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27 May 2016 07:00
Chenavari Capital Solutions Limited
Primary Investment
Chenavari Capital Solutions Limited (the "Company") announces a new primary transaction.
Primary transaction
The Company has re-invested approximately £3.5 million in a repeat transaction replacing an exposure that recently matured in the portfolio. The transaction is a first loss exposure to SME and corporate loans extended by a large Swiss bank (the "Bank"). The loan portfolio is very granular with over 1,500 reference entities and a maximum concentration of 0.5%. The transaction references the core on-going business of the Bank.
The Bank has a long track record of lending in the Swiss SME and corporate market and has experienced extremely low loan losses over the last 10 years with minimal increase through the financial crisis. The tight underwriting standards and borrower characteristics are integral to this stable performance. The Bank has issued several regulatory capital transactions (this is the fourth since 2013) which have exhibited strong performance. The Company participated in one of these previous deals in the secondary market which redeemed in April 2016 with no tranche losses. This purchase is effectively a replacement of that exposure.
The transaction is robustly structured with credit-linked notes being issued by a special purpose vehicle which significantly removes counterparty risk to the Bank. The cash deposit will remain with the Bank but is subject to rating based triggers which provide protection to investors. The Bank will retain a significant percentage of each loan on their balance sheet, in excess of the regulatory minimum, in order to increase alignment of interest in the transaction.
Upon acquisition, the transaction represents approximately 3% of the Company's net asset value. Under the Investment Advisor's base case the anticipated return on the transaction is a double-digit internal rate of return for a portfolio that has exhibited extremely low losses and volatility.
Enquiries:
Kirstie McLaren
Chenavari Investment Managers
Email: ccslir@chenavari.com
Telephone: +44 20 7259 3600
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