REG - RM Infrastructure RM SecDirect - RMDC - Net Asset Value(s)

RM Infrastructure IncomeAnnouncement

17/10/2022 07:00

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RNS Number : 9964C  RM Infrastructure Income PLC  17 October 2022

 RM Infrastructure Income Plc

 ("RMII" or the "Company")

 LEI: 213800RBRIYICC2QC958

 Net Asset Value

 NAV & Share price performance

The Company's NAV % Total Return for the month of September was -0.37%, which
 brings the NAV % Total Return for the quarter to +0.72%.

 The NAV % Total Return over the last twelve months was +2.73%, since January
 2020 pre-COVID-19 pandemic the NAV % Total Return has been +14.81%, since
 January 2022 the NAV % Total Return has been +3.42% and inception to date has
 been +35.19%.

 The Ordinary Share NAV as at 30(th) September 2022 was 92.726 pence per share.
 This monthly NAV return of -1.971 pence per share arose primarily from the
 ex-dividend effect of the 1.625 pence per share ordinary dividend for the
 period Q2 2022, declared in August 2022 and paid in September 2022. Otherwise,
 there was positive interest income, net of expenses, of 0.469 pence per share
 and a decrease in portfolio valuations of 0.815 pence per share.

 The decrease in portfolio valuations arose due to the mark to market of Level
 2 assets and an increase of 50bps of yield attributed to the fixed rate Level
 3 assets to reflect some of the increase in the underlying government yield
 curve which moved dramatically higher over the month of September,
 particularly after the mini budget.

Summary for September 2022 (pence per share)
 Net interest income             +0.469p
 Change in portfolio valuations  -0.815p
 Payment of Dividend (Q2 2022)   -1.625p
 Net NAV Movement                -1.971p

 

 The net interest income includes an accounting adjustment during the month of
 September, and would have been circa +0.523p without it.

 The closing mid-market share price at the quarter-end was 85 pence which is 2
 pence lower than the opening mid-market share price at the start of the year
 and represents a total shareholder return(12) of +2.53% over the twelve months
 to 30(th) September 2022.

 Market Update

 Credit spreads closed the period slightly wider and saw significant volatility
 with an initial Markit ITRX European Crossover Index tightening from 590 into
 460 before moving to close the quarter at 640. The real story was in the rates
 markets as UK government bond yields rose steadily through the quarter and
 then accelerated significantly after the mini budget. As the yield increases
 accelerated, Liability Driven Investment "LDI" strategies sold assets to meet
 margin calls which put further pressure across all risk assets and in
 particular UK government bonds. This doom loop was stabilised by the Bank of
 England intervening in the UK government bond market, however, systemic risk
 is now back on investors' minds.

 It is also notable that the shape of the UK yield curve moved as the spread
 between 2 year and 10 year gilts started the quarter at circa +35bps and
 closed the period at -20bps. This is a leading indicator of recession within
 the UK and is an indicator of weak credit and growth.

 RMII has significantly outperformed benchmark loan and bond indices year to
 date, in FY2022 with a share price total return of -5.56% versus

 -13.60% for the S&P European Leverage Loan Index Total Return and -25.74%
 for the Ishares Core Corp Bond UCITS ETF GBP.

                    Total Return
                     YTD      ITD
 RM Infrastructure Income NAV           +3.42%   +35.19%
 RM Infrastructure Income Share Price   -5.56%   +22.40%
 S&P European Leveraged Loan Index      -13.60%  -0.10%
 Ishares Core Corp Bond UCITS ETF GBP   -25.74%  -21.65%

 

Portfolio Update

The Investment Manager remains confident with regards to the low interest rate
 sensitivity of the portfolio, despite the persistently high inflation levels
 and likely further interest rate hikes by global central banks. This is
 largely driven by the short duration nature of the portfolio which is
 currently 1.70 years which in turn means that loans can be repaid relatively
 quickly and reinvested at higher yields.

