TIDMGABI TIDMGABC
RNS Number : 9570V
GCP Asset Backed Income Fund Ltd
20 April 2021
GCP Asset Backed Income Fund Limited
(the "Company" or "GCP Asset Backed")
LEI: 213800FBBZCQMP73A815
Net Asset Value and Investment Update
20 April 2021
GCP Asset Backed, which invests in asset backed loans, announces
that, as at 31 March 2021, the unaudited net asset value ("NAV")
per ordinary share of the Company (including current period
revenue) is 102.49 pence.
NAV
The NAV performance for the 3 month period is a positive
movement of 0.31 pence per share after the payment of dividends, a
rise of 0.30 per cent.
The Company's investments continued to perform in the period to
31 March 2021, with all principal and interest payments received as
expected(1) . The performance in this period means that all
expected interest and principal payments have been received in
their entirety since the onset of the COVID-19 pandemic in early
2020.
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 to
discount rate movements to reflect continued uncertainties related
to the COVID-19 pandemic on several loans. However, during the
period a number of the discount rate adjustments have been unwound
or scaled back as a result of the continued strong performance of
the underlying borrower.
(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.
Year end results
The Company's results were published on 23 March 2021 for the
period ending 31 December 2020. The results highlighted the
Company's resilience during a challenging year. Despite the impact
of the pandemic, the Company was able to raise its dividend for the
fifth consecutive year and pay out a special dividend.
The Company announced in its results that it has increased its
target dividend for the current year to 6.30pps(2) .
The results and a link to the analyst presentation can be found
here:
https://www.graviscapital.com/funds/gcp-asset-backed/literature
2 The target dividend set out above is a target only and not a
profit forecast or estimate and there can be no assurance that it
will be met.
Portfolio Update
As described further below, whilst we are maintaining a cautious
and prudent approach on discount rates, the continued performance
of the portfolio has meant we are continuing to unwind several of
the provisions put in place in March 2020. During the period,
provisions across 15 loans were scaled back.
We continue to allocate our loans on a high-level basis into
three categories. In line with previous updates, the portfolio
continues to move towards a lower risk rating with discount rates
being adjusted to reflect this risk reduction:
Impact Commentary % of Portfolio % of Portfolio Movement (as
March 21 December % of portfolio)
20
------------- --------------- --------------- -----------------
No
major
impact
to
the
way
the
business
operates,
with
revenue
and
costs
remaining
in
line
with
previous
quarters.
No
expected
long
term
impact
as
a
result
of
change
in
the
medium
Low term. 56.5% 52.1% 4.4%
------------- --------------- --------------- -----------------
Some
impact
on
how
the
business
operates,
some
increased
costs
or
reduction
in
revenues
Limited
expected
disruption
to
markets
in
the
medium
Medium term. 34.7% 39.1% (4.4%)
------------- --------------- --------------- -----------------
Significant
impact
on
how
the
business
operates,
increases
in
costs
or
reductions
in
revenues
Expected
disruption
to
the
business
model
in
the
medium
High term. 8.8% 8.8% -
------------- --------------- --------------- -----------------
The Investment Manager will be holding a webinar on 29 April
2021 at 10am to provide more detail on the portfolio. For any
investor interested in joining, please e-mail
zoe.french@graviscapital.com .
Sector update
Co-living - Discount Rate unchanged from 31 March 2020
The borrower, which provides a mixture of long stay and short
stay accommodation, has a facility in place with a security package
comprising 10 operational assets, 5 assets in construction and 12
sites in pre-development.
The borrower's long and short stay business has seen resilience,
as well as growth in certain areas, of occupancy levels during the
most recent lockdown. The borrower's strategic review of funding
options to deliver its development sites continues, and the
business recently received funding to complete the acquisition of
two of its most recently identified London assets.
These assets are valued with an LTV of less than 65 per cent.
The Investment Manager continues to closely monitor this loan, but
remains encouraged by the health of the sector, as the Investment
Manager believes this project's occupancy levels continue to
outperform those of the hotel and student accommodation
sectors.
