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(Alliance News) - Chenavari Toro Income Fund Ltd on Monday said it is introducing measures to narrow its share price discount, including an enhanced dividend policy, and special quarterly distributions.
Shares in Chenavari Toro were up 4.7% at EUR0.60 in London in morning trading.
The company invests and trades in public and private asset backed securities as well as direct origination. As at April 30, Chenavari Toro's discount to net asset value was 34%.
"While the board acknowledges that the company's net asset value has held up more robustly than most of the company's listed peers in the recent major market dislocation arising from the global Covid-19 pandemic, it also acknowledges the disappointment caused to shareholders by the persistent share price discount to NAV," said Chenavari Toro.
To combat this discount, the company has enhanced its dividend policy to target a quarterly dividend yield of 2.5%, giving an annualised dividend yield target of 10% with reference to NAV. The net target return is still between 9% and 11% per annum.
Moreover, Chenavari Tori is rebalancing is investment strategy to focus on tradable securities and is planning to realise illiquid assets. The investment strategy will focus on liquid and tradable asset backed securities and collateralised loan obligations instead.
Share buybacks will remain under considerations to help with discount narrowing, while Chenavari Toro will keep investing in hedging instruments.
The company will also implement quarterly special distributions of its available excess cash. At the end of every calendar quarter in 2020, Chenavari Toro will maintain a maximum cash balance in its portfolio of 10% of NAV while all excess cash above this will be distributed as special dividends on a quarterly basis on top of any other quarterly dividends.
Starting January 2021, the maximum cash balance limit will fall to 5% of NAV unless the investment manager decides otherwise.
Chair Fred Hervouet said: "The persistence of the discount to NAV has somewhat overshadowed the underlying quality of the company. We hope that the announcement of these new initiatives will provide assurance to shareholders that the company will do whatever it takes to seek to narrow and eventually eliminate the discount. Through these new steps, we are demonstrating the Board's commitments to seek to generate a high investment return profile for shareholders, and maximise shareholder value".
By Anna Farley; annafarley@alliancenews.com
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