Last checked at 
13 Aug 2009 12:29
Queen's Walk Investment Limited (the "Company")
13 August 2009
This interim management statement relates to the period from 31 March 2009 to 13 August 2009 and has been prepared solely in order to comply with the requirement (pursuant to the EU Transparency Directive as implemented by the Disclosure and Transparency Rules) for an interim management statement to be made by the Company no earlier than 3 June 2009 and no later than 19 August 2009. The Company is currently in the process of preparing its quarterly report for the period ended 30 June 2009 which is expected to be released in September 2009. Unless otherwise noted herein, the financial information provided in this interim management statement (and the asset valuations underlying that financial information) are as at 31 March 2009 and such financial information (and underlying valuations) will be stated as at a more recent date in the Company's forthcoming quarterly report.
Performance Summary
As at 31 March 2009, the Company's NAV was €3.96 per share down from a NAV of €4.12 per share as at 31 December 2008. The decrease in NAV reflected the increase in discount margin applied to the SME and continental European mortgage portfolios.
In the quarter ended 31 March 2009, the Company estimated cash flows for the June quarter of €5.5 million (using 30 June 2009 FX rates). Actual cash flows recorded in the quarter ended 30 June 2009 were €5.2 million. The Company had a net cash balance of €9.6 million as at 13 August 2009, following payment in July 2009 of €2.1 million for the March 2009 dividend, and payment of €1.5 million to reduce the principal of its financing facility.
In November 2008 the Company renegotiated its financing facility, thereby reducing its debt and agreeing to a flexible two year repayment schedule of the outstanding debt. The revised agreement reduced the risk associated with material change clauses that could have forced a repayment of the debt on unfavourable terms. Following the repayment of €1.5 million of the facility in July 2009, the current outstanding amount of €22.0 million is already significantly lower than the agreed target loan amount at 31 March 2010 of €25 million.
Investment Portfolio
The tables below summarise the Company's investment portfolio as at 31 March 2009.
Portfolio Composition by Jurisdiction as at 31 March 2009*
*By reference to underlying asset jurisdiction. Figures stated as a percentage of the fair value of the Company's residual investments including accrued interest.
| Jurisdiction | % |
| Portugal | 43.2% |
| Germany | 24.1% |
| Italy | 15.9% |
| Holland | 10.7% |
| UK | 5.5% |
| France | 0.6% |
| CDO | 0.0% |
| US | 0.0% |
Portfolio Composition by Asset Type as at 31 March 2009*
*By reference to underlying asset collateral. Figures stated as a percentage of the fair value of the Company's residual investments including accrued interest.
| Portfolio Composition | % |
| Prime | 59.4% |
| SME | 33.2% |
| Investment Grade Bonds | 4.8% |
| SubPrime | 1.8% |
| NearPrime | 0.8% |
| CDO | 0.0% |
As at 13 August 2009, the securitisations to which the Company had exposure through its residual investment portfolio were:
| Issuer | Description of Underlying Assets |
| Alba 2005-1 plc | UK non-conforming* and buy-to-let residential mortgages
|
| Alba 2006-1 plc | UK non-conforming residential mortgages, primarily first-ranking
|
| Amstel Corporate Loan Offering BV 2006-1 | Middle market corporate loans |
| Cheyne CLO Investments I Limited | Investment grade CLOs |
| Cheyne High Grade ABS CDO, Ltd | Investment grade ABS CDOs with exposure to the US sub-prime mortgage market |
| Earls Eight Limited (Tranche 312B) | SME loans |
| Eirles Three Limited (Tranche 227B) | SME loans |
| Eirles Three Limited (Tranche 236B) | SME loans |
| Eurosail 2006-1 plc | UK non-conforming and buy-to-let residential mortgages |
| Lusitano Mortgages No. 1 plc | First-ranking, fully amortising Portuguese residential mortgages
|
| Lusitano Mortgages No. 2 plc | First-ranking, fully amortising Portuguese residential mortgages
|
| Lusitano Mortgages No. 3 plc | First-ranking, fully amortising Portuguese residential mortgages
|
| Magellan Mortgages No. 1 plc | First ranking, fully amortising Portuguese residential mortgages
|
| Magellan Mortgages No. 2 plc | First ranking mortgage rights (or second-ranking where first-ranking is also transferred) Portuguese residential mortgages
|
| Newgate Funding plc | UK non-conforming residential mortgages, primarily first-ranking
|
| RASC Series 2006-KS2 Trust | US Sub-prime residential mortgages, primarily first-ranking |
| RMAC 2004-NSP4 plc | UK non-conforming residential mortgages, primarily first-ranking
|
| RMAC 2005 NS3 plc | UK non-conforming residential mortgages, primarily first-ranking
|
| RMAC 2005 NS4 plc | UK non-conforming residential mortgages, primarily first-ranking
|
| Sestante Finance S.R.L. | First-ranking prime Italian residential mortgages
|
*Non-conforming relates to subprime and near prime residential mortgages.
