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Volta Finance Limited (AMS:VTA) NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
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Guernsey, 16 October 2008 - Volta Finance Limited (the "Company" or "Volta Finance" or "Volta") has published its September 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 30.09.08 | At 29.08.08 | |-----------------------------+-------------+-------------| | Gross Asset Value (GAV / €) | 111,721,711 | 159,160,332 | |-----------------------------+-------------+-------------| | GAV per share (€) | 3.72 | 5.30 | +---------------------------------------------------------+
As of the end of September 2008, the Gross Asset Value (the "GAV") of Volta Finance Limited (the "Company", "Volta Finance" or "Volta") was €111.7m or €3.72 per share, a decrease of €1.58 from €5.30 per share at the end of August 2008.
The September mark-to-market variations* of Volta Finance's asset classes have been: -4.2% for ABS investments, -14.3% for CDO investments and -63.6% for Corporate Credit investments.
As stated in the previous monthly report, the default of Lehman Brothers Holdings Inc (LBHI) has had a significant impact on some of Volta's assets. Direct losses were generated on the Corporate Credit investments (ARIA II, ARIA III and Jazz III) and the prices of other assets have been indirectly affected by this event. In the August monthly report, the Company estimated the LBHI jump-to-default to reduce the value of the three Corporate Credit investments that are directly impacted from €62.7m to €20.1m. As of the end of September the cumulative value of these three investments, €22.8m, is close to the August monthly report estimate. The end of September value was established using an estimated recovery of 10% on LBHI's default. A recent value estimate of these positions taking into account the effective recovery (8.625%) and the significant improvement in financial CDS spreads would not be materially different.
The Company also announced on 10 October 2008 that a dividend of €0.25 per share will be recommended by the Company's Board of Directors to the General Assembly, which is going to take place on 20 November 2008.
MARKET ENVIRONMENT AND LATEST DEVELOPMENTS
In September, the financial crisis reached a level requiring coordinate government actions in order to restore financial stability. These actions have started to take place in the first weeks of October in most developed countries. Nevertheless, economic difficulties are now materialising even if the financial crisis now seems to be somewhat contained.
As an illustration, from the end of August to the end of September, the spread of the 5y European iTraxx index (series 9) widened significantly from 100 bps to 116 bps, reaching 144 bps on 17 September at the peak of the turbulence and its Crossover counterpart (5y iTraxx European Crossover index series 8) continued to widen from 550 bps to 597 bps. According to the CSFB Leverage Loan Index, the average price for US liquid first lien loans declined from 87.62% to 82.91%.**
Since the end of September, Leveraged Loans prices have continued to decline significantly and the iTraxx indices have continued to widen. During the same period the sub-index representative of senior financial debt in Europe went from 119 bps at the end of September to 84 bps on 14 October. This shows that the default risk has switched from the financial companies to the non-financial companies.
VOLTA FINANCE PORTFOLIO
All these events have affected and will continue to affect significantly Volta's assets if the economic situation worsens. Under such a worsening situation scenario, the impact would be felt first through continuing asset price decline and second, if defaults were to increase significantly, through a downward revision of expected cash flows on some assets. Nevertheless it is too early in the default cycle to estimate the impact of the worsening economic situation on Volta's assets,
As regards Aria II, Aria III and Jazz III, even if it seems that, following the multiple government interventions, no significant financial institution is expected to go bankrupt in the coming months, these investments remain at risk of a significant deterioration of the economic cycle that would affect their exposure to non-financial companies. In September, these assets benefited from a tightening of the spread of financial companies following the previous dramatic widening. The underlying portfolios of these three assets are significantly overweighted on financial companies.
Taking into account the final recovery on LBHI (8.625% for Euro-denominated Senior CDS), and prior to the reinvestment of the recovered amount, the situation of these three assets is the following:
- ARIA II, which was a 1.53/2.53% attachment/detachment tranche at the end of August 2008, has lost 30% of its future coupons and principal, and is now a 0/0.70% tranche.
- ARIA III, which was a 0/3% attachment/detachment tranche with a 0.6% internal reserve at the end of August 2008 has lost its reserve, 41% of its future coupons and principal, and is now a 0/1.77% tranche.
- Jazz III Euro and USD tranches, which accounted respectively for 85% and 15% of the initial Jazz III investments, were both 0/5.75% tranches at the end of August 2008 and are expected to lose a little less than 20% of their expected quarterly payments, and respectively 41% and 43% of their principal. The Euro tranche is now a 0/3.41% tranche and the USD one a 0/3.27% one.
As regards the ABS asset class, one of the UK non-conforming residual owned by Volta, Eurosail 2006-, is indirectly concerned by the failure of LBHI. Some of the swaps in the structure were concluded by Lehman Brothers Special Financing and the transaction servicer is Capstone, both of which are subsidiaries of LBHI. While these two entities were outside LBHI's bankruptcy perimeter, this situation does create a certain level of uncertainty.
Given the ongoing volatility and uncertainties around structured products, Volta has continued to maintain a significant level of cash in its portfolio. Cash was representing 25.2% of the GAV at the end of September. Since then, Volta has spent €3.1m to buy €5m and $4m of principal amount in two BBB tranches of CLO.
In the best interest of its shareholders, the Company will continue to reinvest the cash available without precipitation. As of the end of September the cash position was €28.2m (€0.94 per share), which comprises the amount that has been put aside (€7.5m) following the recommended dividend of €0.25 per share and the latest investments (€3.1m). The company still owns a significant amount of cash to seize market opportunities.
* "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.
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.
***** This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
