TIDMQWIL
RNS Number : 4407N
Queen's Walk Investment Limited
11 June 2010
Queen's Walk Investment Limited
Financial Results Announcement for the
Fourth Quarter and Year Ended 31 March 2010
Queen's Walk Investment Limited reports EUR3.0 million profit for quarter ended 31
March 2010
Queen's Walk Investment Limited (the "Company"), a Guernsey-incorporated
investment company, has reported a net profit of EUR3.0 million, or EUR0.11 per
ordinary share1, for the quarter ended 31 March 2010, compared to a net profit
of EUR0.6 million, or EUR0.02 per ordinary share for the quarter ended 31 December
2009.
Fair value write-ups for the quarter were a net EUR0.1 million, compared to EUR2.4
million of write-downs for the quarter ended 31 December 2009. The Company's net
asset value ("NAV") at quarter end was EUR3.73 per share2 compared to EUR3.69 per
share at the previous quarter end, and EUR3.96 per share as at 31 March 2009.
The investment portfolio generated more cash than forecast in the quarter. Cash
proceeds received from investments of EUR6.3 million in the quarter exceeded the
forecast of EUR4.5 million. The Company realised additional cash proceeds of EUR14.6
million from the sale of the Magellan 2 portfolio and the AAA-rated portion of
the ABS bond portfolio. The cash position was EUR15.7 million as at 31 March
2010.
The Board of Directors of the Company has declared an interim dividend of EUR0.08
per share for the quarter ended 31 March 2010, unchanged from the previous
quarter.
Debt fully repaid; increasing focus on growth through building ABS bond
portfolio
The Company has made substantial progress in its strategy of repaying its
financing facility and increasing exposure to ABS (asset-backed securities). On
6 April 2010, the Company fully repaid its loan facility, which stood at EUR29.5
million as at 31 March 2009. The final repayment, nine months ahead of
schedule, removes all leverage from the balance sheet.
During the quarter, the Company invested EUR6.5 million in purchasing ABS bonds
which accounted for 15.3% of the investment portfolio at the end of the quarter
and 20.4% as at 1 June 2010. The Company will continue its strategy of
purchasing ABS bonds in order to deliver an improved risk/reward profile to
investors.
The elimination of debt repayments combined with active investment of the bonds
will free up additional cash to fund the Company's growth in future quarters.
The Company expects the ABS portfolio to increase as a percentage of overall
assets in coming quarters, and for legacy assets to fall as a proportion of
overall assets. In line with this goal, the Company has sold the Gate 06-1 SME
portfolio since the March 2010 quarter end, raising the pro-forma NAV to EUR3.80
per share.
Tom Chandos, Chairman of Queen's Walk Investment Limited, said: "Completing
repayment of our debt ahead of schedule marks an important milestone for the
Company. It allows the Company to intensify its focus on growth, by investing
more available cash in under-valued ABS bonds."
Fourth Quarter Highlights
· Quarterly dividend of EUR0.08 per share; total paid or declared dividends of
EUR2.45 per share since the IPO.
· ABS bond portfolio comprises 15.3% of investment portfolio across 24 bond
positions.
· Sales of Portuguese mortgage and SME loan portfolios accretive to NAV.
· Fair-value write ups in the UK mortgage and ABS bond portfolios offset
write-downs in SME and European mortgage portfolios.
· Loss adjusted gross cash flow forecast of EUR168.0 million over the remaining
life of the portfolio3.
Conference Call & Further Information
A conference call to review the Company's financial results for the fourth
quarter ended 31 March 2010 will take place at 10:30 AM London time on 11 June
2010. The conference call can be accessed by dialing +44 (0) 20 3037 9221, ten
minutes prior to the scheduled start of the call. Please reference Queen's Walk
Investment Limited. A results presentation will be available on the Queen's
Walk website (www.queenswalkinv.com).
A webcast of the conference call will also be available on a listen-only basis
at www.queenswalkinv.com. Please allow extra time prior to the call to visit the
site and download the necessary software required to listen to the internet
broadcast. A replay of the webcast will be available for three months following
the call.
