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23 Nov 2020 09:02
London, UK, 23 November 2020
Edison issues outlook on Marble Point Loan Financing (MPLF)
Marble Point Loan Financing (MPLF) is a closed-end fund that invests in leveraged loans mostly by buying the equity tranches in collateralised loan obligations (CLOs) managed by Marble Point Credit Management (Marble Point). The experienced credit investment team employs a conservative, disciplined approach. Unlike most of its peers, MPLF marks its portfolio to market, which resulted in considerable NAV volatility during the pandemic. NAV halved during Q120 but subsequently rose by nearly 50%. However, although loan defaults have risen in its underlying portfolio, cash flow generation has remained strong. After suspending its dividend in April 2020, reinstated it in August and the shares now offer a yield of 15.1%.
The stock is trading at a 9% discount to the last published NAV (31 October 2020). We think the company may be penalised for its marking to market approach (its peers usually prefer marking to model), paradoxically because it actually provides greater transparency. If the CLOs and asset prices continue to recover, this should be reflected in the shares, with cash flow fundamentals better priced in.
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