TIDMGABI TIDMGABC
RNS Number : 0070T
GCP Asset Backed Income Fund Ltd
15 July 2020
GCP Asset Backed Income Fund Limited
(the "Company" or "GCP Asset Backed")
LEI: 213800FBBZCQMP73A815
Net Asset Value and Investment Update
15 July 2020
GCP Asset Backed, which invests in asset backed loans, announces
that as at 30 June 2020, the unaudited net asset value ("NAV") per
ordinary share of the Company (including current period revenue)
was 100.83 pence.
NAV
The NAV performance for the period is a positive movement of
0.90 pence and a rise of 0.9 per cent.
The Company's investments continued to perform in the period to
30 June 2020, with all principal and interest payments received as
expected(1) , generating an increase in NAV of 0.90 pence per share
after the payment of dividends.
The Board, after due consideration to advice from the
independent Valuation Agent and recommendations from the Investment
Manager, has determined to continue with its prudent approach and
keep in place a number of the discount rate movements that were
made last quarter due to the continued uncertainties associated
with the COVID-19 pandemic.
The Board and the Investment Manager remain confident that the
Company and its subsidiary's (the Group's) diverse portfolio of
assets continues to perform well and continues to offer
shareholders both strong downside protection and an attractive
yield even in current markets.
Portfolio Update
So far this financial year, the Company has received all
expected interest and principal(1) on time and in full, as well as
generating significant fees from early loan repayments. One of the
Company's smallest loans was repaid in full during the quarter,
with the early repayment fee generating a net IRR to the Company of
nearly 40%. The Investment Manager has not received any requests
for forbearance for the upcoming quarter, although one borrower is
expected to continue to rely on its debt service reserve account to
service its quarterly payment (see further details under Community
Facility below).
As described below, there continues to be an impact from
COVID-19 across a number of the Group's borrowers although all have
performed in line with expectations to date and the Investment
Manager is confident that the Group's portfolio remains highly
defensive, by diversity of sector, borrower and through the
customary protections that are afforded to debt providers.
We continue to take a cautious and prudent approach on discount
rates, despite the uninterrupted debt service, as inherent
uncertainty in the medium to long term continues to persist. Our
expectations of the long term returns the Company may generate have
not changed.
The Investment Manager will be holding a webinar on 24 July at
10am to provide more detail on the portfolio. For any investor
interested in joining, please e-mail zoe.french@graviscapital.com
.
(1) As previously reported by the Company the CHP and ROC loan
referred to below remains in default and no payments are expected
on this loan until the anticipated sale completes.
Care Homes - Discount Rate unchanged from 31 March 2020
The Group has lent to four care homes. COVID-19 was detected at
one of the homes during the period. At the period end, the
Investment Manager was not aware of any active cases in either the
residents or staff. The UK Government has announced a programme of
weekly testing for staff and residents and the homes have all had
access to sufficient PPE and staff throughout the period.
The discount rate has been held, as although the homes have
weathered the outbreak well, the Investment Manager believes there
will be a slow down in take up of new care beds over the remainder
of the year. The Investment Manager will continue to monitor the
impact the virus has on new residents, noting that demographics and
the push for newly designed and modern homes will continue to play
into the homes' favour.
Co-living - Discount Rate unchanged from 31 March 2020
The Group has a facility in place with a security package
comprising 9 operational assets, 2 assets in construction and 16
sites in pre-development. The borrower provides a mixture of long
stay and short stay accommodation.
Since the COVID-19 outbreak, the short stay business has been
impacted by UK Government-advised restrictions, whilst the long
stay accommodation remains operational and is expected to benefit
from the easing of lockdown. Due to the refinancing that occurred
on this asset in February, the borrower is currently in a strong
cash position with the ability to weather the impact of the drop in
occupancy.
The borrower has put in place strategies and is looking at
several further means of maximising revenue on its sites. These
include discussions with various planning authorities in relation
to the planning strategy for relevant sites and engaging in a
contract with a citywide health department to provide short stay
accommodation for health workers.
Community Facility - Discount Rate unchanged from 31 March
2020
The Group has provided loans to two community facilities. These
borrowers house a variety of small businesses, including bars, food
outlets, co-working space and studio space.
One facility has been operational since December 2017. This
facility was closed in accordance with Government guidance. Since
the beginning of July, the facility has been slowly opening
non-public areas and is in discussions with tenants about the
opening of public areas.
The Investment Manager continues to remain cautious on this loan
and is working closely with the management, noting that it is
highly unlikely this business will be able to operate in the same
manner as pre COVID-19. The borrower continues to have access to a
debt service reserve account which it is using to make interest
payments.
The second facility recently reached practical completion on the
buildings, with work starting on the fit out and outside spaces.
This facility has significant outdoor space which the Investment
Manager believes will help ensure that it is better able to cope
with the impact of COVID-19. The facility is not due to open until
Spring 2021.
CHP and ROC Engines - Discount Rate increased by 2100 bps
This loan defaulted in March 2019 and remains the only loan to
have defaulted since IPO. The loan has in place a signed sale and
purchase agreement and it was expected that the transaction would
have been completed during the quarter. However, since COVID-19,
gas prices have halved which has put the initial project returns
for the buyers under some strain. The buyers are in the process of
renegotiating the construction and operations contracts to get the
required savings to make the project fundable.
The Investment Manager continues to work with the buyers, but it
has also reached out to several other parties who have expressed an
interest in the equipment. Due to the continued uncertainty around
the timing of a disposal, the Company has decided to increase the
bad debt provision on this asset.