For further information please contact:
Public Relations: James Wallis +44 (0)20 7920 2329
Investor Relations: Natalie Withers +44 (0)20 7968 7348
About the Company
Queen's Walk Investment Limited is a Guernsey-incorporated investment company
listed on the London Stock Exchange. The Company invests primarily in a
diversified portfolio of subordinated tranches of asset-backed securities,
including the unrated "equity" or "first loss" residual income positions
typically retained by the banks or other financial institutions which have
originated the loan assets that collateralise a securitisation transaction. The
Company makes such investments where its investment manager, Cheyne Capital
Management (UK) LLP ("Cheyne Capital" or the "Investment Manager"), considers
the coupon or cash flows from the investment to be attractive relative to the
credit exposure of the underlying asset collateral.
This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be identified
by the use of forward-looking terminology, including the terms "believes",
"forecasts", "estimates", "anticipates", "expects", "intends", "considers",
"may", "will" or "should". 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. The Company's actual
results and performance may differ materially from the impression created by the
forward-looking statements and should not be relied upon. The Company undertakes
no obligation to publicly update or revise forward-looking statements, except as
may be required by applicable law and regulation (including the Listing Rules).
Financial Highlights
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| | Revenue | Fair | Total | Revenue | Fair | Total |
| | | value | Quarter | | value | Quarter |
| | | gains | ended | | gains | ended |
| | | and | 31 | | and | 31 |
| | | losses | December | | losses | March |
| | | | 2009 | | | 2010 |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Operating | 4,106,756 | | 4,106,756 | 3,747,279 | | 3,747,279 |
| Income | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Gains and | | (2,375,133) | (2,375,133) | | 115,472 | 115,472 |
| losses on fair | | | | | | |
| value through | | | | | | |
| profit or loss | | | | | | |
| financial | | | | | | |
| instruments | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| | 4,106,756 | (2,375,133) | 1,731,623 | 3,747,279 | 115,473 | 3,862,751 |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Operating | (979,731) | | (979,731) | (769,041) | | (769,041) |
| Expenses | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Finance Costs | (119,116) | | (119,116) | (67,217) | | (67,217) |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Net profit / | 3,007,909 | (2,375,133) | 632,776 | 2,911,021 | 115,473 | 3,026,493 |
| (loss) | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Total Assets | | | 120,000,313 | | | 111,336,170 |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Total | | | 21,565,392 | | | 12,006,329 |
| Liabilities | | | | | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| Equity Capital | | | 98,434,921 | | | 99,329,841 |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
| NAV per share | 3.69 | 3.73 |
+-----------------+---------------------------------------+-----------------------------------+
| Shares | 26,644,657 | 26,644,657 |
| Outstanding | | |
+-----------------+-----------+-------------+-------------+-----------+---------+-------------+
Investment Portfolio
A breakdown of the Company's investment portfolio by jurisdiction (by reference
to underlying asset originator) is set out below. The ABS bonds are included in
the charts and are also detailed in the next section. Percentages for each
asset class are in relation to the value of the Company's investment portfolio
excluding cash and hedges.
+--------------------+----------------------------+
| Queen's Walk Portfolio Breakdown by |
| Jurisdiction as at 31 December 2009 |
| |
+-------------------------------------------------+
| Portugal | 40.3 |
+--------------------+----------------------------+
| Germany | 24.7 |
+--------------------+----------------------------+
| Italy | 12.0 |
+--------------------+----------------------------+
| UK | 12.0 |
+--------------------+----------------------------+
| Holland | 10.1 |
+--------------------+----------------------------+
| France | 0.6 |
+--------------------+----------------------------+
| Spain | 0.3 |
+--------------------+----------------------------+
| Ireland | 0.1 |
+--------------------+----------------------------+
| Total (EURmm) | 102.8 |
+--------------------+----------------------------+
+--------------------+----------------------------+
| Queen's Walk Portfolio Breakdown by |
| Jurisdiction as at 31 March 2010 |
| |
+-------------------------------------------------+
| Portugal | 36.0 |
+--------------------+----------------------------+
| Germany | 24.3 |
+--------------------+----------------------------+
| UK | 17.0 |
+--------------------+----------------------------+
| Holland | 12.2 |
+--------------------+----------------------------+
| Italy | 9.7 |
+--------------------+----------------------------+
| France | 0.7 |
+--------------------+----------------------------+
| Switzerland | 0.1 |
+--------------------+----------------------------+
| Total (EURmm) | 92.5 |
+--------------------+----------------------------+
A breakdown of the Company's investment portfolio by asset type (by reference to
underlying asset collateral) is set out below. Percentages for each asset class
are in relation to the value of the Company's investment portfolio, excluding
cash and hedges.
