AEFS.L Regulatory News (AEFS)

Alcentra European Floating Rate Income Fund Limited

Market Commentary

The European loan market had a busy September with a broad range of primary transactions providing new investment opportunities. This supply had little impact on secondary markets, with the market technically strong, and the Credit Suisse Western European Leveraged Loan Index ("CS WELLI") (hedged to EUR) posting a +0.34% return. This took the CS WELLI return for the year-to-date to +2.88%[1].

The month began with the launch of anticipated large M&A related transactions for Stada, Avantor/VWR and Refresco, alongside a range of other smaller fundraises for both new issuers and add-ons to existing deals. As those were absorbed comfortably, the end of the month saw increased focus on refinancing activity, with SIG Combibloc the first to announce a repricing transaction, followed immediately after month-end by Altice International and SFR both announcing dual currency loan transactions to refinance bonds.

Year-to-date loan volume stands at €84.9 billion at month-end, 71% up on 2016[2]. With new money M&A issuance picking up, the level of new investment opportunities is better than it has been for most of the year, although for the year as a whole a significant proportion of issuance has been refinancing driven. The market has also seen a sizeable number of repayments over the year and so net issuance is significantly lower, although the market has seen some growth with the CS WELLI now exceeding €200 billion of face value compared to €166 billion a year ago1.

The combination of repayments and continued inflows into the asset class continues to provide robust demand for loans, as a broad range of institutional investors look to the asset class to provide yield without adding duration to their portfolios. CLO issuance has also continued to be strong, with year-to-date volume reaching €12.8 billion[3], compared to the €16.8 billion for the full year 2017, and with a strong pipeline the market is now expecting to set a new post-crisis issuance record by year-end.

Looking forward, loan issuance is expected from large "take private" transactions for Paysafe and Nets, as well as a widely rumoured €10 billion loan and bond refinancing of Italian telecommunications company Wind. Given the level of demand for the asset class we expect these transactions to be comfortably absorbed by the market[4].

Portfolio Update

The worst performer was German pharmaceutical business Aenova (-7.3%) which saw some selling after reporting weaker results. UK chicken supplier, Boparan (-4.3%), saw some volatility after some negative press stories over some practices in one of the plants led to operations at the plant being temporarily suspended. The strongest performer was again Vivarte Super Senior debt (+7.1%) which benefitted from improved financial performance of the business and continued improvement in sentiment around the name, while Concordia (+5.3%) and SSK Perstorp (+2.5%) also performed well.

ENDS.

For further information please contact:

Alcentra Limited

Simon Perry +44 20 7367 5272

Factsheet

An accompanying factsheet which includes the information above as well as wider commentary on the investments made by the Fund can be found on the Fund's website www.aefrif.com.

Background Information

Alcentra European Floating Rate Income Fund Limited, a Guernsey Authorised Closed-Ended Collective Investment Scheme, regulated by the Guernsey Financial Services Commission and listed on the Main Market of the London Stock Exchange invests predominantly in senior secured loans and senior secured bonds issued by European corporates and targets returns (net of fees and expenses) of 7% to 10% per annum. The Fund targets a dividend yield of 5.5 pence per £1.00 issue price of the initial offering of shares in the Fund for the first full year of investment, paid quarterly.

Important Notices

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

This report is aimed at existing investors in the fund and has not been approved by any competent regulatory authority.

The information contained in this document is given as at the date of its publication (unless otherwise marked) and is based on past performance. Past performance is not a guide to future performance and the value of investments and investment value can go down as well as up. The future performance of the Fund will depend on numerous factors which are subject to uncertainty. Including changes in market conditions and interest rates and exchange rates and in response to other economic, political or financial developments, investment return and principal value of your investment will fluctuate, so that when your investment is sold, the amount you receive could be less than what you originally invested. Past or current yields are not indicative of future yields.

This document does not contain any representations, does not constitute or form part of any solicitation of any offer to sell or invitation to purchase any securities of the Fund, nor shall it or any part of it or the fact of its distribution form the basis of or be relied upon in connection with any contract therefor, and does not constitute a recommendation regarding the securities of the Fund. Nothing in this document should be construed as a profit or dividend forecast.

This document includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include, without limitation, statements typically containing words such as "believes", "considers", "intends", "expects", "anticipates", "targets", "estimates", "will", "may", or "should" and words of similar import. The forward-looking statements are based on the beliefs, assumptions and expectations of future performance and market development of Alcentra Limited ("Alcentra"), taking into account information currently available and made as at the date of this document. These can change as a result of many possible events or factors, not all of which are known or within Alcentra's control. If a change occurs, the Fund's business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future performance. Alcentra qualifies any and all of the forward-looking statements by these cautionary factors. Please keep this cautionary note in mind while reading this document.

An investment in the Fund is suitable only for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear losses (which may equal the whole amount invested) that may result from such an investment. An investment in the Fund should constitute part of a diversified investment portfolio. Accordingly, typical investors in the Fund are expected to be sophisticated and/or professional investors who understand the risks involved in investing in the Fund.

Alcentra gives no undertaking to provide recipients of this document with access to any additional information, or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent including in relation to any forward-looking statements. The distribution of this document shall not be deemed to be any form of commitment on the part of Alcentra to proceed with any transaction.

This document is issued by Alcentra Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and whose registered address is at 160 Queen Victoria Street, London, United Kingdom, EC4V 4LA.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

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