NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
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Guernsey, 14 December 2007 - Volta Finance Limited has published its November monthly report. The full report is attached to this release and is available on Volta Finance Limited's financial website (www.voltafinance.com). As of 30 November 2007, Volta Finance Limited's Gross Asset Value per share was €8.27, down €0.86 per share from 31 October 2007.
Gross Asset Value
|
|
At 30.11.07 |
At 31.10.07 |
|
Gross Asset Value (GAV / €) |
248,355,534 |
274,003,155 |
|
GAV per share (€) |
8.27 |
9.13 |
Volta Finance Limited (the "Company" or "Volta Finance") wishes to comment on the November market conditions and their impact on the Gross Asset Value (the "GAV") of the Company, which is down €0.86 per share from €9.13 at the end October to €8.27 at the end November 2007. This decrease is mostly due to the payment of the dividend (€0.40 per share) as well as the payment of the investment manager fee and other ongoing fees (€0.08 per share). The November mark-to-market variation of the assets held by Volta Finance accounts for the remainder of the decrease (€0.38 per share).
MARKET ENVIRONMENT*
Until the very end of November, credit markets have continued to be pounded by the fallouts of the subprime crisis. After the disclosure of billions in write-offs by major banks throughout the world in Q3 2007, more is expected to come in Q4 2007. Simply put, the deterioration of bank balance sheets weighs heavily everywhere, from credit to equity markets.
Various measures have been announced to contain any significant contagion of the banking ills to other economic players. Central banks have taken accommodative actions, while Asian and Middle Eastern investors have been showing a strong appetite for discounted Western bank capital. Even the US administration has come up with its own "Hope Now" plan for weakened subprime borrowers and has been one of the main drivers of the Master Liquidity Enhancement Conduit (MLEC) superfund. All those various actions and measures act as a reminder of the complexity and the difficulty of the situation. Those measures have certainly struck a chord amongst investors, with optimism returning at least momentarily to the market at each new announcement.
We stick to our medium-term view that the various actions will have a positive effect on the financial markets, but not in the short term. We expect losses on mortgages to continue rising in the US, with Home Prices decelerating almost everywhere due to the ongoing credit tightening over the coming months. This crisis situation seems to be already mostly priced in by the markets. We expect that the crisis will be contained to very specific economic sectors and is unlikely to last beyond 2008 as actions will likely continue to be taken in order to keep economic fundamentals afloat. While it is too early to draw any conclusions about the future prospects of the US housing market, Pending Home Sales have stabilised in October and November, mainly driven by a strong recovery of home affordability for classic prime fixed rate borrowers.
In the corporate credit sphere, from the end of October to the end of November, the 5y European iTraxx index (series 8) experienced a substantial spread widening from 37.2 to 52.12 bps, while the spread on its Crossover counterpart (5y iTraxx European Crossover index series 8) was up from 322.340 to 348.940 bps. In the US, the 5y CDX index (series 9) widened from 60.29 to 76.045 bps and the 5y CDX Crossover index (series 9) increased from 211.660 to 256 bps. Proportionally, the deterioration was worse for investment grade names than for high yield ones given that the banking crisis tends to negatively affect all companies, even the ones with the strongest credit.
The leveraged loans European 5y LevX index (senior series 1) lost ground in November, giving up 1.23 point from its end of October level to 97.245 at the end of November. This discount relatively to the par value of loan seems to already price in a deterioration of the economic conditions, which would eventually lead to an increase in defaults more in line with historical rates from current low rates.
The mark-to-market value of structured finance assets such as CLOs and ABS has continued to remain under pressure, with CLOs continuing to fare better. The CLOs issued prior to the crisis has fared relatively well, and should continue to do so as their cost of funding is fixed and reinvestment opportunities abound in the loan market.
VOLTA FINANCE PORTFOLIO
The overall GAV of Volta Finance decreased €0.86 per share from the end of October to the end of November 2007, mainly due to the November payment of the Company's final dividend as well as of the investment manager fee and other ongoing fees for the year ended 31 July 2007, for a total of €14,507,693 in cash amounting to €0.48 per share.
Given that Volta Finance has no direct exposure to the US RMBS market and that we expect the economic situation to normalise within two or three quarters, we maintain the long-term assumptions used for setting the expected Internal Rate of Return (IRR) of the various assets held by Volta Finance.
The actual low default rates on corporate credit, including the loan markets, are significantly below our initial long-term assumptions. Given the consequences of the current US subprime crisis, we are expecting a deterioration of default rates over 2008 and 2009, which would bring them almost in line with historical rates. We expect this to allow our assets, on an aggregate basis, to keep meeting their long-term stated IRR, with periods of low default rates offsetting periods of higher default rates over a full credit cycle.
Corporate credit
The mark-to-market variation** of Volta Finance's corporate credit investments has been -7.0% in November.
Leveraged loans
The mark-to-market variation of Volta Finance's leveraged loan TRS has been -10.5% in November.
ABS
The mark-to-market variation of Volta Finance's ABS investments has been +0.3% in November.
CDO
The mark-to-market variation of Volta Finance's CDO investments has been +1.1% in November.
* Index data source: Bloomberg
** "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
(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
+44 (0) 1481 715601
Portfolio Administrator
Deutsche Bank
For the Investment Manager
AXA Investment Managers Paris
Julien Laplante
+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.
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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.
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