Interim Management Statement

RNS Number : 6959G

Queen's Walk Investment Limited

05 February 2010

 



Queen's Walk Investment Limited (the "Company")

5 February 2010

This interim management statement relates to the period from 30 September 2009 to 5 February 2010 and has been prepared solely in order to comply with the requirement (pursuant to the EU Transparency Directive as implemented by the Disclosure and Transparency Rules) for an interim management statement to be made by the Company no earlier than 9 December 2009 and no later than 17 February 2010. The Company is currently in the process of preparing its quarterly report for the period ended 31 December 2009 which is expected to be released in March 2010.  Unless otherwise noted herein, the financial information provided in this interim management statement (and the asset valuations underlying that financial information) are as at 30 September 2009 and such financial information (and underlying valuations) will be stated as at a more recent date in the Company's forthcoming quarterly report.

Performance Summary

As at 30 September 2009, the Company's NAV was €3.75 per share up from a NAV of €3.69 per share as at 30 June 2009 due to fair value write-ups of €0.6 million. In the quarter ended 30 September 2009, the investment portfolio generated more cash than forecast, with total cash proceeds of €6.5 million received versus an expectation of €5 million.

The continued ability of Queen's Walk's investment portfolio to generate cash flow is supporting the strategy of purchasing undervalued investment grade bonds.  The Company invested €2.9 million from 30 September 2009 to 31 January 2010.  Following the recent rally in high quality ABS bonds, the Company sold some of its portfolio of AAA bonds on 22 January 2010 and realised total proceeds of €3.1 million.  The average sale price of the bonds was 92.4 cents versus an average purchase price of 74.2 cents.  The annualised return from these investments was 28.2%.

The Company has used the cash proceeds from the sale of the bonds, cash flows from the investment portfolio and cash on the balance sheet to reduce the balance of its loan facility to €8.6 million down from €18.3 million as at 25 November 2009. 

Investment Portfolio

The tables below summarise the Company's investment portfolio as at 30 September 2009.

Portfolio Composition by Jurisdiction as at 30 September 2009*

*By reference to underlying asset jurisdiction.  Figures stated as a percentage of the fair value of the Company's investments including accrued interest. 

Jurisdiction	%
Portugal	41.9%
Germany	25.1%
Italy	13.1%
UK	10.3%
Holland	8.6%
France	0.6%
Spain	0.3%
Ireland	0.1%

Portfolio Composition by Asset Type as at 30 September 2009*

*By reference to underlying asset collateral. Figures stated as a percentage of the fair value of the Company's investments including accrued interest.

Portfolio Composition	%
Prime	55.4%
SME	30.7%
Investment Grade Bonds	8.8%
SubPrime	3.8%
NearPrime	1.3%

As at 5 February 2010, the securitisations to which the Company had exposure through its residual investment portfolio were:

Issuer	Description of Underlying Assets
Alba 2005-1 plc	UK non-conforming* and buy-to-let residential mortgages
Alba 2006-1 plc	UK non-conforming residential mortgages, primarily first-ranking
Amstel Corporate Loan Offering BV 2006-1	Middle market corporate loans
Cheyne CLO Investments I Limited	Investment grade CLOs
Cheyne High Grade ABS CDO, Ltd	Investment grade ABS CDOs with exposure to the US sub-prime mortgage market
Earls Eight Limited (Tranche 312B)	SME loans
Eirles Three Limited (Tranche 227B)	SME loans
Eirles Three Limited (Tranche 236B)	SME loans
Eurosail 2006-1 plc	UK non-conforming and buy-to-let residential mortgages
Lusitano Mortgages No. 1 plc	First-ranking, fully amortising Portuguese residential mortgages
Lusitano Mortgages No. 2 plc	First-ranking, fully amortising Portuguese residential mortgages
Lusitano Mortgages No. 3 plc	First-ranking, fully amortising Portuguese residential mortgages
Magellan Mortgages No. 1 plc	First ranking, fully amortising Portuguese residential mortgages
Magellan Mortgages No. 2 plc	First ranking mortgage rights (or second-ranking where first-ranking is also transferred) Portuguese residential mortgages
Newgate Funding plc	UK non-conforming residential mortgages, primarily first-ranking
RASC Series 2006-KS2 Trust	US Sub-prime residential mortgages, primarily first-ranking
RMAC 2004-NSP4 plc	UK non-conforming residential mortgages, primarily first-ranking
RMAC 2005 NS3 plc	UK non-conforming residential mortgages, primarily first-ranking
RMAC 2005 NS4 plc	UK non-conforming residential mortgages, primarily first-ranking
Sestante Finance S.R.L.	First-ranking prime Italian residential mortgages

