REG - VPC Specialty - Half-year Report
29/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230929:nRSc0793Oa&default-theme=true
RNS Number : 0793O VPC Specialty Lending Invest. PLC 29 September 2023
29 September 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
(the "Company" or "Parent Company" with its subsidiaries (together) the
"Group")
Half-Year Report and Unaudited Financial Statements
For the Six-Month Period Ended 30 June 2023
The Board of Directors (the "Board") of VPC Specialty Lending Investments PLC
(ticker: VSL) present the Company's Half-Year Report and Unaudited Financial
Statements for the period ended 30 June 2023.
A copy of the Company's Half Year Report is available to view and download
from the Company's website, https://vpcspecialtylending.com/documents/
(https://vpcspecialtylending.com/documents/) . Neither the contents of the
Company's website nor the contents of any website accessible from hyperlinks
on the Company's website (or any other website) is incorporated into or forms
part of this announcement.
A copy of the Half-Year Financial Report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for inspection at the
NSM, which is situated
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) , in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
All page numbers below refer to the Half-Year Report on the Company's website.
Further information on VPC Specialty Lending Investments PLC is available at
https://vpcspecialtylending.com (https://vpcspecialtylending.com) .
Enquiries
For further information, please contact:
Victory Park Capital via Jefferies or Winterflood (below) info@vpcspecialtylending.com
Brendan Carroll (Senior Partner and Co-Founder)
Gordon Watson (Partner)
Jefferies International Limited Tel: +44 20 7029 8000
Stuart Klein
Gaudi le Roux
Winterflood Securities Limited Tel: +44 20 3100 0000
Joe Winkley
Neil Morgan
Montfort Communications Tel: +44 (0)7717 857736 / +44 (0)7798 626282
Matthew Jervois vpc@montfort.london
Gay Collins
Link Company Matters Limited (Company Secretary) Tel: +44 20 7954 9567
LEI: 549300UPEXC5DQB81P34
INTRODUCTION TO THE COMPANY AND THE GROUP
VPC Specialty Lending Investments PLC (the "Company" or "VSL") provides
asset-backed lending solutions to emerging and established businesses
("Portfolio Companies") with the goal of building long-term, sustainable
income generation. VSL focuses on providing capital to vital segments of the
economy, which for regulatory and structural reasons are underserved by the
traditional banking industry. Among others, these segments include small
business lending, working capital products, consumer finance and real estate.
VSL offers owners of shares of the Company ("Shareholders") access to a
diversified portfolio of opportunistic credit investments originated by
non-bank lenders with a focus on the rapidly developing technology-enabled
lending sector.
The Company's investing activities are undertaken by Victory Park Capital
Advisors, LLC (the "Investment Manager" or "VPC"). VPC is an established
private capital manager headquartered in the United States ("U.S.") with a
global presence. VPC identifies and finances emerging and established
businesses globally and seeks to provide the Company with attractive yields on
its portfolio of credit investments. VPC offers a differentiated private
lending approach by financing Portfolio Companies through asset-backed delayed
draw term loans, which is referred to as "Asset Backed Lending," designed to
limit downside risk while providing Shareholders with strong income returns.
Through rigorous due diligence and credit monitoring by the Investment
Manager, the Company generates stable income with significant downside
protection.
This half year report for the period to 30 June 2023 includes the results of
the Company (also referred to as the "Parent Company") and its consolidated
subsidiaries (together the "Group"). The Company (No. 9385218) was admitted to
the premium listing segment of the Official List of the Financial Conduct
Authority ("FCA") (the "Official List") and to trading on the London Stock
Exchange's main market for listed securities (the "Main Market") on 17 March
2015, raising £200 million by completing a placing and offer for subscription
(the "Issue"). The Company raised a further £183 million via a C Share issue
on 2 October 2015. The C Shares were converted into Ordinary Shares and were
admitted to the Official List and to trading on the Main Market on 4 March
2016. Proposals to amend the Company's investment policy to facilitate a
managed wind-down of the Company were approved by Shareholders at the General
Meeting on 12 June 2023.
INVESTMENT OBJECTIVE
Following the wind-down vote and accompanying amendments to the investment
policy, the Company's investments will be realised in an orderly manner, that
is, with a view to achieving a balance between returning cash to Shareholders
promptly and maximising value. On pages 5 and 8 of this report more
information is provided about the intended schedule for liquidating VSL's
portfolio.
