KKVL.L Regulatory News (KKVL)

 11 November 2020

KKV Secured Loan Fund Limited

LEI: 2138007S3YRY3IUU4W39

Valuation Update

Further to the announcement of 30th September 2020, the Board, AIFM and Portfolio Manager have been progressing with the valuation review of the Company's portfolio for inclusion in the annual financial statements, assisted by the review undertaken on certain assets by KPMG.

The review is ongoing with certain information still being collated and, as such, the Company is not currently in a position to provide detailed guidance regarding collective or individual asset values, which remain subject to audit. However, the Company is starting to get an indication of the potential outcomes from this review. The assets of both the Ordinary Share and the C Share portfolios can be considered in three main categories:

Assets subject to the review by KPMG: Certain reviews remain outstanding and final valuation numbers have not yet been determined for these assets, in some instances as third party specialist asset valuations are being finalised. Creating specific point values as at 30th June 2020 for some assets is highly challenging given the great uncertainty and range of potential outcomes. However, it is becoming clear that a number of these assets will see very material impairments. Certain of these assets were previously classified as Stage 1 assets but will be moving into Stage 2 and 3 and hence will be impaired, although the precise quantum has yet to be determined with any degree of accuracy.

Anaerobic Digestion ("AD") plants: The Ordinary Share portfolio holds positions in a number of Anaerobic Digestion ("AD") plants which have been subject to a separate review for the year-ended 30th June 2020. The review of these assets is substantially complete but remains subject to audit. The expected outcome is that the current value of these plants will show a further small deterioration in the aggregate value of the AD plant positions of approximately £1.5m.

Other assets that were not subject to a third party review: The circumstances at borrower level and the macro environment around Covid-19 may see some assets move from Stage 1 or 2 to a higher stage. In addition, the Portfolio Manager has revised the methodology for assessment of Expected Credit Loss to reflect a realistic range of outcomes for the nature of investments held within the portfolio. Therefore, it is also expected that the probability-of-default and the loss-given-default for both Stage 1 and Stage 2 assets will be higher than previously utilised in the light of the economic environment and the Company's more recent credit loss experience. It is likely that there will be a wide range of outcomes seen in the impairments required on these assets, from some which may see only modest increases in the current Expected Credit Loss provisions to others which may see very material impairments. It should be noted that the new policy will also be subject to audit review.

Considerable work is still required to finalise the valuations and the Company will provide a further update at such time as any new material information becomes available. The Board continues to work very closely with the Portfolio Manager and the AIFM in finalising these figures for audit.

The Company also anticipates publishing a circular next week to propose the change of investment objectives and policies to permit the managed wind down of both share classes of the Company.

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