  *Non-conforming relates to subprime and near prime residential mortgages.

As at 31 January  2010, the Company has spent €11.0 million (using FX rates at dates of purchase) purchasing sixteen investment grade Asset Backed Securities ("ABS"). These securities have exposure to residential and commercial mortgage portfolios. The table below summarises the Company's ABS exposure by sector and rating at the time of purchase.

Percentage of Portfolio by Cost Price

Rating by Type1	UK  Prime RMBS2	UK Buy To Let RMBS2	UK Non-Conforming RMBS2	Euro Prime RMBS2	UK CMBS3	Euro CMBS3	SME	Total
AAA	0.00%	0.00%	0.00%	0.00%	10.30%	13.97%	0.00%	24.27%
AA	2.08%	18.94%	0.00%	0.00%	0.00%	0.00%	0.00%	21.02%
A	0.00%	0.00%	0.00%	0.00%	0.00%	21.98%	0.00%	21.98%
BBB	7.34%	0.00%	9.23%	0.00%	0.00%	10.11%	6.05%	32.72%
Total	9.42%	18.94%	9.23%	0.00%	10.30%	46.07%	6.05%	100.00%

1.     Rating at time of purchase

2.     Residential Mortgage Backed Securities

3.     Commercial Mortgage Backed Securities

Outlook

The Company will continue to focus on improving financial stability through debt repayment and improved performance through new investments. 

Cash balances as at 31 January 2010 were €5.2 million and we have forecast future quarterly cash flows at over €5.0 million.

Over the coming months, the Company aims to continue its strategy of selectively purchasing mis-priced bonds in the ABS markets.  Given the rally in AAA-rated ABS bonds, the Company will consider purchases in AA to BBB rated bonds, and in particular will focus on opportunities that arise in commercial mortgage-backed bonds. 

We expect buying opportunities to continue in 2010 as rating downgrades and capital pressures prompt selling by banks and other financial institutions.  Given the continued ability of the investment portfolio to generate cash flow, the Company remains well positioned to take advantage of these opportunities. 

Investor Enquiries:

Caroline Villiers

M:Communications            Tel: [phone]

About Queen's Walk Investment Limited:

Queen's Walk Investment Limited (the "Company") is a Guernsey-incorporated investment company listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange. The Company invests primarily in a diversified portfolio of subordinated tranches of asset-backed securities, including the unrated "equity" or "first loss" residual income positions typically retained by the banks or other financial institutions which have originated the loan assets that collateralise a securitisation transaction. The Company makes such investments where its investment manager, Cheyne Capital Management (UK) LLP ("Cheyne Capital"), considers the coupon or cash flows from the investment to be attractive relative to the credit exposure of the underlying asset collateral.

Disclaimer

This document contains forward-looking statements with respect to the financial condition, results and business of the Company.  By their nature, forward-looking statements involve risk and uncertainty.  The Company's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

Any projections or analysis provided in this statement to assist the recipient in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results.  Accordingly, any projections or analysis should not be viewed as factual and should not be relied upon as an accurate prediction of future results.  Furthermore, to the extent permitted by law, neither the Company nor any of its agents, service providers or professional advisers assume any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this statement or for any decision based on it.

 

END

 

 

IMSDMGGZZDRGGZM