited in certain jurisdictions and no recipient may circulate copies of this document in breach of such limitations or restrictions.
This press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Volta Finance has not registered, and does not intend to register, any portion of any offering of its securities in the United States or to conduct a public offering of any securities in the United States.
***** This document is being distributed by Volta Finance Limited in the United Kingdom only to investment professionals falling within article 19(5) of the Financial Services and Market Act 2000 (Financial Promotion) Order 2005 (the "Order") or high net worth companies and other persons to whom it may lawfully be communicated, falling within article 49(2)(A) to (E) of the Order ("Relevant persons"). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the shares will be engaged only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. Past performance cannot be relied on as a guide to future performance.
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This press release contains statements that are, or may deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "anticipated", "expects", "intends", "is/are expected", "may", "will" or "should". They include the statements regarding the level of the dividend, the current market context and its impact on the long-term return of Volta's investments. By their nature, forward-looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance. Volta Finance's actual results, portfolio composition and performance may differ materially from the impression created by the forward-looking statements. Volta Finance does not undertake any obligation to publicly update or revise forward-looking statements.
Any target information is based on certain assumptions as to future events which may not prove to be realised. Due to the uncertainty surrounding these future events, the targets are not intended to be and should not be regarded as profits or earnings or any other type of forecasts. There can be no assurance that any of these targets will be achieved. In addition, no assurance can be given that the investment objective will be achieved.
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