TIDMAEFS
RNS Number : 6801P
Alcentra European Fltng Rate Inc Fd
11 October 2019
Alcentra European Floating Rate Income Fund Limited
Market Commentary
The Fund was up +0.67% (gross, estimated) in September, ahead of
both the Credit Suisse Western European Leveraged Loan Index ("CS
WELLI") (hedged to GBP) which returned +0.65%[1] for the month, and
the Credit Suisse Western European Leveraged Loan Index excluding
USD (hedged to GBP) which returned +0.64%[2]for the same
period.
The European Loan market saw strong performance in September on
the back of continued demand from ramping CLOs, as well as
increased demand as a result of some larger than expected loan
repayments (Wind, Refinitiv, M7). While loan issuance was solid at
EUR9.1bn[3], it took longer than expected for the primary market to
reopen after the August break, leading to investors purchasing more
assets in the secondary market and prices increasing c.0.25pts in
the month[4].
The September new issue volume of EUR9.1bn is -25%[5] down on
the strong September of last year, but overall volumes since the
weak Q1 have been decent. This leaves the YTD new issuance volume
at EUR58.0bn, -30%[6] on the same period last year. For the month,
average new issue spreads stood at 407bps, at a price of 99.55.
While this is attractive, there were signs of tightening as the
month progressed, with a number of stronger credits seeing their
deals flex tighter on the back of strong investor demand. October
is expected to remain busy as a number of larger deals are now in
the market, including Merlin Entertainment, and the S&P forward
pipeline is at a healthy EUR8.3bn[7].
The market for new CLO formation also reopened after a quieter
August, with issuance in the month of EUR2.0bn, +25.0% YoY[8]. This
leaves YTD CLO formation at EUR22.2bn, +6.3% on the prior year[9].
The pipeline for further issuance remains robust, aided by the
continued tightening in the cost of AAA liabilities. This should
mean that demand for European Leverage Loans remains strong into
year end.
The S&P default rate for the 12 months ending September
again remained at the record low level of 0.00% seen since
January[10]. We continue to expect a return to a more normalised
1.5% - 2.0% rate in the medium term. This is backed up by the
S&P distress ratio (share of performing issuers trading below
80) which rose marginally to 3.65%[11].
After a strong September, the market feels broadly balanced with
robust issuance expected to be supported by continued strong demand
from new and ramping CLOs. We expect this to continue into year
end, although there does remain some risk of financial market
volatility on the back of concerns around Brexit, global growth
etc. We would expect the European loan market to continue to remain
resilient in the face of these risks, relative to other asset
classes.
Portfolio Manager's Commentary
The top performing name was a Specialist Financial Services
Business that was up +6.93%, after positive headlines around the
company's valuation. The second best performing credit was an
Agricultural Products Company that was up +6.19%, on the back of an
improved outlook and a better buying sentiment.
The worst performing position was a Healthcare Business that was
down -9.55%, after weaker than expected results. The second weakest
credit was a European Retailer that was -5.16% lower on continued
selling pressure after lenders agreed to take control of the
business.
ENDS
For further information please contact:
Alcentra Limited
Simon Perry +44 20 7367 5272
Factsheet
An accompanying factsheet which includes the information above
as well as wider commentary on the investments made by the Fund can
be found on the Fund's website www.aefrif.com.
Background Information
Alcentra European Floating Rate Income Fund Limited, a Guernsey
Authorised Closed-Ended Collective Investment Scheme, regulated by
the Guernsey Financial Services Commission and listed on the Main
Market of the London Stock Exchange invests predominantly in senior
secured loans and senior secured bonds issued by European
corporates and targets returns (net of fees and expenses) of 7% to
10% per annum. The Fund targets a dividend yield of 5.5 pence per
GBP1.00 issue price of the initial offering of shares in the Fund
for the first full year of investment, paid quarterly.
Important Notices
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This report is aimed at existing investors in the fund and has
not been approved by any competent regulatory authority.
