LONDON (Alliance News) - Chenavari Capital Solutions Ltd Thursday said it had invested about GBP9 million in a first-loss credit linked note referencing the relationship loan book of a Eurozone bank, its third primary investment.
It didn't name the bank, but said the portfolio represents approximately 250 credit obligations with a global geographical distribution concentrated in the US, UK and France and has a majority of investment grade exposure.
"The note is the latest issuance from a long running programme that has exhibited a track record of low credit losses for investors," it added.
It said the deal represents about 7% of its net asset value, and it is now about 71% invested based on its net asset value on April 30.
"The Investment Adviser continues to work on the pipeline of transactions with multiple deals being analysed which could potentially offer good risk-adjusted returns and attractive relative value versus other investment opportunities," it said.
Chenavari said the new transaction is protected from adverse migration by stringent replenishment criteria. There are also a large number of undrawn exposures included in the transaction, and the bank has undertaken to retain a 5% exposure to each name in line with the cash reserve ratio, which increases alignment between investor and the bank.
The note is issued directly from the bank's balance sheet, which means Chenavari is taking a counterparty risk to the bank.
"This is mitigated by the systemically important nature of the bank, its strong credit rating and the liquidity of CDS which the company could potentially use to hedge this risk," it said.
Chenavari shares last traded at 106.75 pence.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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