Net Asset Value(s)

RNS Number : 7964J

RM Secured Direct Lending PLC

16 April 2020

 

RM Secured Direct Lending Plc and RM ZDP PLC

("RMDL" or the "Company")

LEI: 213800RBRIYICC2QC958

Net Asset Value

RMDL announces that its unaudited net asset value per ordinary share as at 31 March 2020, on a cum income basis, was 86.64 pence (29 February 2020: 98.74 pence).

RM ZDP PLC announces that the unaudited accrued capital entitlement per ZDP share as at 31 March 2020 was 107.05 pence (29 February 2020: 106.75 pence). NAV NAV % Total Return for the month was -10.53%, which brings the NAV % Total Return for the year to date ("YTD") to -9.66% and for the last 12 months to -5.22%. The Ordinary Share NAV as at 31st March 2020 was 86.64 pence per share, a reduction of 10.53%. This monthly return of -12.09 pence per share arises from positive net interest income net of expenses of 0.60 pence per share and a decrease in portfolio valuations and currency hedging costs of 10.99 pence per share. In addition, there is an ex-dividend effect of the 1.70 pence total ordinary and special dividend declared and paid in March. The NAV performance in March is reflective of the significant uncertainty and market volatility experienced in the period. The Investment Manager remains focused on the NAV performance over the medium term. RMDL is a long-only lender, it does not hedge any credit risk and operates a mark to market accounting policy. This means periods such as these will see higher NAV volatility than normal. Investing in secured debt gives an investor an expectation of capital preservation and the Investment Manager's base case scenario is that the credit spreads will return to more normal levels over the coming months and the portfolio values will recover.  Summary Profit for month 0.60 pence per share Headline change of -12.09 pence per share Payment of Q4 2019 dividend 1.70 pence per share Change in portfolio valuations -10.99 pence per share Market Update Q1 was dominated by COVID-1 9 and its effect on the global economy. During March in particular, the risk premium for corporate credit increased as spreads widened and yields increased significantly. Central bank intervention has been swift and decisive in order to support many corporates who cannot function due to supply chain constraints or the lack of consumers. The current indications are that most economies will gradually exit this "lockdown" over the course of Q2 2020. Growth has slumped globally and there is a range of views in the market as to how fast GDP will rebound for H2 2020.  The result of the above is that corporate bonds and loans had their worst month since 2008 - for example Markit IBOX EUR Liquid High Yield index was -10.87% and the S&P European Leveraged Loan index -14.60%.  These moves have been exacerbated by ETF and passive funds selling illiquid credit holdings into a weak market. It is the Investment Manager's view that although there undoubtably will be specific losers, overall, the businesses and sectors which RMDL focuses on offer significant value at these yields. Portfolio Update Since the economic effects of the coronavirus began to be felt, the Investment Manager has worked closely with borrowers to ensure that businesses can endure the lockdowns in the UK and Europe, and resume operations over the coming months. The Investment Manager provided a portfolio update and an investor call during March regarding its expectations and activity with regard to the effects of COVID-19. On the call, available on the website, the Investment Manager focused on the top 10 holdings which account for circa 54% of the portfolio. The full portfolio is shown at the bottom of this factsheet. Over the quarter, the portfolio size increased slightly from £134m to £136m of invested capital with the average coupon being 8.34%. Given the reduction in portfolio value which occurred during March, the portfolio running yield is 9.65%.  As at month end, the share price was trading at a 16% discount to NAV which implies a running yield of 11.55% from the month end closing mid-market share price. YTD the number of total investments remains unchanged at 34, split across 13 sectors as there has thus far been 1 full loan repayment and 1 new loan investment. The monitoring of the portfolio investments remains a key priority for RM. The company holds cash balances of £3.02m and has capacity to draw an additional £4.2m under its revolving credit facility with OakNorth bank. In addition, the Company has de-minimis obligations to fund existing transactions.  Dividend A final dividend was declared for Q4 2019 and paid in March 2020 of 1.625 pence and an additional special dividend of 0.075 pence was declared and paid on these dates following portfolio outperformance. This gives total distribution for 2019 of 7.025 pence per ordinary share and a NAV total return for the financial year 2019 of 8.18%. Long term income sustainability remains a key priority. The Company has the capacity to maintain its dividend and to manage credit losses. The dividend cover during Q1 was 1.15 times the amount required to meet the 1.625 pence per share targeted for Q1. The dividend trajectory will be appraised by the Investment Manager and the Board on a monthly basis and reported to stakeholders via the factsheet. Outlook Overall, the Investment Manager remains positive for the outlook of the portfolio and RMDL's ability to generate attractive risk-adjusted returns and preserve capital. Valuations are expected to improve as credit spreads return to more normal levels and the