 The Investment Manager has continued to focus on investments under its
 enhanced monitoring list and during the third quarter of 2022 the Investment
 Manager, reached positive outcomes for two of the three investments:

 ·      Social Infrastructure - Student Accommodation, Ref 68: A
 wholly-owned purpose-built student accommodation property based in Coventry
 (80 beds). After extensive remedial works, predominantly required by
 non-compliant cladding, the Company has now successfully received approval
 from the relevant authorities to occupy the property which is now being
 tenanted by students. We note that the property benefits from a number of key
 attributes that will enable it to outperform in a stagflation environment;
 namely (i) the property offers low weekly rates (sub £100/week) which should
 lead to high demand with residents with lower disposable income and (ii) the
 property benefits from solar rooftop panels providing direct power to the
 building and its appliances. In addition, the Company has served its legal
 claim letter to the former main contractor, with a claim amount in excess of
 £3m (c.2.5p/share). This claim has not been valued yet within the Company's
 NAV.

 ·      Environmental Infrastructure - Energy Efficiency, Ref 62 &
 63: Loans to a business that sells energy-efficient heating & cooling
 devices (electric boilers, air source heat pumps etc.). The loan has been
 reduced by approximately £600,000 over the quarter as the borrower has
 conducted asset sales. It is expected that this loan balance will continue to
 reduce over the final quarter. Operationally the business is trading well with
 several new material buyers of zero carbon home heating products (electric
 boilers & Air Source Heat Pumps "ASHP") contributing to profitability.

 The last investment remaining under RM's enhanced monitoring list relates to
 the Clyde St investment, a Glasgow-based hotel development (Ref 58, 79, 80
 & 92). The Borrower has been facing well-publicised construction delays
 driven by inflationary pressures, supply chain issues and labour shortages
 within the construction sector. The result of this is evidenced by their
 inability to reach practical completion within the previously forecasted
 timing. Limited works remain to be completed on site, as such, with practical
 completion now confirmed to be at year-end 2022, and, the Operator, Virgin
 Hotels, has started to market the rooms for this year-end.

 In terms of new investments, scheduled drawdowns and repayments / prepayments
 during the reporting quarter, activity was limited as outlined below:

 Increased investments

 ·      Social Infrastructure - Aged Care, Ref 88: c.£950,000

 ·      Social Infrastructure - Health & Well-being, Ref 76: £12,500

 ·      Environmental Infrastructure - Energy Efficiency, Ref 96:
 £400,000

 New Investments

 ·      Social Infrastructure - Childcare, Ref 95: £3,000,000

 Repayment:

 ·      Non-Core - Other Manufacturing, Ref 62: c.£780,000

 ·      Social Infrastructure - Health and Well-being, Ref 94: c.£56,000

 ·      Environmental Infrastructure - Renewable Heat Incentive, Ref
 9&52: £140,000

 Partial Divestment

 ·      Social Infrastructure - Health and Well-being, Ref 15 (Voyage
 Care 1L): £2,500,000

 A quarterly update webinar from the Investment Manager can be viewed via the
 following link
 https://rm-funds.co.uk/2022/10/rmii-third-quarter-investor-update/
 (https://rm-funds.co.uk/2022/10/rmii-third-quarter-investor-update/) and on
 the RM Funds website.

 The Company also announces that the Monthly Report for the period to 30
 September 2022 is now available to be viewed on the Company website:

 https://rm-funds.co.uk/rm-infrastructure-income/rm-funds-investor-monthly-fact-sheets-2/

 END

 For further information, please contact:
 RM Capital Markets Limited - Investment Manager
 James Robson
 Thomas Le Grix De La Salle
 Tel: 0131 603 7060

 Sanne Fund Management (Guernsey) Limited - AIFM
 Chris Hickling
 Shaun Robert
 Tel: 01481 737600

