GCP Asset Backed Inc GCP Asst Bckd - GABC - Quarterly Portfolio Update and Dividend
26/01/2023 07:00
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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
£45.2m invested, including drawdown of a £14m 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, £24.1m 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
(mailto: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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