The information contained in this document is given as at the
date of its publication (unless otherwise marked) and is based on
past performance. Past performance is not a guide to future
performance and the value of investments and investment value can
go down as well as up. The future performance of the Fund will
depend on numerous factors which are subject to uncertainty.
Including changes in market conditions and interest rates and
exchange rates and in response to other economic, political or
financial developments, investment return and principal value of
your investment will fluctuate, so that when your investment is
sold, the amount you receive could be less than what you originally
invested. Past or current yields are not indicative of future
yields.
This document does not contain any representations, does not
constitute or form part of any solicitation of any offer to sell or
invitation to purchase any securities of the Fund, nor shall it or
any part of it or the fact of its distribution form the basis of or
be relied upon in connection with any contract therefor, and does
not constitute a recommendation regarding the securities of the
Fund. Nothing in this document should be construed as a profit or
dividend forecast.
This document includes statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
include, without limitation, statements typically containing words
such as "believes", "considers", "intends", "expects",
"anticipates", "targets", "estimates", "will", "may", or "should"
and words of similar import. The forward-looking statements are
based on the beliefs, assumptions and expectations of future
performance and market development of Alcentra Limited
("Alcentra"), taking into account information currently available
and made as at the date of this document. These can change as a
result of many possible events or factors, not all of which are
known or within Alcentra's control. If a change occurs, the Fund's
business, financial condition, liquidity and results of operations
may vary materially from those expressed in the forward-looking
statements. By their nature, forward-looking statements involve
known and unknown risks and uncertainties. Forward-looking
statements are not guarantees of future performance. Alcentra
qualifies any and all of the forward-looking statements by these
cautionary factors. Please keep this cautionary note in mind while
reading this document.
An investment in the Fund is suitable only for investors who are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear losses (which
may equal the whole amount invested) that may result from such an
investment. An investment in the Fund should constitute part of a
diversified investment portfolio. Accordingly, typical investors in
the Fund are expected to be sophisticated and/or professional
investors who understand the risks involved in investing in the
Fund.
Alcentra gives no undertaking to provide recipients of this
document with access to any additional information, or to update
this document or any additional information, or to correct any
inaccuracies in it which may become apparent including in relation
to any forward-looking statements. The distribution of this
document shall not be deemed to be any form of commitment on the
part of Alcentra to proceed with any transaction.
This document is issued by Alcentra Limited, which is authorised
and regulated in the United Kingdom by the Financial Conduct
Authority and whose registered address is at 160 Queen Victoria
Street, London, United Kingdom, EC4V 4LA.
BNY Mellon is the corporate brand of The Bank of New York Mellon
Corporation and may also be used as a generic term to reference the
Corporation as a whole or its various subsidiaries generally.
(c) 2019 The Bank of New York Mellon Corporation. All rights
reserved. Trademarks and logos belong to their respective
owners.
[1]Credit Suisse Western European Leveraged Loan Index, All
Denom, hedged to GBP, 30 September 2019
[2]Credit Suisse Western European Leveraged Loan Index, Non USD,
hedged to GBP, 30 September 2019
[3]S&P Global Market Intelligence, LCD Global Interactive
Loan Volume Report, 7 October 2019
[4]Credit Suisse Western European Leveraged Loan Index, All
Denom, hedged to GBP, 30 September 2019
[5]S&P Global Market Intelligence, LCD Global Interactive
Loan Volume Report, 7 October 2019
[6]S&P Global Market Intelligence, LCD Global Interactive
Loan Volume Report, 7 October 2019
[7]S&P Global Market Intelligence, Forward calendar: Autumn
Pipeline, 2 October 2019
[8]S&P Global Market Intelligence, CLO Historical Stats, 1
October 2019
[9]S&P Global Market Intelligence, CLO Historical Stats, 1
October 2019
[10]S&P Default Ratio, 1 October 2019.
[11]S&P Distress Ratio, 1 October 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
PFUBUBDGXGBBGCB
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