INVESTMENT POLICY
The Company seeks to achieve its investment objectives by investing in
opportunities in the financial services market through Portfolio Companies and
other lending related opportunities. There have been no new investments since
30 June 2023. The only circumstances where the Company will fund existing
portfolio investments will be where there are contractual requirements to do
so or where it is considered vital to protect the value of that investment.
The Company invests directly or indirectly into available opportunities,
including by making investments in, or acquiring interests held by,
third-party funds (including those managed by the Investment Manager or its
affiliates).
Direct investments include consumer loans, small- and medium-sized enterprises
("SME") loans, advances against corporate trade receivables and/or purchases
of corporate trade receivables originated by Portfolio Companies ("Debt
Instruments"). Such Debt Instruments may be subordinated in nature, or may be
second lien, mezzanine or unsecured loans.
Indirect investments include investments in Portfolio Companies (or in
structures set up by Portfolio Companies) through the provision of senior
secured floating rate credit facilities ("Credit Facilities"), equity or other
instruments. Additionally, the Company's investments in Debt Instruments and
Credit Facilities are made through subsidiaries of the Company or through
partnerships in order to achieve bankruptcy remoteness from the platform
itself, providing an extra layer of credit protection.
The Company may also invest in other financial services related opportunities
through a combination of debt facilities, equity or other instruments.
The Company may also invest (in aggregate) up to 10% of its Gross Assets (at
the time of investment) in listed or unlisted securities (including equity and
convertible securities or any warrants) issued by one or more of its Portfolio
Companies or financial services entities.
The Company invests across several Portfolio Companies, asset classes,
geographies (primarily US, UK, Europe, Australia, Asia and Latin America) and
credit bands in order to create a diversified portfolio and thereby mitigate
concentration risks.
FINANCIAL HIGHLIGHTS
SUMMARY HIGHLIGHTS FOR THE FIRST HALF OF 2023
v February 2023: The Company declared its 20th consecutive dividend of 2.00p
for the three-month period to 31 December 2022.
v April 2023: On 28 April 2023, the Company released its 2023 Annual Report,
which was published on its website.
v May 2023: On 16 May 2023, the General Meeting Circular was announced and
published to the Company's website, inclusive of two proposals for the
Company's managed wind-down, with a vote on the proposals taking place on 12
June 2023. On 31 May 2023, the recurring AGM Circular was announced and
published on the Company's website.
v June 2023: At the General Meeting held on 12 June 2023, the resolutions put
to the meeting inclusive of two proposals for the Company's managed wind-down
were approved by Shareholders. The Company announced that at its AGM held on
23 June 2023, all resolutions set out in the Notice of AGM were passed by the
requisite majority. On 26 June 2023, the Company declared its 21st consecutive
dividend of 2.00 pence per share for the three-month period to 31 March 2023.
SUBSEQUENT EVENTS
v July 2023: The Company sold 932,968 shares of Bakkt (NYSE: BKKT) for US$1.6
million, including a gain of US$0.1 million.
v August 2023: In August 2023, the Company sold a portion of its remaining
equity in Kueski, Inc. for US$0.8 million, including a gain of US$0.7 million.
On 25 August 2023, the Company received a paydown of US$5.3 million on CFG
Partners Holdings, L.P. that the Company used to reduce the outstanding
gearing facility.
v September 2023: In September 2023, the Company received cash inflows
totalling US$14.0 million from the Company's Asset Backed Lending and equity
investments. The proceeds were used to partially reduce the outstanding
gearing facility.
RETURN SUMMARY AS AT 30 JUNE 2023
30 June 2023 30 June 2022 31 December 2022
Net Asset Value ("NAV" per Ordinary Share 94.18p 105.51p 98.19p
Ordinary Share Price 69.20p 83.40p 83.10p
Discount to NAV 26.53% 20.95% 15.37%
NAV (Cum Income) Return -2.04% -4.06% -6.97%
Total Shareholder Return (based on share price)(1) -14.32% -5.21% -1.19%
Dividends per Ordinary Share(2) 4.00p 4.00p 8.00p
Total Net Return -£5.55 million -£12.88 million -£22.11 million
Revenue Return +£21.79 million +£13.21 million +£28.02 million
( )
(1) Net of issue costs.
(2) Dividends declared which relate to the period.
( )
TOP TEN POSITIONS
The table below provides a summary of the top ten exposures of the Group, net
of gearing, as at 30 June 2023. The summary includes a look-through of the
Group's investments in VPC Synthesis, L.P. and VPC Offshore Unleveraged
Private Debt Fund Feeder, L.P. to illustrate the exposure to underlying
Portfolio Companies as it is a requirement of the investment policy (set out
on page 3 to consider the application of the restrictions in this policy on a
look-through basis.