Community Facility - Discount Rate unchanged from 31 March
2020
The Group has provided loans to two community facilities. These
facilities 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 remains impacted by the Government restrictions on working
and hospitality. The site is open to studio members only with the
food kiosk businesses continuing to operate via deliveries and the
co-working space open at a reduced capacity to allow social
distancing. The site has a formalised reopening plan which aligns
with the Government guidance and, at this stage, expects to fully
open by Step 4 of the Government's Roadmap out of lockdown (21 June
at the earliest).
The loan utilised its debt service reserve account last year to
pay interest due. However, the borrower has met the Q1 interest
payment via operational cash flows from the parts of the site that
remain open. Forecasts for the project anticipate that the borrower
will meet all interest payments due this financial year. The
Investment Manager continues to closely monitor this loan but is
encouraged by the impact of the lifting of restrictions and the
borrower's ability to make the period's interest payment.
The second facility recently reached practical completion on the
buildings, with work starting on the fit-out and outside spaces.
The fit-out has been delayed as a result of issues with the order
of steel for the mezzanine floor. The site is now expected to open
at the end of June. The mezzanine floor, will increase the amount
of indoor seating at the site to 108 (with space for c.400 seats
outdoors) and allow greater utilisation of the site during the
winter period.
The site is opening to the public in a limited manner this
month, offering outdoor bars and street food to make use of the
significant outdoor space at the project. The food hall is expected
to open in full in June to coincide with the anticipated lifting of
restrictions on hospitality. The Investment Manager continues to
remain cautious on this loan and is working closely with the
borrower.
CHP and ROC Engines - Discount Rate unchanged from 30 June
2020
This loan defaulted in March 2019 and remains the only loan to
have defaulted since IPO (it represents only 0.4% of net
assets).
We have continued to work on a sale of the asset. As reported
last quarter, the buyer instructed advisers with their suite of due
diligence reporting completed pre-Christmas. The sale of the asset
has been fully documented and is awaiting final credit approval
from the bank's head office which the Investment Manager hopes will
be obtained over the course of this week.
Nurseries - Discount Rate reduced by average of 5bps
The Group has lent to ten nurseries, all of which are now
operational. The group lent against four additional nurseries in
the period.
The borrower group continues to perform and occupancy remains
high with particularly strong ramp-up seen on the recently opened
sites showing demand for the high-quality service provision by the
borrower group. Occupancy is expected to pick up further as
lockdown restrictions ease and more people return to commuting and
office-based working.
Bridging Loans - Discount Rate reduced by average of 7bps
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.
The book has continued to perform throughout the period with
support from government incentives such as the recent extension to
the stamp duty holiday, which has continued to provide confidence
in the housing market. We have reduced the COVID-19 related risk
premium down to 15bps across several assets in this sector. We have
left headroom in even the strongest performing assets to ensure
there remains some prudence as a result of the medium-term economic
uncertainty. However, the Investment Manager continues to remain
confident in the performance of these loans.
Student accommodation - Various rates
The Group has four remaining loans secured against student
accommodation projects. Of these loans, one is operational with the
remaining units under development.
The operational project has performed well and is showing
positive occupancy take-up for September, which has resulted in its
discount rate adjustment being removed. One construction asset is
due to be sold in the summer and another borrower is in discussions
to partially pre-pay half of the outstanding loan through equity,
in advance of scheduled repayments.
The Investment Manager remains confident in the sector and
continues to see strong institutional demand for these assets.
General
Share dealings
Over the quarter, the Company purchased 325,000 of its own
shares at an average price of 90.22 pence, to be held in
treasury.
The Board and Investment Manager note that the Company's shares
continue to trade at a discount to NAV and continue to monitor this
closely.
Dividends
On 26 January 2021, the Company declared a quarterly dividend in
respect of the period from 1 October 2020 to 31 December 2020 of
1.575p per share, which was paid on 5 March 2021.
In respect of the financial year ended 31 December 2020, the
Company has paid quarterly dividends of 6.225p per share and the
special dividend of 0.25p per share, totalling 6.475p per
share.
Outlook
The Investment Manager remains encouraged by the financial
position of our borrowers and hopeful that with the lifting of
COVID restrictions across the UK, our loans will continue to
perform. We continue to see refinancing of loans in the portfolio
coming through and have access to a pipeline of opportunities in
excess of our available 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.
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END
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