 Tulchan Group - Financial PR
 Elizabeth Snow
 Oliver Norgate
 Tel: 0207 353 4200

 Sanne Fund Services (UK) Limited - Administrator and Company Secretary
 Brian Smith
 Ciara McKillop
 Tel: 020 3327 9720

 Singer Capital Markers Advisory LLP - Financial Adviser and Broker
 James Maxwell
 Asha Chotai
 Tel: 020 7496 3000

 Peel Hunt LLP - Financial Adviser and Broker
 Luke Simpson
 Liz Yong
 Tel: 020 7418 8900

 About RM Infrastructure Income

 RM Infrastructure Income Plc ("RMII" or the "Company") is a closed-ended
 investment trust established to invest in a portfolio of secured debt
 instruments.

 The Company aims to generate attractive and regular dividends through loans
 sourced or originated by the Investment Manager with a degree of inflation
 protection through index-linked returns where appropriate. Loans in which the
 Company invests are predominantly secured against assets such as real estate
 or plant and machinery and/or income streams such as account receivables.

 For more information, please see
 https://rm-funds.co.uk/rm-infrastructure-income/

 

The net interest income includes an accounting adjustment during the month of
September, and would have been circa +0.523p without it.

The closing mid-market share price at the quarter-end was 85 pence which is 2
pence lower than the opening mid-market share price at the start of the year
and represents a total shareholder return(12) of +2.53% over the twelve months
to 30(th) September 2022.

Market Update

Credit spreads closed the period slightly wider and saw significant volatility
with an initial Markit ITRX European Crossover Index tightening from 590 into
460 before moving to close the quarter at 640. The real story was in the rates
markets as UK government bond yields rose steadily through the quarter and
then accelerated significantly after the mini budget. As the yield increases
accelerated, Liability Driven Investment "LDI" strategies sold assets to meet
margin calls which put further pressure across all risk assets and in
particular UK government bonds. This doom loop was stabilised by the Bank of
England intervening in the UK government bond market, however, systemic risk
is now back on investors' minds.

 

It is also notable that the shape of the UK yield curve moved as the spread
between 2 year and 10 year gilts started the quarter at circa +35bps and
closed the period at -20bps. This is a leading indicator of recession within
the UK and is an indicator of weak credit and growth.

RMII has significantly outperformed benchmark loan and bond indices year to
date, in FY2022 with a share price total return of -5.56% versus

-13.60% for the S&P European Leverage Loan Index Total Return and -25.74%
for the Ishares Core Corp Bond UCITS ETF GBP.

 

                                        Total Return
                                        YTD      ITD
 RM Infrastructure Income NAV           +3.42%   +35.19%
 RM Infrastructure Income Share Price   -5.56%   +22.40%
 S&P European Leveraged Loan Index      -13.60%  -0.10%
 Ishares Core Corp Bond UCITS ETF GBP   -25.74%  -21.65%

 

Portfolio Update

The Investment Manager remains confident with regards to the low interest rate
sensitivity of the portfolio, despite the persistently high inflation levels
and likely further interest rate hikes by global central banks. This is
largely driven by the short duration nature of the portfolio which is
currently 1.70 years which in turn means that loans can be repaid relatively
quickly and reinvested at higher yields.

The Investment Manager has continued to focus on investments under its
enhanced monitoring list and during the third quarter of 2022 the Investment
Manager, reached positive outcomes for two of the three investments:

·      Social Infrastructure - Student Accommodation, Ref 68: A
wholly-owned purpose-built student accommodation property based in Coventry
(80 beds). After extensive remedial works, predominantly required by
non-compliant cladding, the Company has now successfully received approval
from the relevant authorities to occupy the property which is now being
tenanted by students. We note that the property benefits from a number of key
attributes that will enable it to outperform in a stagflation environment;
namely (i) the property offers low weekly rates (sub £100/week) which should
lead to high demand with residents with lower disposable income and (ii) the
property benefits from solar rooftop panels providing direct power to the
building and its appliances. In addition, the Company has served its legal
claim letter to the former main contractor, with a claim amount in excess of
£3m (c.2.5p/share). This claim has not been valued yet within the Company's
NAV.