INVESTMENT COUNTRY INVESTMENT TYPE EXPOSURE
Deinde Group, LLC United States Asset Backed Lending 12.65%
Caribbean Financial Group Holdings, L.P. Latin America Asset Backed Lending 6.90%
FinanceApp AG Switzerland Equity 6.58%
Applied Data Finance, LLC United States Asset Backed Lending 6.23%
FinAccel Pte Ltd Singapore Asset Backed Lending 5.90%
Perch HQ, LLC United States Asset Backed Lending 4.91%
Razor Group GMBH Germany Asset Backed Lending 4.46%
Heyday Technologies, Inc. United States Asset Backed Lending 3.95%
Heyday Technologies, Inc. United States Equity 3.25%
Elevate Credit, Inc. United States Asset Backed Lending 3.13%
CHAIRMAN'S STATEMENT
I present to you the half-year results for the Company for the period to 30
June 2023. Over this period, the Company delivered a total return of -2.04%,
with strong revenue returns of 5.94% but capital and other returns were down
by 8.10% due to challenges in the broader equity markets. Through this period,
the Company's investment portfolio remained stable, and its dividend has been
unaltered with quarterly dividends totalling 4.00 pence per share declared
with 2.00 pence per share paid as of 30 June 2023.
The first half of 2023 has been dominated by Western economies attempting to
dampen rising inflation with sustained monetary policy tightening. These
efforts have made daily life increasingly difficult for consumers and
borrowers, and investor sentiment has suffered. That said, there were some
positive developments this year. For example, fears of banking sector
contagion following the fallout of Silicon Valley Bank in March have
dissipated, and lending conditions have tightened by less than initially
feared. Moreover, even as growth has been anaemic, larger economies have so
far this year managed to avoid recession. Consequently, we may be closer to
the end of the rate-hiking cycle in both Europe and the U.S., even if the U.S.
Federal Reserve ("Fed") appears unlikely to ease monetary policy before early
2024.
Closer to home, the Association of Investment Companies ("AIC") reported that
UK investment trusts as a whole are now trading at the widest discount to net
asset value ("NAV") since 2009 at the height of the Global Financial Crisis.
The discount then continued to widen because of the still challenging economic
environment eroding investor confidence. Indeed, discounts appear particularly
steep for those investment trusts invested in relatively illiquid assets,
including private companies and real estate. Investment trust discounts are
unlikely to close significantly until investors feel far more optimistic about
the future direction of the global economy.
THE COMPANY'S INVESTMENTS
The Company continues to generate robust returns from its core lending
business in asset backed investments (which represent 76% of the total
portfolio as at 30 June 2023). The core lending business benefits from a
secure lending position, targeting minimal capital losses and a high level of
income generation that supports regular dividend payments. Most of the
Company's asset backed investments are delayed draw, floating rate senior
secured loans that may have equity subordination. These asset backed
investments are secured primarily by underlying collateral consisting of
consumer loans, small business loans and alternative assets.
The Company's equity interests are often an affiliated accompaniment to its
core lending activity, as are its investments in Special Purpose Acquisition
Companies ("SPACs"). During the half-year review period, the proportion of the
overall portfolio represented by equity investments, including investments in
SPACs, increased slightly from 22% to 23%. The Company's investment in SPACs
is valued at £4.9 million, approximately 2% of NAV.
More information about the performance of the Company's investments can be
found in the Investment Manager's Report.
INVESTMENT OBJECTIVE
Proposals to amend the Company's investment policy to facilitate a managed
wind-down of the Company were approved by Shareholders at the General Meeting
on 12 June 2023. There are two key aspects of the wind-down process I am keen
to address to Shareholders; the first is the timing of realisations, and the
second is the expedient and measured return of capital. In terms of
realisations, the Investment Manager is committed to ensuring that the
Company's investments will be realised in an orderly manner, that is,
intending to achieve a balance between returning cash to Shareholders promptly
and maximising value. Given the illiquid nature of the Company's investments,
it is difficult to provide certainty on the timeframe for realisation;
however, I would direct Shareholders to the Company's website to view the most
recently published Monthly Report, where we will continue to publish any
information relating to actual and potential realisations. The profile of
contractual maturities less projected borrowing paydowns for Asset Backed
Lending Investments as at 30 June 2023 is available on the Company's website:
https://vpcspecialtylending.com/documents/
(https://vpcspecialtylending.com/documents/) and updates will continue to be
provided monthly. For ease of reference the maturity profile as at 30 June
2023 can be found on page 8 below.
