TIDMGABI TIDMGABC
RNS Number : 8880N
GCP Asset Backed Income Fund Ltd
26 January 2023
26 January 2023
GCP Asset Backed Income Fund Limited
(the "Company" or "GCP Asset Backed")
LEI: 213800FBBZCQMP73A815
Quarterly Portfolio Update and Dividend Announcement
GCP Asset Backed, which invests in asset backed loans, announces
that, as at 31 December 2022, the unaudited net asset value ("NAV")
per ordinary share of the Company (including current period
revenue) is 94.90 pence per share.
NAV
The NAV performance for the 3-month period to 31 December 2022
is a downward movement of 1.26 pence per share after the payment of
dividends, a decrease of 1.31 per cent.
The negative NAV performance for the period was driven by
further reductions in the valuation of the Co-Living Group Loan due
to a re-assessment of the estimates of the net realisable value of
the underlying assets that remain subject to changes in market
conditions and other factors.
Portfolio Update
Whilst the negative NAV movement over the period is
disappointing, the Investment Manager is pleased to report an
active period for investment with GBP45.2m invested, including
drawdown of a GBP14m loan committed in Q3 2022. Investments were
made in the period in further drawdowns for both new and existing
borrowers in six distinct sectors including football finance,
anaerobic digestion, community facilities, FX margin financing,
residential development and property lending. Investments in the
period have seen further progress in the Company's ability to
opportunistically capture higher yields, with an average 8.9% yield
in the period (8.7% in Q3) against the Company's average portfolio
yield of 8.03% (7.57% in Q3). We believe that this demonstrates the
strength of the opportunity presented to reset the return profile
of the portfolio through re-investment in the current macroeconomic
environment.
Over the quarter, GBP24.1m in repayments were received,
including scheduled amortisation across operational assets and
final repayments on a property bridging position, infrastructure
assets and one of the football finance loans. The weighted average
yield on loans repaid during the quarter was 7.5%.
Inflation mechanics on a number of loans have been triggered by
base rate increases, leading to uplifts in interest rates of up to
75bps on impacted loans. The Investment Manager continues to work
closely with borrowers to ensure that inflation mechanics remain
appropriate for the underlying businesses, but the Investment
Manager is pleased to see these increases flowing through to the
loan book valuation.
Work-out continued on the two problem loans:
- Co-Living Group Loan (1.0% of the Company's portfolio):
Work is continuing to realise value from key assets within the
portfolio.
During the period, the Canary Wharf asset was sold by the
acquisition vehicle, which is a significant milestone in the
recovery process. Work continues with the buyer with the final
settlement of the remaining sales proceeds expected by the end of
H1 2023. Progress is ongoing to resolve outstanding points for the
acquisition vehicle to market the other large operational asset,
Old Oak. The Collective Group's sales process for the flagship US
asset has not produced viable offers to-date .and the cost
estimates to wind up the acquisition vehicle have been revised
upwards. Therefore, in conjunction with the Company's independent
Valuation Agent, it has been deemed prudent to apply a further
write-down to the recovery figure for the assets.
While this is a disappointing result for the Company, the
Investment Manager is confident that the issues with this loan do
not read-across to the rest of the portfolio which is continuing to
perform well.
- Community Facilities (1.5% of the Company's portfolio):
Performance of both sites was positive over the quarter, with
income from Christmas events and the football World Cup driving
additional revenue. As reported in October 2022, one site has moved
to new ownership and the Investment Manager is working closely with
operators on the second site to move the asset into profitability
and agree a revised repayment profile.
In addition, the Investment Manager has added one additional
asset to the watchlist:
- Supported Living Asset (3.0% of the Company's portfolio):
This loan is secured against 15 properties, of which three are
managed by a Registered Provider which was downgraded by the
Regulator for Social Housing in the period and is currently overdue
on some rental payments. These three properties account for 1.5% of
the Company's portfolio and accrued unpaid rent is de minimis. The
Investment Manager is working with the borrower to explore
available options to help ensure recovery of the outstanding
amounts in full. The remaining 12 properties continue to perform in
line with expectations.
Dividends
On 2 November 2022, the Company declared a quarterly dividend in
line with its dividend target for the year of 6.325p in respect of
the period from 1 July 2022 to 30 September 2022 of 1.58125p per
share, which was paid on 9 December 2022.
The Board is pleased to announce a quarterly dividend in respect
of the period from 1 October 2022 to 31 December 2022 of 1.58125
pence per ordinary share (the "Q4 Dividend").
The ordinary shares will go ex-dividend on 2 February 2023 and
will be paid on 3 March 2023 to holders of ordinary shares recorded
on the register as at close of business on 3 February 2023.
Scrip Dividend Suspension
The Board, in its discretion, has determined that the offer of a
scrip dividend will remain suspended for the Q4 Dividend. The
suspension is as a result of the discount between the likely scrip
dividend reference price of the shares and the current net asset
value per share of the Company. The Board will keep the payment of
future scrip dividends under review.
Share Buybacks
In the period, the Company purchased 5,682,459 of its own shares
at an average price of 81.7p, to be held in treasury. The buybacks
have continued post period end, with an additional 2,050,000 shares
purchased as at the date of this announcement. The Company's shares
are currently trading at a discount to the December 2022 quarter
end NAV. The Board and Investment Manager are continuing to work to
try to reduce this discount and have been engaging with
shareholders in the period.
Outlook
Whilst it is disappointing to see a further reduction in the
NAV, the Investment Manager is pleased to report significant
re-investment of the portfolio and efficient use of available
capital. The Investment Manager is continuing to see strong
opportunities for investment with new and existing borrowers at
attractive risk-adjusted rates of return.
The current macroeconomic environment presents both challenges
but also opportunities for alternative lenders and the Investment
Manager remains confident that the portfolio of defensive and
diversified loans mean that the Company is well placed to deliver
against the Company's investment objectives, including regular and
growing distributions.
The Investment Manager will be holding a webinar on Wednesday
1(st) February at 10am to provide more detail on the portfolio. For
any investor interested in joining, please e-mail
zoe.french@graviscapital.com .
For further information, please contact:
Gravis Capital Management Ltd +44 (0)20 3405 8500
Rollo Wright
Philip Kent
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 backed loans which are secured against contracted,
predictable medium to long term cash flows and/or physical
assets.
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END
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