+--------------------+----------------------------+
| Queen's Walk Portfolio Breakdown by Asset Type |
| as at 31 December 2009 |
| |
+-------------------------------------------------+
| Prime | 52.8 |
+--------------------+----------------------------+
| SME | 30.3 |
+--------------------+----------------------------+
| Investment Grade | 11.4 |
| Bonds | |
+--------------------+----------------------------+
| SubPrime | 3.8 |
+--------------------+----------------------------+
| NearPrime | 1.3 |
+--------------------+----------------------------+
| Total (EURmm) | 102.8 |
+--------------------+----------------------------+
+--------------------+----------------------------+
| Queen's Walk Portfolio Breakdown by Asset Type |
| as at 31 March 2010 |
| |
+-------------------------------------------------+
| Prime | 46.8 |
+--------------------+----------------------------+
| SME | 30.3 |
+--------------------+----------------------------+
| Investment Grade | 15.3 |
| Bonds | |
+--------------------+----------------------------+
| SubPrime | 5.8 |
+--------------------+----------------------------+
| NearPrime | 1.8 |
+--------------------+----------------------------+
| Total (EURmm) | 92.5 |
+--------------------+----------------------------+
N.B. 'Prime' indicates that the underlying pool of loans comprises mortgages
made to borrowers with good credit records and whose incomes were verified at
the time of the origination.
European Mortgage Portfolio (40.4% of GAV)
The Company's European mortgage residuals performed satisfactorily, generating
cash flow for the quarter ended 31 March 2010 of EUR1.8 million, compared to EUR2.6
million in the previous quarter. Cash flows in the year ended 31 March 2010
totalled EUR9.7 million, compared to EUR13.3 million in the previous year.
Write-downs in the portfolio totalled EUR2.5 million. A EUR3.5 million write-down in
the Sestante portfolio was partly offset by a gain of EUR1.0 million in the
Portuguese mortgage portfolio.
The lower Euribor rate has had a positive effect on the Portuguese mortgage
portfolio, with fewer mortgage borrowers falling into arrears than in previous
quarters. These lower arrears levels translated into lower defaults in the
portfolio for the quarter. However, the Company has decided not to reduce its
default rate assumptions in the period.
Average Default Rate of the Portuguese Mortgage Portfolio
+------------------+------------+---------------+---------------+
| | | Period | |
+------------------+------------+---------------+---------------+
| |Jun - Sept | Oct - Dec | Dec - Mar |
+------------------+------------+---------------+---------------+
| Average Default | 1.32% | 1.37% | 1.03% |
| Rate | | | |
+------------------+------------+---------------+---------------+
The Company's exposure to the Portuguese market has fallen to 36.0% from 40.3%
of the overall investment portfolio following the sale of the Magellan 2
mortgage portfolio on 26 February 2010. The bank that originated the underlying
mortgages bought the portfolio at a sale price in line with the Company's 31
December 2009 valuation.
QWIL has closely followed developments regarding fiscal deficits in Southern
Europe and the widening credit spreads. The Company believes that the wider
spreads should have no direct impact on its mortgage portfolios because the
majority of mortgage loans are indexed to short term Euribor rates. The key
risk to asset value remains an increase in unemployment and consequent mortgage
defaults as a result of government austerity measures.
The Company views it as positive that the Portuguese government and opposition
parties have agreed to lower the country's 2010 deficit to 7.3% of GDP from 9.3%
of GDP. This reduction in deficit will be implemented through a combination of
spending cuts and increased taxes. Portugal experienced GDP growth of 1.0% in
Q1 2010 and export growth of 15%. Nonetheless, to reflect continued uncertainty,
the default rates the Company uses to forecast cash flows are approximately 30%
higher than observed default rates.
QWIL has written down EUR3.5 million of the Sestante Italian mortgage portfolio as
a result of an anticipated delay in expected cash flows which comprises a single
bullet payment at the end of the transaction. Mortgage holders are finding it
harder to refinance, with the result that the portfolio's mortgage refinancing
rate fell to 9.5% this quarter from 18.5% in the previous quarter. This fall
was more rapid than expected. Lower mortgage refinancing rates are likely to
persist for a prolonged period and, as a consequence, have delayed the expected
repayment date by approximately two years. This reassessment has lowered the
net present value of the Sestante portfolio.