 

·      Environmental Infrastructure - Energy Efficiency, Ref 62 &
63: Loans to a business that sells energy-efficient heating & cooling
devices (electric boilers, air source heat pumps etc.). The loan has been
reduced by approximately £600,000 over the quarter as the borrower has
conducted asset sales. It is expected that this loan balance will continue to
reduce over the final quarter. Operationally the business is trading well with
several new material buyers of zero carbon home heating products (electric
boilers & Air Source Heat Pumps "ASHP") contributing to profitability.

The last investment remaining under RM's enhanced monitoring list relates to
the Clyde St investment, a Glasgow-based hotel development (Ref 58, 79, 80
& 92). The Borrower has been facing well-publicised construction delays
driven by inflationary pressures, supply chain issues and labour shortages
within the construction sector. The result of this is evidenced by their
inability to reach practical completion within the previously forecasted
timing. Limited works remain to be completed on site, as such, with practical
completion now confirmed to be at year-end 2022, and, the Operator, Virgin
Hotels, has started to market the rooms for this year-end.

In terms of new investments, scheduled drawdowns and repayments / prepayments
during the reporting quarter, activity was limited as outlined below:

Increased investments

·      Social Infrastructure - Aged Care, Ref 88: c.£950,000

·      Social Infrastructure - Health & Well-being, Ref 76: £12,500

·      Environmental Infrastructure - Energy Efficiency, Ref 96:
£400,000

New Investments

·      Social Infrastructure - Childcare, Ref 95: £3,000,000

Repayment:

·      Non-Core - Other Manufacturing, Ref 62: c.£780,000

·      Social Infrastructure - Health and Well-being, Ref 94: c.£56,000

·      Environmental Infrastructure - Renewable Heat Incentive, Ref
9&52: £140,000

Partial Divestment

·      Social Infrastructure - Health and Well-being, Ref 15 (Voyage
Care 1L): £2,500,000

 

A quarterly update webinar from the Investment Manager can be viewed via the
following link
https://rm-funds.co.uk/2022/10/rmii-third-quarter-investor-update/
(https://rm-funds.co.uk/2022/10/rmii-third-quarter-investor-update/) and on
the RM Funds website.

The Company also announces that the Monthly Report for the period to 30
September 2022 is now available to be viewed on the Company website:

 

https://rm-funds.co.uk/rm-infrastructure-income/rm-funds-investor-monthly-fact-sheets-2/

 

 

END

 

 

For further information, please contact:

RM Capital Markets Limited - Investment Manager

James Robson

Thomas Le Grix De La Salle

Tel: 0131 603 7060

Sanne Fund Management (Guernsey) Limited - AIFM

Chris Hickling

Shaun Robert

Tel: 01481 737600

Tulchan Group - Financial PR

Elizabeth Snow

Oliver Norgate

Tel: 0207 353 4200

Sanne Fund Services (UK) Limited - Administrator and Company Secretary

Brian Smith

Ciara McKillop

Tel: 020 3327 9720

Singer Capital Markers Advisory LLP - Financial Adviser and Broker

James Maxwell

Asha Chotai

Tel: 020 7496 3000

Peel Hunt LLP - Financial Adviser and Broker

Luke Simpson

Liz Yong

Tel: 020 7418 8900

About RM Infrastructure Income

 

RM Infrastructure Income Plc ("RMII" or the "Company") is a closed-ended
investment trust established to invest in a portfolio of secured debt
instruments.

The Company aims to generate attractive and regular dividends through loans
sourced or originated by the Investment Manager with a degree of inflation
protection through index-linked returns where appropriate. Loans in which the
Company invests are predominantly secured against assets such as real estate
or plant and machinery and/or income streams such as account receivables.

For more information, please see

https://rm-funds.co.uk/rm-infrastructure-income/

 

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