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Volta Finance Limited NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
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Guernsey, 17 June 2008 - Volta Finance Limited (the "Company" or "Volta Finance" or "Volta") has published its May monthly report. The full report is attached to this release and is available on Volta Finance Limited's financial website (www.voltafinance.com).
Gross Asset Value
+---------------------------------------------------------+ | | At 30.05.08 | At 30.04.08 | |-----------------------------+-------------+-------------| | Gross Asset Value (GAV / €) | 183,121,226 | 187,226,347 | |-----------------------------+-------------+-------------| | GAV per share (€) | 6.10 | 6.24 | +---------------------------------------------------------+
As of the end of May 2008, the Gross Asset Value (the "GAV") of Volta Finance Limited (the "Company", "Volta Finance" or "Volta") was €6.10 per share, a decrease of €0.14 from €6.24 per share at the end of April 2008. This slight erosion of the GAV is the consequence of the end of the liquidation process of the Leveraged Loan Total Return Swap (TRS) meanwhile the other asset classes remained relatively stable.
The May mark-to-market variations* of Volta Finance's asset classes have been: -19.1% for the TRS, -3.9% for ABS investments, +3.9% for CDO investments and +4.4% for Corporate Credit investments.
MARKET ENVIRONMENT
The financial environment has remained stable in May. Markets started to encompass some premium due to increasing inflation uncertainties, just when market participants were taking some breath after having escaped a nightmarish Bear Stearns default.
From the end of April to the end of May, the spread of the 5y European iTraxx index (series 9) widened slightly from 72 bps to 77 bps, while its Crossover counterpart (5y iTraxx European Crossover index series 8) barely moved from 437 bps to 447 bps. According to the iTraxx LevX Senior Index, the average price for European liquid first lien loans declined modestly from 97.19% to 96.69%.**
VOLTA FINANCE PORTFOLIO
At the end of May, the cash position of the Company was €30m equivalent. This amount is partially available for investment. The Company will continue to invest in its primary underlying asset classes (among which RMBS, Leveraged Loans or Corporate credits) through embedded leverage at the residual level or at a second loss level.
As stated in previous monthly reports, due to significant increase in discount margins in the structured credit market, the Company considers that mezzanine tranches of CLOs are now within its investment perimeter. These second loss-type of investments bring some kind of risk diversification to the residual positions in CLOs already owned by Volta. Due to the current crisis and its consequences, the portfolio has mechanically increased its position in two asset classes: US Leveraged Loans and Corporate Credit. Further concentration in these two asset classes is to be expected even if some diversification could be achieved by investments in first or second loss tranches of European Leveraged Loans. As a matter of fact, the Company invested $5m in a 2-year mezzanine tranche of CLO in May.
By end of June, Volta Finance expects to receive slightly more than €18 million from the liquidation of the TRS, on top of its current cash position. Most of this amount will be available for reinvestment.
As previously stated, the financial crisis creates growing uncertainties about the future performances of UK mortgages. This environment continues to affect negatively Volta Finance since prepayments after reset are detrimental to the Company's ABS residual positions. Since the end of January 2008, most of the decline in the mark-to-market value of Volta's RMBS UK non-conforming residuals is expected to reflect a further decline in expected cash flows additional to the €9m already announced at the end of January. If the increase in defaults for borrowers unable to refinance were to be confirmed and/or if the already high prepayments increased further, the value of ABS held by Volta would continue to be negatively affected and further decline in expected cash flows could occur.
Except for the Company's position in UK non-conforming residuals, which represents 14% of the portfolio, the remainder of the investments, once the liquidation of the TRS will be settled (all CDO assets and Corporate Credit assets as well as one ABS positions) has continued to perform, in terms of cash flows, in line with or better than the assumptions employed at the time of their purchase even if the mark-to-market value of these assets have declined due to market conditions.
The Company will continue to monitor its current assets and to focus on reinvestment opportunities even if the Company continues to believe that there is no reason for precipitate action in investing the cash held by the Company given that volatility is expected to continue and that the lack of liquidity limits investment opportunities on the market
* "Mark-to-market variation" is calculated as the Dietz-performance of the assets in each bucket, taking into account the MtM of the assets at month-end, payments received from the assets over the period, and assuming that changes in cross currency rates have no impact given that Volta Finance implements a currency hedge on non-euro assets. Nevertheless, some residual currency effects could impact the aggregate value of the portfolio when aggregating each bucket. ** Index data source: Bloomberg.
(Full monthly report in attachment or on www.voltafinance.com)
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ABOUT VOLTA FINANCE LIMITED
Volta Finance Limited is incorporated in Guernsey under the Companies (Guernsey) Laws, 1994 to 1996 (as amended) and listed on Euronext Amsterdam. Its investment objectives are to preserve capital and to provide a stable stream of income to its shareholders through dividends. For this purpose, it pursues a multi-asset investment strategy targeting various underlying assets. Volta Finance's basic approach to its underlying assets is through vehicles and arrangements that provide leveraged exposure. The exposure to those underlying assets is gained through direct and indirect investment in five principal asset classes: corporate credits, CDOs, ABS, leveraged loans, and infrastructure assets.
Volta Finance has appointed AXA Investment Managers Paris, an investment management company with a division specialised in structured credit, for the investment management of all its assets.
ABOUT AXA INVESTMENT MANAGERS
AXA Investment Managers (AXA IM) is a multi-expert asset management company within the AXA Group, a global leader in financial protection and wealth management. AXA IM is one of the largest European-based asset managers with €550 billion in assets under management as of the end of March 2007. AXA IM employs approximately 2,800 people around the world and operates out of 19 countries.
CONTACTS
Company Secretary Mourant Guernsey Limited volta.finance@mourant.com +44 (0) 1481 715601
Portfolio Administrator Deutsche Bank voltaadmin@list.db.com
For the Investment Manager AXA Investment Managers Paris Julien Laplante julien.laplante@axa-im.com +33 (0) 1 44 45 94 92
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This press release is for information only and does not constitute an invitation or inducement to acquire shares in Volta Finance. Its circulation may be prohibited in certain jurisdictions and no recipient may circulate copies of this document in breach of such limitations or restrictions.
This press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Volta Finance has not registered, and does not intend to register, any portion of any offering of its securities in the United States or to conduct a public offering of any securities in the United States.
***** This document is being distributed by Volta Finance Limited in the United Kingdom only to investment professionals falling within article 19(5) of the Financial Services and Market Act 2000 (Financial Promotion) Order 2005 (the "Order") or high net worth companies and other persons to whom it may lawfully be communicated, falling within article 49(2)(A) to (E) of the Order ("Relevant persons"). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the shares will be engaged only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. Past performance cannot be relied on as a guide to future performance.
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This press release contains statements that are, or may deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "anticipated", "expects", "intends", "is/are expected", "may", "will" or "should". They include the statements regarding the level of the dividend, the current market context and its impact on the long-term return of Volta's investments. 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. Volta Finance's actual results, portfolio composition and performance may differ materially from the impression created by the forward-looking statements. Volta Finance does not undertake any obligation to publicly update or revise forward-looking statements.
Any target information is based on certain assumptions as to future events which may not prove to be realised. Due to the uncertainty surrounding these future events, the targets are not intended to be and should not be regarded as profits or earnings or any other type of forecasts. There can be no assurance that any of these targets will be achieved. In addition, no assurance can be given that the investment objective will be achieved.