SME Portfolio Investments (27.2% of GAV)
The Company's SME portfolio performed in line with expectations. Cash flows in
the quarter ended 31 March 2010 totalled EUR1.7 million, compared with EUR1.8
million in the previous quarter. Cash flows in the year ended 31 March 2010
totalled EUR7.4 million, compared with EUR14.3 million the previous year. However,
the Company recorded fair-value write downs of EUR2.6 million in the quarter in
anticipation of lower recovery rates on some assets.
Default rates remained volatile. The average default rate for the SME portfolio
fell to 0.66%, from 1.84% in the previous quarter. Gate 05-2 recorded the
greatest fall in default rates, to 1.48% from 5.71% in the prior quarter. We
expect continued default rate volatility in the coming quarter.
+---------+--------------+--------------+--------------+
| | Sept | Dec | Mar |
| | 2009 | 2009 | 2010 |
| | Default | Default | Default |
| | Rate | Rate | Rate |
| |(annualised) |(annualised) |(annualised) |
+---------+--------------+--------------+--------------+
| Amstel | 0.0% | 0.3% | 0.5% |
| 06-1 | | | |
+---------+--------------+--------------+--------------+
| Smart | 1.1% | 1.3% | 0.7% |
| 06-1 | | | |
+---------+--------------+--------------+--------------+
| Gate | 0.8% | 0.1% | 0.0% |
| 06-1 | | | |
+---------+--------------+--------------+--------------+
| Gate | 0.6% | 5.7% | 1.5% |
| 05-2 | | | |
+---------+--------------+--------------+--------------+
|Average | 0.6% | 1.8% | 0.7% |
+---------+--------------+--------------+--------------+
The Company recorded write-downs against the Gate 05-2 and Gate 06-1 SME
portfolios in the March quarter after observing an unusually low recovery rate
for four defaulted loans. The Company continues to analyse these loans and has
taken the precautionary measure of lowering the recovery rate across both these
portfolios.
On 28 May 2010, the Company sold the Gate 06-1 SME portfolio at a level that was
accretive to NAV. Through this sale the SME exposure has fallen from 30.3% to
24.4% of the overall investment portfolio.
ABS Bond Portfolio (13.7% of GAV)
The ABS bond portfolio recorded cash flows of EUR0.2 million in the quarter ended
31 March 2010, compared to EUR0.8 million in the previous quarter. Cash flows in
the year ended 31 March 2010 totalled EUR1.7 million, compared to EUR0.8 million in
the previous year. The lower cash flow this quarter is due to an increase in the
proportion of mezzanine bonds. Mezzanine bonds receive interest but are not
entitled to principal repayment until related senior bonds have been repaid.
While this extends the cash flow profile, we currently see better potential for
capital gain because of the higher relative value of mezzanine bonds versus
AAA-rated bonds.
Appetite for high quality AAA-rated ABS bonds increased substantially in the
early weeks of 2010. To take advantage of the price rally, on 22 January 2010,
the Company sold EUR3.4 million nominal value of AAA RMBS bonds. The average sale
price was 92.4 cents versus an average purchase price of 74.2 cents, giving an
annualised return on the investments of 28.2%.
In the March quarter, the Company purchased EUR6.5 million of ABS bonds. New
purchases were spread evenly across mezzanine, UK RMBS bonds and CMBS bonds.
The average purchase price was 63 cents with an average rating of BBB+.
As at 31 March 2010, the ABS Bond portfolio held 24 bonds at a cost value of
EUR14.1 million4 and a nominal value of EUR29.9 million5. The following tables
detail the European ABS bonds purchased by the Company up to 15 May 20106. The
weighted average rating of the portfolio (based on the invested amount) is
approximately BBB+7.