In terms of returning capital to Shareholders, we are conscious that our
Shareholder register features both institutional and retail investors. With
that in mind, we will seek to ensure as far as possible that no Shareholder
group is disadvantaged in how capital is returned over time.
Although Shareholders should place only limited reliance on this information,
it is the Board's current estimate that the first distribution will occur at
the end of 2023 or in early 2024 and that distributions will continue
thereafter with a substantial proportion of the portfolio being realised
within the next three years. Based on existing market conditions, potential
cash flows and on the assumption of continued strong portfolio performance,
the Company currently expects to continue paying dividends at the current rate
for at least a year and potentially longer. The Company will communicate the
expected timing of distributions as the portfolio is realised, through Monthly
Reports and via direct Shareholder communication as required.
INVESTOR ENGAGEMENT
Following the votes at the General Meeting and the AGM, the Board has been
engaging with Shareholders to understand the reasons for over 20% of the votes
being cast against Resolution 2 (To revise the investment management
agreement) at the General Meeting and at the AGM: on Resolutions 5 (To
re-elect the Chairman as a Director), 10 (To authorise the Directors to allot
Ordinary Shares), and 11 (To dis-apply pre-emption rights ). We acknowledged
the outcome of these votes in our communications after both meetings and have
subsequently been in contact with a number of Shareholders to listen to the
reasons for their votes against those Resolutions and to assure them that
their concerns have been acknowledged. I would like to thank those
Shareholders who engaged in these constructive discussions. We will continue
to consult Shareholders regularly.
One key piece of feedback was concern from some Shareholders regarding
Resolution 2 of the General Meeting to restructure the Investment Manager's
management and performance fee arrangements in light of the wind-down process.
In response, it is important to note that the revised management and
performance fee arrangements require a full NAV return (i.e., the High Water
Mark NAV Amount) in cash to Shareholders before any performance fees are paid
to the Investment Manager, which was not previously the case. Further, the
Company will not pay performance fees on unrealised gains in the future, with
performance fees only being paid out of realised returns. The arrangement
should mitigate against disposals at an excessive discount which would
expedite the voluntary liquidation of the Company but may disadvantage
Shareholders.
We continue to believe that the revised management and performance fee
arrangements better align the interests of the Company, its Shareholders and
the Investment Manager, as it incentivises the Investment Manager to undertake
the wind-down process efficiently and in a way that optimises value and
decreases risk for Shareholders. A fixed management fee alone could not
achieve the same degree of alignment, and I hope this helps to further allay
any Shareholder concerns on this matter.
THE COMPANY'S ESG IMPACT
As an investment trust, the Company does not have employees, property, or
factories. Therefore, its ability to make a positive environmental, social,
and governance ("ESG") impact is directed by the Investment Manager and
through the Portfolio Companies the Company invests in. The Investment Manager
aims to operate and invest responsibly, ethically, and fairly and continues to
be a signatory of the United Nations Principles for Responsible Investment
("PRI"), the leading global network for investors committed to integrating ESG
considerations into long-term investment decision-making.
As a consequence of the new investment policy, we recognise we have an even
greater responsibility to ensure we treat all underlying Portfolio Companies
fairly in respect of timings of exits and in our efforts to achieve a fair
value for all concerned parties. Decisions will continue to be taken after
considering the impact on all relevant stakeholders.
The Board and the Investment Manager remain committed to ensuring the
Company's culture is aligned with its stated purpose, values, and strategy,
throughout the wind-down process. Moreover, the Company continues to have
policies and procedures in place to maintain a culture of good governance,
including policies and procedures relating to all aspects of diversity,
equity, and inclusion.
OUTLOOK
We have been encouraged by the Company's resilience during continued market
uncertainty and in an era of significant interest rate hikes. This resilience
stems from the nature of the core asset backed securities held by the Company,
the deal structuring applied to portfolio investments, the risk management
measures implemented, as well as the Investment Manager's long-standing credit
expertise.
Now that the wind-down process has begun in earnest, the Board will meet
regularly to review the following: (i) progress in implementing the Company's
revised investment objective and policy, and (ii) the liquidity of unrealised
holdings. We recognise that the strategy for realising individual investments
must be flexible and may need to be altered to reflect changes in the
circumstances of a particular investment or to account for prevailing market
conditions. While some investments may be considered appropriate for sale in
the shorter term, other investments may be held for a longer period with a
view to enabling their inherent value to be achieved.
