To generate an attractive total return for shareholders consisting of dividend income and capital growth through investments in specialty lending opportunities.
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Frankly, I think this is a good idea, and very timely as there is likely to be a general investor bloodbath at some time next year. I fully expect a deep and long lasing recession which will leave no business unscathed (except gold miner, perhaps).
Millfield
I think you have that wrong. if it is a deep recession selling out of debt particularly the companies they own shares in will be disastrous. The returns will be minimal.
An obvious but, is they will probably cease doing so until the market picks up. IE no chance of getting out at good price or a long wait to do so. I will be selling out (probably) early. Annoying as the dividends from this company are covered by the £5,000 starter savings tax allowance.
Well clearly based on share price the market doesn't care to much for this wind down.
Out of 18 shares only vpc is down today. I really struggle to understand the stupidity of some people on here.
If the market doesn't t understand it but you do, you will ultimately be the genius.
Read again I didn't say the market doesnt understand it. I said the market doesnt think much of the probability of a wind down based on the share price.
No need for snide comments.
SD
Please explain the 5k "starter allowance". It is a new one to me (and I don't employ an accountant).
I Dont employ an accountant either. It's basically for low income people like myself.
This is the HMRC explanation.- https://www.gov.uk/apply-tax-free-interest-on-savings.
Note it must be streamed interest Paid as dividends if its from an investment trusts.
Ignore the bit about Open ended as they can't hold illiquid assets.
VSL today 81.4p to 82p lower than post the announcement.
Clearly the market is not at all Happy with wind down. The debt sector doesn't seem to be going in the same direction.
Damn just noticed I have gone into a loss on vsl. I was up 3%. On the other hand I have a small limit order on them.
'There will be a general meeting held in due course to approve this winding up. If approved it is expected the board of the company will begin to realise all of the company's investments and make timely capital returns to shareholders.'
I don't really understand (I am new) , are they going to return cash to us or ?? Anyone can answer it ? thanks
Yes @Lfish - gradually, and they will still be paying a dividend on the remaining assets. Take a look at the link below, which refers to ICG Longbow. They have been winding down now for 14 months, and are still paying a quarterly dividend. As each investment is sold, they return some capital to shareholders in addition to the dividend.
https://citywire.com/investment-trust-insider/news/overlooked-longbow-leaps-16-on-surprise-move-to-wind-up-7-yielding-loan-fund/a1421350
Possible problems are that they may not get full value for all investments, and as they get close to ending the company, they probably won't want to continue paying for listings, at which time most people will sell out quickly before the company is delisted. Personally I expect to still be here for 18 months or so.
Thank you @adv11 so much for your information and advice, I only invested VSL about 18 months ago and now loss money on it, it is very tricky decisions to sell now or wait a bit.....
I believe the wind down option will be to run off loans - most are short term (under five years) so potential losses are limited / the more difficult area will be unquoted shares and any remaining SPAC exposure which will probably be much more market sensitive, i. e. Timing
Sorry forgot to add the split as I read it is 67% loans 33% shares etc
The 33% shares are in unlisted companies (mainly) so you have to hope fintech turnaround. I think 50% fall. And the unlisted ones can be sold. Furthermore at a reasonable price not a fire sale price
Coming to the end of a similar process for RDL which is now private, almost all money returned with a reasonable amount hopefully still to come.
The process has been going on for about 3 years but has been slowed down by covid.
If all goes well I would expect VSL run down to return a reasonable profit but would prefer to if they kept going with good dividends.
Was also in PSSL which got taken over at a decent profit, the problem is the markets undervalue these companies so are ripe for takeover or wind down, I think only Honeycomb (now Pollen) will be left.
Terrym1
Price is definitely going the wrong way at the moment.
Not sure about pollen it is on huge discount though. It might end up in wind down.
Biopharma looks like good option. Regular special dividends as well.
From today's rns
" The average interest rate on the portfolio was 13.9%, up from 13.3% in October 2022"
Interest rate in December 21 was 10.5%
Bakkt up 94% will help, still some way to go though
This was a dividend/income hold for me. Can’t work out whether to hold, add or sell now. What are others views?
Likewise I bought for income and it has been great at maintaining the divi through many difficulties. As to what to do? It’s on a nearly 20% discount so in theory if it could be run off at net then there’s a clear 20% gain. The loan book is circa 67% and fairly short term (less than 5 years) so I would see that being run off/sold at pretty close to net. The grey area is the 33% unlisted stocks, very much out of favour this last year or so but I do detect a change in that with trusts with similar holdings making steady improvement - so I’m hoping for the divi but will keep an eye on discount and monitor the unlisted side
Good discussion and info already on this thread - thanks everyone. I too am pondering course of action.
Simplisticly, a potential 25% capital gain if book value of assets realised (81p share price --> 101p nav).
I'd expect loans to realise at close to book value. Imponderable is the unlisted stock though, like Broomtree, think sentiment has turned here and we may see NAV rising as a result.
However, need to assess the time frame this will play-out over and the cashflow:
- What dividends and when
- how they'll tail off as loans run down
- how long will it take to shift the unlisted stock
- inflation outlook over next 2-3 years
I feel there are too many unknowns at this stage to make an informed decision. Will wait to see what transpires from the GM and subsequent info from the trust. Preference would be for VPC to continue.
I'm holding for now, really frustrated at the decision to wind this up. Good steady dividend payer going along nicely, then some greedy II comes in & kills the golden goose. Happening all too often now because the UK market is undervalued more or less across the board. If this had been based stateside it would have been valued at £1+ & everyone would have been happy. Hey ho, waiting to see how it plays out now.
Tipped in the Telegraph's Questor column today. Some consider this the 'kiss of death' but might explain all the buying this morning.
https://www.telegraph.co.uk/investing/shares/new-holding-yields-10pc-offers-chance-capital-gains/
This new holding yields 10pc – and it offers the chance of capital gains
Questor Income Portfolio: we’ll deploy the proceeds of a matured retail bond into a specialised fund that is narrowing its discount
The fund is VPC Specialty Lending, tipped in our “trust bargains” format in October last year. It makes loans to businesses, mostly American, which typically lend the money on to their own customers. While that may sound risky, it secures its loans against its borrowers’ assets, limits the amount it lends relative to the value of its collateral and scrutinises its borrowers carefully on a continuous basis.
The yield was more than 10pc when we tipped the fund, although a slight rise in the shares since then has trimmed it marginally. It is still more than we would get from any retail bond of tolerable risk, although we should acknowledge that the fund too poses risks, such as that borrowers may default if interest rates continue to rise or if America experiences a serious recession.
There’s more to the story, however. The trust has proposed that it be wound up, following pressure from activist investors.
This should not only limit the scope for damage should there be a deep recession, as maturing loans would not be reinvested, but offer the chance of capital gains too. This is because the trust currently trades at a steep discount to its net asset value; if the managers can realise their assets at or close to book value and organise the wind-up without incurring undue cost, investors should receive back a sum much closer to NAV, even if they have to wait for it.
We will be happy to receive the generous yield for as long as the trust remains in business.
Still no share price rise. Trading roughly below the price at which the wind up was announced. Although the there's been no vote yet.