Since July 2008, the Company has spent €9.8 million (using FX rates at dates of purchase) purchasing seventeen investment grade Asset Backed Securities ("ABS"). These securities have exposure to residential and commercial mortgage portfolios. The table below summarises the Company's ABS exposure by sector and rating at the time of purchase.
Percentage of Portfolio by Value
| Rating by Type | UK Prime RMBS(2) | UK Buy To Let RMBS (1) | UK Non-Conforming RMBS (1) | Euro Prime RMBS (1) | UK CMBS (2) | Euro CMBS (2) | SME | Total |
| AAA | 3.45% | 12.58% | 2.47% | 9.35% | 7.97% | 35.83% | ||
| AA | 23.76% | 4.58% | 28.34% | |||||
| A | 11.57% | 3.37% | 14.95% | |||||
| BBB | 12.90% | 7.98% | 20.89% | |||||
| Total | 16.36% | 36.34% | 14.04% | 9.35% | 4.58% | 11.36% | 7.97% | 100.00% |
(1) Residential mortgage backed securities
(2) Commercial mortgage backed securities
Outlook
The Company will continue to focus on improving financial stability through debt repayment and improved performance through new investments. Since 30 November 2008, the Company has repaid €18.5 million of debt. As at 13 August 2009 the Company has spent €9.8 million on purchasing investment grade bonds.
Cash balances remain strong with cash flows currently running at €5.5 million a quarter. Following the repayment of €1.5 million of the facility in July 2009, the current outstanding amount of €22.0 million is already significantly lower than the agreed target loan amount at 31 March 2010 of €25 million.
Over the coming months, the Company aims to continue selectively acquire mis-priced assets in the ABS markets. The Company is also investigating transactions that allow banks to deconsolidate their ABS balance sheets to achieve regulatory capital relief. Return targets for these types of assets are typically in excess of 20%.
Given the cash flow generation of the Company's portfolio, the Company remains well positioned to take advantage of the continued investment opportunities in the ABS markets.
Investor Enquiries:
Caroline Villiers
M:Communications Tel: +44(0)20 7153 1521
About Queen's Walk Investment Limited:
Queen's Walk Investment Limited (the "Company") is a Guernsey-incorporated investment company listed on the London Stock Exchange. The Company invests primarily in a diversified portfolio of subordinated tranches of asset-backed securities, including the unrated "equity" or "first loss" residual income positions typically retained by the banks or other financial institutions which have originated the loan assets that collateralise a securitisation transaction. The Company makes such investments where its investment manager, Cheyne Capital Management (UK) LLP ("Cheyne Capital"), considers the coupon or cash flows from the investment to be attractive relative to the credit exposure of the underlying asset collateral.
Disclaimer
This document contains forward-looking statements with respect to the financial condition, results and business of the Company. By their nature, forward-looking statements involve risk and uncertainty. The Company's actual future results may differ materially from the results expressed or implied in these forward-looking statements.
Any projections or analysis provided in this statement to assist the recipient in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. Accordingly, any projections or analysis should not be viewed as factual and should not be relied upon as an accurate prediction of future results. Furthermore, to the extent permitted by law, neither the Company nor any of its agents, service providers or professional advisers assume any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this statement or for any decision based on it.