The Company's goal in the wind-down is to keep Shareholders updated on
progress and to achieve realisations in a timely and efficient manner. We
recognise that to be overly prescriptive on the timeframe could prove
detrimental to the overall aims of the orderly wind-down, which is to achieve
the best value for Shareholders. However, our conversations with Shareholders
confirmed that timing is paramount for some. We will therefore endeavour to
keep all Shareholders informed and updated throughout the realisation process
while being mindful of our responsibilities to all Stakeholders and Portfolio
Companies.
Finally, your Board and I would like to thank all Shareholders for their
continued support.
Graeme Proudfoot
Chairman
28 September 2023
INVESTMENT MANAGER'S REPORT
PERFORMANCE REVIEW
Amid ongoing economic uncertainty during the first half of the year, the
Company generated negative performance primarily driven by unrealised losses
on equity investments within the eCommerce aggregation portfolio. Even so, we
believe the portfolio remains well-positioned due to the protections
structured into the Company's balance sheet investments, and the Company
continues to make quarterly dividend payments to its investors in line with
expectations.
During the period, the Company generated a total return of -2.04% (2.00p) for
shareholders, declared dividends for the period of 4.00p and produced a NAV
per share as at 30 June 2023 of 94.18p. The Company generated gross revenue
returns of 7.98% (7.83p) as a percentage of NAV in the first half of 2023 from
the Company's balance sheet investments, continuing the stable trend of the
past few years. As detailed in the returns table below, gross capital returns
of -6.95% (-6.82p) were primarily due to the unrealised losses from the
Company's privately held and publicly traded equity investments. Finance costs
were -1.28% (-1.25p) and operating expenses and management fees were -1.09%
(-1.07p) for the period.
Revenue growth and contribution margins continue to be depressed within the
eCommerce aggregation portfolio, a dynamic felt across the broader eCommerce
and retail industries, driving the decision to adjust the fair market value of
some investments. In addition, certain individual Portfolio Companies
underperformed to budget, exacerbating the valuation adjustments.
Overall, the continued weak performance of equities and sustained pressure on
consumer spending were notable themes during the first six months of the year,
a dynamic felt in particular across the broader eCommerce and retail
industries. After experiencing rapid growth during the pandemic, eCommerce
companies have experienced a notable post-pandemic slowdown, and have been
forced to navigate a slower growth environment. For context, even Amazon
reported its first unprofitable year since 2014. Inflation, while showing
signs of abating, continues to be a primary driver of pressure on consumers,
particularly those in the lower income brackets. While many of the supply
chain challenges faced by eCommerce since early 2022 have eased, higher prices
have not fully offset the pressure on margins and reductions in force have
been more commonplace.
In the second quarter of 2023, eCommerce Portfolio Companies continued to
right-size balance sheets by reducing inventory to unlock working capital and
manage corporate spending. This is not unique to the Company's portfolio but
has been a broader theme consistent across the industry, from large
multinationals to small third-party sellers. On a positive note, there have
been signs that these right-size measures are paying off. Revenue and margin
performance are improving while liquidity remains generally robust, albeit
continued risk-management efforts to improve profitability and underlying
asset performance will remain a work in process through the back half of the
year.
The Company's fintech credit facilities have demonstrated continued
resilience. In the consumer space, consumer credit is showing signs of
normalisation, with credit card delinquencies returning to pre-pandemic
levels.
The demand in Venture Capital ("VC") markets has, in general, been notably
weaker during 2023, with VC investors scaling back funding and taking longer
to assess new investment opportunities. Public equity volatility and a general
reset in valuations have led to a higher "bar" for new equity investments.
According to Crunchbase, seed funding in the first quarter of 2023 was down
44% year over year, and early-stage funding was down 54% over the previous
year. The slowdown led to a decrease in valuations for the private equity
book.
By contrast, the demand for private debt as a practical alternative to growth
equity financing for emerging businesses has continued. In 2007, the private
debt market had approximately US$190 billion in assets. It has subsequently
increased to approximately US$1.5 trillion in assets in 2022. The evidence
suggests that as traditional funding has dried up, growth-stage companies are
increasingly relying on debt financing and non-traditional funding to support
their expansion plans.
The Company's asset backed investment portfolio primarily consists of senior
secured floating rate credit facilities. The senior secured floating rate
credit facilities are further structured to provide significant first-loss
protection to Company's investments. Recent higher interest rates have
positively affected revenue returns, as rates on the Company's facilities are
floating.