defensive nature of the portfolio will mean that significant income will still be generated and distributed as dividends. Post the quarter end, the Company purchased 500,000 shares at a price of 72.5 pence per share on 7th April and these shares are held in treasury. This was at a significant discount to the NAV announced on the portfolio update on the 25th March. At the time of writing the share price remains at a significant discount to the NAV and the Board and the Investment Manager are monitoring this closely. Full Portfolio Listing- As at 19th March 2020 for portfolio update call comprised as follows: Borrower Rank Deal type Sector Business Description Nominal m LTV1 Valuer Private Loan- SPV Holdco Bilateral Loan Asset Finance U.K. focused asset backed lending £10.1 68% V Agent Private Loan- SPV Jnr Bilateral Loan Hotel Three U.K. prime location regional city hotels. £8.5 80% V Agent Private Loan- SPV Jnr Bilateral Loan Hotel Two U.K. prime location regional city hotels. £8.3 80% V Agent Beinbauer Holdco Syndicated Loan Manufacturing  Automotive Parts Manufacturing € 7.9 83% V Agent Zellis Snr Syndicated Loan Business Services HR and payroll services £7.0 78% External Motor Fuel Group Snr Syndicated Loan Forecourt operator National forecourt operator, UK £6.7 56% External Gym Franchise Snr Bilateral Loan Healthcare and fitness Owner operator of gym franchising £6.8 40% V Agent Elysium Snr Syndicated Loan Social Infrastructure Providing acute £6.0 72% External and age care services Private Loan- SPV Snr Bilateral Loan Social Infrastructure Coventry based purpose-built student accommodation - prime location. £5.9 74% V Agent Private Loan- SPV Jnr Bilateral Loan Social Infrastructure Five purpose-built student accommodations located in prime regional U.K. cities £5.9 76% V Agent Private Loan- SPV Jnr Bilateral Loan Real Estate Hotel development, Glasgow £5.1 91% V Agent Busy Bees Childcare Snr Syndicated Loan Social Infrastructure Leading childcare nursery group within the UK £5.0 58% External Valeo Foods Holdco Syndicated Loan Food production and distribution Manufacturer of staple food goods £4.5 61% External Private Loan - SPV Snr Bilateral Loan Social Infrastructure Operational student accommodation based in Glasgow £4.4 62% V Agent Private Loan- SPV Jnr Bilateral Loan Asset Finance U.K. focused asset backed lending £4.4 68% V Agent Private Loan- SPV Jnr Bilateral Loan Real Estate Cambridge based recently built hotel - prime location £4.0 74% V Agent Trent Capital Snr Bilateral Loan Manufacturing & Energy Efficiency Boiler manufacturer and energy efficiency measure installer £3.7 85% V Agent Mehiläinen Jnr Syndicated Loan Social infrastructure Finnish private provider of healthcare and care services € 3.5 44% External Premier Foods Snr Bond Food manufacturing Britain's largest food manufacturing company. £3.5 64% External L'Oscar Snr Bilateral Loan Real Estate Boutique central London hotel £3.1 64% V Agent Voyage Care Jnr Bond Social Infrastructure Providing nursing, dementia and aged care facilities £3.0 54% External EG Group Snr Syndicated Loan Forecourt Operator Global forecourt operator £2.9 49% External Praetura Commercial Snr Bilateral Loan Asset Finance U.K. focused Invoice discounting £2.7 58% V Agent Euroports Jnr Syndicated Loan Economic Infrastructure European ports business with worldwide operations. €2.0 52% External EG Group 2L Jnr Syndicated Loan Forecourt operator Global forecourt operator € 1.8 52% External Private Loan- SPV Snr Bilateral Loan Real Estate Property Bridging - residential £1.8 66% V Agent Trent Capital Snr Bilateral Loan Manufacturing & Energy Efficiency Boiler manufacturer and energy efficiency measure installer £1.5 90% V Agent Private Loan- SPV Snr Bilateral Loan Renewable and Energy Efficiency Payments from domestic renewable heat scheme £1.4 85% V Agent Private Loan Snr Bilateral Loan Real Estate Property Bridging - business £1.3 70% V Agent L'Oscar B Snr Syndicated Loan Real Estate Boutique central London hotel (B facility) £0.9 58% V Agent Private Loan- SPV Jnr Bilateral Loan Hotel Travelodge Hotel £0.9 67% V Agent Private Loan- SPV Snr Bilateral Loan Real Estate Business premises £0.6 63% V Agent Private Loan - SPV Snr Bilateral Loan Renewable and Energy Efficiency Payments from domestic renewable heat scheme £0.5 85% V Agent Private Loan - SPV Snr Bilateral Loan Real Estate Property Bridging - residential £0.5 56% V Agent 1.  LTV - where appropriate as per recent collateral report/valuation/implied or actual equity contribution from sponsor- for private syndicated facilities left blank.

The Company also announces that the Monthly Report for the period to 31 March 2020 is now available to be viewed on the Company website:

https://rmdl.co.uk/investor-centre/monthly-factsheets/

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For further information, please contact:

RM Capital Markets Limited - Investment Manager

James Robson

Pietro Nicholls

Tel: [phone]

International Fund Management - AIFM

Chris Hickling

Shaun Robert

Tel: [phone]

Tulchan Group - Financial PR

James Macey White

Elizabeth Snow

Tel: [phone]

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

Brian Smith

Ciara McKillop

Tel: [phone]

Nplus1 Singer Advisory LLP - Financial Adviser and Broker

James Maxwell

Lauren Kettle

Tel: [phone]

About RM Secured Direct Lending

RM Secured Direct Lending Plc ("RMDL" 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://rmdl.co.uk/investor-centre/monthly-factsheets/

 

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