Nurseries - Discount Rate unchanged from 31 March 2020
The Group has lent to five nurseries, four of which are
operational, with one in construction. The nurseries have 320
children registered to attend and also operate significant
waitlists. All four operational nurseries have now re-opened and
are in the process of slowly ramping up operations in accordance
with government guidelines.
The borrower was able to benefit from business interruption
insurance, as well several other government initiatives. The
nursery in construction is now due to open in November, with
construction slowing down because of the difficulties maintaining
social distancing whilst working inside the building.
Waste Facility - Discount Rate unchanged from 31 March 2020
The Group has lent to a waste facility which processes c.130,000
tonnes per annum of commercial, industrial and household waste. The
facility produces a refuse-derived fuel which is supplied to a
large building supply company under a long-term contract for
burning in its cement kilns.
As a result of COVID-19 there was an initial drop in waste
supply to the facility, coupled with the contracted offtaker
turning off its cement kilns.
The borrower responded well to the challenges, keeping the
facility open throughout, finding new supplies of waste and
purchasing a bail and wrap machine to enable the plants offtake to
be stored. As economic activity increases, waste streams have
started to be switched back on and the cement kilns have also been
turned on, meaning the facility is tracking back to full operating
capacity.
Boilers - Discount Rate unchanged from 31 March 2020
The boiler portfolio continues to perform well, though an
increase in late payments was noted in the quarter. However, this
still represents less than 3.5% of total payments due. The
repayments and interest remain well covered and the book continues
to perform strongly.
This loan had been previously revalued upwards due to its strong
performance and the discount rate increase in the last quarter
simply reversed this upwards valuation, taking it back to its par
value. All cover ratios continue to be met and the borrowers'
business remains active. The loan was conservatively financed with
cover ratios being applied generating headroom in the cashflows, as
well as cash sweep mechanics put in place to ensure debt remained
prioritised if the outlook on the loans did start to
deteriorate.
Bridging Loans - Discount Rate unchanged from 31 March 2020
The Group has lent to several parties which provide bridging
loans secured against residential property. The loans are at a low
loan-to-value ratio (less than 65 per cent) and typically have
secondary protection in place, including personal guarantees.
A discount rate movement was added last quarter due to the
slowdown in the housing market because of COVID-19. The book has
continued to perform throughout the period, however, the rate is
being held due to the continued uncertainty that is underpinning
the UK housing market. However, the Company notes that recent
Government initiatives are likely to have a positive impact.
Mezzanine Loans - Discount Rate moved to asset specific
assessment
Last quarter a blanket increase was applied across all mezzanine
loans. This quarter the loans were looked at on an individual
basis, resulting in the increase being removed from several loans
which are performing strongly.
Construction Assets -Discount Rate moved to asset specific
assessment
Last quarter a blanket rate increase was applied on all
construction loans. Three loans exited construction during this
quarter, resulting in the increase being removed from these loans.
We equally assessed all loans on an individual basis and have only
continued to apply the discount rate increase to loans which are
showing a potential or expected construction delay.
Share dealings
Over the quarter, the Company purchased 25,000 of its own shares
at an average price of 78.19 pence, to be held in treasury. The
buybacks were conducted at a significant discount to NAV. One of
the Directors of the Company also purchased shares in the
period.
The Board and Investment Manager note that the Company's shares
continue to trade at a significant discount to NAV and continue to
monitor this closely.
Outlook
The Company has had a very strong first six months of the year
despite the significant impact of the pandemic. The loan book
continues to perform and the dividend remains fully covered. We are
happy that the loan book remains highly defensive and diverse and
performed strongly both prior to the onset of COVID-19 and during
the first wave of the pandemic. The Investment Manager remains
encouraged by the financial position of our borrowers, the steps
each borrower is taking in managing an unprecedented situation and
the support they are receiving from their equity investors.
The defensive nature of the portfolio means significant income
will continue to be generated and distributed as dividends. The
Company is in a robust position with cash on its balance sheet and
it has access to an undrawn GBP50m credit facility, which was
extended to August 2021 post period end. The extension was granted
on the same terms as the previous facility.
We continue to seek out and look for attractive investment
opportunities, both supporting our existing borrowers who are
seeing opportunities as a result of coming through the pandemic in
a position of strength and assessing new transactions which were
historically too tightly priced for the Group's cost of
capital.
For further information, please contact:
Gravis Capital Management Ltd +44 (0)20 3405 8500
David Conlon
Joanne Fisk
Investec Bank plc +44 (0)20 7597 4000
Helen Goldsmith
Denis Flanagan
Neil Brierley
Buchanan/Quill +44 (0)20 7466 5000
Helen Tarbet
Sarah Gibbons-Cook
Henry Wilson
Notes to Editors
GCP Asset Backed is a closed ended investment company traded on
the Main Market of the London Stock Exchange. Its investment
objective is to generate attractive risk-adjusted returns primarily
through regular, growing distributions and modest capital
appreciation over the long term.
The Group seeks to meet its investment objective by making
investments in a diversified portfolio of predominantly UK based
asset back loans which have contracted, predictable medium to long
term cash flows and/or physical assets.
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
MSCFZGMNNDZGGZM
(END) Dow Jones Newswires
July 15, 2020 02:00 ET (06:00 GMT)
Gcp Asset Backed Income (LSE:GABI)
Historical Stock Chart
From Apr 2024 to May 2024
Gcp Asset Backed Income (LSE:GABI)
Historical Stock Chart
From May 2023 to May 2024