In keeping with the Company's expected credit loss allowance policy, reserves
are reviewed monthly. Given the continued challenging economic environment and
in running the scenarios detailed in the footnotes to the financial
statements, the Company saw a nominal increase in the expected credit loss
reserves by 9.63% or £1.6 million during the period.
RISKS AND UNCERTAINTIES
Although there are several risks and uncertainties, the Investment Manager
believes the most significant of these include:
v Rising interest rates: While the Company's investment portfolio primarily
consists of floating rate credit facilities with interest rate floors, changes
in interest rates could affect its investments, the profitability of the
Portfolio Companies, and that of the underlying borrowers, potentially leading
to lower returns or changes in repayments or default rates of the underlying
borrowers.
v Potential changes in credit risk: There is inherent risk in the Company's
underlying investments of a borrower default and a majority of the underlying
exposure is in the U.S. Given the short duration of the collateral in the
portfolio, the underly Portfolio Companies continue to generate sufficient
cash flow.
The Investment Manager's proactive approach to mitigating risk includes
tightening credit criteria on originations, bolstering operations,
rationalising operating expenses, tightening structural protections, and
leveraging third-party consultants as needed. It is also committed to ongoing
monitoring on a daily, weekly, and monthly basis of cash reserve levels,
collateral, and repayment activity.
INVESTMENT MANAGER UPDATE
VPC had a robust first half of 2023. As at 1 August 2023, VPC's team included
55 employees across its locations in Chicago, New York, Los Angeles, San
Francisco, and London. The Investment Manager continues to operate in a hybrid
workplace, with employees working from the office three days a week and
remotely two days per week, respectively.
As it relates to portfolio management, the Investment Manager remains focused
on proactive risk management and controls across its portfolio. Senior
management holds multiple calls each week, and the investment team is in
regular contact with Portfolio Companies. With the help of the Investment
Manager's proprietary Data Analytics and Risk Technology System (DARTS), VPC
is able to monitor risk and performance proactively.
OUTLOOK
The last 18 months have seen interest rates raised by central bankers at an
unprecedented pace. As recently as the first quarter of 2022, the Fed held the
federal funds rate at near zero. Since then, the Fed has raised rates 11
times, taking the federal funds rate to a range of 5.25% to 5.50% at the time
of writing. It is, therefore, not surprising that companies are struggling to
acclimatise to borrowing rates. While there are growing hopes that U.S.
monetary tightening has peaked, the Fed is not ruling out the possibility of
more rate hikes this year.
The Company's average portfolio interest rate has increased as the Fed has
raised rates, which has positively affected revenue returns over the period.
However, the Investment Manager recognises that central bank policy is not an
exact science, and just as policymakers take time to respond to changes in the
economic outlook, the effects of their policy changes take time to filter
through to the broader economy, companies, and consumers. The Investment
Manager, therefore, is mindful that further increases in short-term rates
could potentially lead to credit risk as Portfolio Companies will face greater
than anticipated interest expenses. As well as monitoring credit performance,
the Investment Manager continually assesses the overall corporate performance
of the Portfolio Companies, including observing board meetings and holding
weekly update calls with management.
From a macroeconomic standpoint, private debt as an asset class remains the
stable choice in volatile times and continues to benefit from investors
seeking income generation and resilient returns across market cycles. From a
structural perspective, as the world adapts to the higher-for-longer interest
rate environment, the Company continues to benefit from its floating rate
credit facilities with interest rate floors, its short-duration collateral in
the underlying Portfolio Companies, and its additional layers of corporate
guarantees and structural protection. Overall, the Investment Manager
anticipates valuations will be flat or slightly down next year as this
environment encourages companies to be measured on valuation expectations. The
theme of mergers and consolidation is expected to be a focus across the
eCommerce space throughout the remainder of 2023 and well into 2024.
As the Investment Manager, VPC is managing the wind-down effectively with the
near-term goal to maintain the Company's dividend target. VPC will manage the
portfolio in accordance with the Firm's institutionalised policies and
procedures with the goal of maximising returns for Shareholders.
Victory Park Capital Advisors, LLC
Investment Manager
28 September 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR EANNPAEEDEFARecent news on VPC Specialty Lending Investments
See all newsREG - VPC Specialty - Annual Financial Report
AnnouncementREG - VPC Specialty - Dividend Declaration
AnnouncementREG - VPC Specialty - Update
AnnouncementREG - VPC Specialty - Net Asset Value(s)
AnnouncementREG - VPC Specialty - Holding(s) in Company
Announcement