Percentage of Portfolio by Cost Price (as at 31 March 2010)
+-------------+----------+----------+----------+----------+----------+
| Rating by | 2004 | 2005 | 2006 | 2007 | Total |
| Vintage¹ | | | | | |
+-------------+----------+----------+----------+----------+----------+
| AAA | 0.0% | 0.0% | 8.8% | 0.0% | 8.8% |
+-------------+----------+----------+----------+----------+----------+
| AA | 0.7% | 4.5% | 18.4% | 0.0% | 23.5% |
+-------------+----------+----------+----------+----------+----------+
| A | 8.5% | 4.6% | 19.0% | 11.9% | 44.0% |
+-------------+----------+----------+----------+----------+----------+
| BBB | 0.0% | 7.6% | 4.7% | 8.3% | 20.6% |
+-------------+----------+----------+----------+----------+----------+
| BB | 0.0% | 0.0% | 3.1% | 0.0% | 3.1% |
+-------------+----------+----------+----------+----------+----------+
| Total | 9.2% | 16.7% | 53.9% | 20.2% | 100.0% |
+-------------+----------+----------+----------+----------+----------+
1. Vintage reflects the issue date of the bond. Rating at time of purchase.
Percentage of Portfolio by Cost Price (as at 31 March 2010)
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| Rating | UK | UK | UK | Euro | UK | Euro | SME | Total |
| by |Prime | Buy |Non-Conforming |Prime |CMBS3 |CMBS3 | | |
| Type1 |RMBS2 | To | RMBS2 |RMBS2 | | | | |
| | | Let | | | | | | |
| | |RMBS2 | | | | | | |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| AAA | 0.0% | 0.0% | 0.0% | 0.0% | 5.2% | 3.6% | 0.0% | 8.8% |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| AA | 0.0% |14.7% | 0.0% | 0.7% | 0.0% | 8.1% | 0.0% | 23.5% |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| A | 3.4% | 0.0% | 13.7% | 0.0% |12.9% |14.0% | 0.0% | 44.0% |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| BBB | 7.6% | 0.0% | 0.0% | 0.0% | 0.0% | 7.9% | 5.1% | 20.6% |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| BB | 0.0% | 0.0% | 3.1% | 0.0% | 0.0% | 0.0% | 0.0% | 3.1% |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
| Total |11.0% |14.7% | 16.8% | 0.7% |18.1% |33.5% | 5.1% |100.0% |
+--------+-------+-------+----------------+-------+-------+-------+-------+--------+
1. Rating at time of purchase
2. Residential Mortgage Backed Securities
3. Commercial Mortgage Backed Securities
UK Mortgage Portfolio (8.5% of GAV)
The UK Mortgage portfolio recorded cash flows of GBP1.6 million in the quarter
ended 31 March 2010 compared to GBP1.2 million in the previous quarter. Cash
flows in the year ended 31 March 2010 totalled GBP3.9 million, compared to
GBP11.1 million in the previous year.
The Company has increased the valuation of its RMAC assets by EUR3.4 million, as a
result of lower defaults in the current period and lower forecast defaults
versus our previous assumptions. The Company maintains conservative forecasts of
defaults for the UK mortgage portfolio. The Company continues to work with
mortgage originators to identify loans that do not satisfy representations and
warranties provided at the time of the securitisation
Portfolio Valuation
In accordance with the Company's valuation procedures, the fair value of the
Company's investments is calculated on the basis of observable market data,
market discount rates and the Investment Manager's expectations regarding future
trends. Given the re-structurings at many investment banks, there is a lack of
reliable independent broker marks for the residual portfolio. Therefore, the
Company has elected to use a model-based approach to value its residual
investments. An external valuation agent has reviewed the underlying pricing
assumptions. The Company has used a 15% discount rate for the European and UK
mortgage portfolios and a 20% discount rate for the SME portfolios. These
discount rates are applied to the loss-adjusted cash flows. The Company
received broker marks for all of its ABS bonds.
Changes in the balance sheet value of the residual portfolio between 31 December
2009 and 31 March 2010 totalled -EUR4.0 million. This comprised -EUR2.3 million of
principal amortisation and fair value losses of -EUR1.7 million. In relation to
the ABS bond portfolio, the balance sheet value increased by EUR2.3 million. There
were EUR6.5 million new purchases, fair value gains of EUR1.3 million, principal
amortisations of -EUR0.1 million and sales of -EUR5.4 million. After giving effect
to these balance sheet changes in the quarter ended 31 March 2010, the NAV of
the Company was EUR3.73 per share as at 31 March 2010 (versus EUR3.69per share as at
31 December 2009).
The Company recorded total cash flows of EUR20.9 million in the quarter, of which
EUR6.3 million came from the investment portfolio, EUR5.4 million was received from
the sale of the AAA bond portfolio and a further EUR9.2 million was received from
the sale of the Magellan 2 portfolio. The net cash inflow from operating
activities was EUR26.3 million for the year ended 31 March 2010 compared to EUR30.9
million for the year ended 31 March 2009. The table below summarises the
changes in balance sheet values of the Company's investment portfolio by asset
class:
+-----------+----------+--------+--------+-----------------------------+------------------------------+
| | 31 Dec | 31 Mar | Change | Cash | Cash |
| Asset | 2009 | 2010 | to B/S | flows | flows |
| Class | B/S | B/S | Value | Received | Received |
| | Value1,2 | Value2 | Since | in the | in the |
| | (EURmm) | (EURmm) | 31 Dec | Quarter | Quarter |
| | | | 2010 | Ended | Ended |
| | | | (EURmm) | 31 Mar | 31 Dec |
| | | | | 2010 | 20093 |
| | | | | (EURmm) | (EURmm) |
+-----------+----------+--------+--------+-----------------------------+------------------------------+
| UK | 7.0 | 8.8 | 1.8 | 1.8 | 1.3 |
| Mortgages | | | | | |
+-----------+----------+--------+--------+-----------------------------+------------------------------+
| Euro | 44.2 | 41.6 | -2.6 | 1.8 | 2.6 |
| Mortgages | | | | | |
+-----------+----------+--------+--------+-----------------------------+------------------------------+
| SME | 31.2 | 28.0 | -3.2 | 1.7 | 1.8 |
+-----------+----------+--------+--------+-----------------------------+------------------------------+
| ABS | 11.8 | 14.1 | 2.3 | 0.2 | 0.8 |
| Bonds | | | | | |
+-----------+----------+--------+--------+-----------------------------+------------------------------+
| TOTAL4 | 94.1 | 92.5 | -1.7 | 5.5 | 6.5 |
+-----------+----------+--------+--------+-----------------------------+------------------------------+
1. Balance sheet values as at 31 December 2009 are expressed using 31 March
2010 FX rates.
2. The balance sheet value figures for 31 December 2009 and 31 March 2010
include accrued interest.
3. Cash flows for 31 December 2009 are expressed using 31 March 2010 FX
rates.
4. The values for each column may not sum to the total due to rounding
differences.
Company Outlook - Focus on new investment opportunities
In the coming quarters, the Company will focus on growing its ABS portfolio and
selling assets in legacy portfolios in order to improve its overall risk-reward
profile. The Company plans to use cash freed up from debt repayment to further
its strategy of selectively purchasing mis-priced bonds in the ABS markets,
especially in the mezzanine segment of the market. Mezzanine bonds offer strong
relative value, however cash-flow payments are lower in the short term because
they repay no principal until related senior bonds are repaid.
Expected market volatility over the coming months will create opportunities to
purchase undervalued ABS bonds. The Company will only invest in bonds whose
price is considered depressed due to technical and liquidity issues.
The Company remains vigilant in monitoring the progress of its Portuguese assets
in light of high fiscal deficits in Southern Europe. We believe that high credit
spreads should have no direct impact on the Company's mortgage portfolios
because most mortgage loans are indexed to short-term Euribor rates. The key
risk to asset value remains an increase in unemployment and consequent mortgage
defaults as a result of government austerity measures.
The Company estimates cash balances will be approximately EUR8.0 million at 30
June 2010. The Company projects cash flow of approximately EUR4.0 million per
quarter for the coming quarters. As at 1 June 2010, the loss adjusted gross
cash flow forecast is EUR168.0 million over the remaining life of the portfolio.
1 Calculations per share based on weighted average number of Ordinary Shares
outstanding as shown in Note 9 of the financial statements for the quarter ended
31 March 2010.
2 Calculations per share are based on the number of Ordinary Shares outstanding
at the end of each respective period.
3 Cash flow forecast as at 1 June 2010.
4 Net of sales completed in January 2010.
5 Nominal shown is original notional using pool factor and FX rate at the time
of purchase.
6 The tables include the bonds purchased at their cost using FX rates at the
time of purchase.
7 Calculated using Moody's WARF (weighted average risk factor) methodology.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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