16 Jul 2020 07:00
RM Secured Direct Lending Plc and RM ZDP PLC | |
("RMDL" or the "Company") | |
LEI: 213800RBRIYICC2QC958 | |
Net Asset Value | |
RMDL announces that its unaudited net asset value per ordinary share as at 30 June 2020, on a cum income basis, was 91.16 pence (31 May 2020: 91.14 pence). |
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RM ZDP PLC announces that the unaudited accrued capital entitlement per ZDP share as at 30 June 2020 was 107.98 pence (31 May 2020: 107.67 pence). |
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NAV & Dividend update NAV % Total Return for the month was +1.80%, which brings the NAV % Total Return for the quarter to 7.09%, year to date ("YTD") to -3.26% and for the last 12 months to -0.16%. The Ordinary Share NAV as at 30th June 2020 was 91.16 pence per share, an increase of 0.02%. This monthly return of 0.02 pence per share arises from positive net interest income net of expenses of 0.94 pence per share and an increase in portfolio valuations and currency hedging costs of 0.70 pence per share. In addition, there is an ex-dividend effect of the 1.625 pence per share total ordinary dividend for the period Q 1 2020, declared in April and paid in June 2020. Market Update There was an improvement in market sentiment from the March lows with government and central bank policy actions providing support and confidence for the market. However, the shape of the recovery remains unclear. Monetary, fiscal and health policy actions are all equally important as we head into H2 2020. The Government has shown with Leicester that local lockdown can be used to target specific areas where there might be a rise in Covid infections offering a glimpse into the "New Normal". Although RM Funds remains cautious on the macro economic outlook, it continues to see a number of value investment opportunities. Corporate bonds and loans have continued to recover over the quarter - for this period the total return on the Markit IBOX EUR Liquid High Yield Index was +11.28% and the S&P European Leveraged Loan index was 9.70%. This rebound is unsurprising as credit had a significant negative swing in March across the board with widespread and indiscriminate selling at the start of the pandemic. Portfolio Update During the quarter the Company purchased 965,000 shares in the market. Both the Board and the Investment Manager remain focused on reducing the discount and therefore continue to closely monitor secondary market levels. As at month end, the Company held cash or near cash from trades being settled of £5m and has capacity to draw an additional £8.8m under its revolving credit facility with OakNorth bank. The portfolio size reduced slightly from £136m to £131m of invested capital as one property bridging loan was repaid, and the Premier Foods, and part of the Motor Fuels Group, holdings were divested. The average portfolio yield increased slightly to 8.62%. Using the mid-market share price against the stated dividend target gives an implied yield for investors of 8.44%. The principal focus over the quarter was the management and monitoring of the existing portfolio of investments. Below is a summary of some key exposures and activities for the period: Asset Finance - (£9.99m) The Borrower has performed better than expected during the period and is operating within covenants and cash paying interest. This transaction has a number of investor protections should business conditions materially deteriorate. Energie Fitness - (£7m) As announced during the period, RMDL supported a management buy-out of the business, led by its former founder. The consortium injected new equity and subordinated capital into the business. As part of the transaction RM Funds was able to successfully call upon a guarantee pledged to RMDL from the previous financial sponsor for £530,000. A portion of this capital was reinvested into the consortium to support the buy-out and provide future liquidity. The claim under the guarantee led to a gain of circa 0.375 pence per share in June (this has been recognised as income however we are seeking tax advice as to whether this gain should be recognised as capital. This income recognition might be adjusted in the future to capital which would be dependent on the outcome of the tax advice). In terms of the equity ownership of the business, RMDL will own a net 28% equity stake within the business and Pietro Nicholls will join the Board (unpaid) to represent the RMDL shareholding. The consortium principally invested via subordinated loan notes with the equity being invested at nominal value. RM Funds wrote off its arrangement fee and instead invested in the equity on the same terms as the consortium. RMDL's £7m senior secured investment remains current, with covenants and revised pricing - the loan is marked at a discount to par reflecting the staged reopening of the economy. The Investment Manager believes this is a prudent approach and is appropriate given the recent capital injection which is subordinate to the RMDL term loan. Operational Hotel Portfolio 1& 2 - (£8.08m) / (£7.8m) Whilst the hotels remained largely closed during the period the Borrowers paid their interest as per their payment schedules. It is expected that the hotels will start to open from July. These loans remain marked at a discount to par whilst we see how the Covid situation unfolds; again, the Investment Manager considers this is a prudent approach. Automotive Parts Manufacturing - (£6.16m) The main factory is now operating above the base case forecast delivered by management in March. As per the allowance within the loan documentation, the Borrower has elected to Pay in Kind "PIK" for the next quarter. This increases the financing costs for the Borrower. Over the period the Investment Manager has continued to mark the value of the loan lower. Specifically, this is because of the potential risks with supply chain disruption and weakness on the demand side. Student Accommodation - Loan 1 (£5.99m) is utilising an interest reserve account whilst the Borrower / Sponsor finalises a decision about the property for 2020/2021 academic year. Loan 2 (£5.78m) bookings are relatively strong with reservations at c.26% for the forthcoming 2020/21 academic year compared to 33% at the same time for the 2019/20 academic year. The Borrower has an Interest reserve account, which has been utilised to pay interest to date and this Borrower will be allowed to capitalise interest for the next two quarters if required; the Lender still has one quarter cash interest in reserve. Central London 5* Boutique Hotel - (£4.1m) Successfully refinanced over the period, enhanced security package with additional £7m of guarantees (total of £12m), increase in coupon to Libor + 7.75% (increase of 166bps). Senior secured LTV of circa 57%, interest is paid current/cash. Travelodge hotel - (£0.9m) RMDL has lent money to one hotel that has Travelodge as a tenant. The interest on the loan has been serviced as expected and the repayment schedule and timing of future receipts is not expected to change. | |
The Company also announces that the Monthly Report for the period to 30 June 2020 is now available to be viewed on the Company website: | |
https://rmdl.co.uk/investor-centre/monthly-factsheets/ | |
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For further information, please contact: | |
RM Capital Markets Limited - Investment Manager | |
James Robson | |
Pietro Nicholls | |
Tel: 0131 603 7060 | |
International Fund Management - AIFM | |
Chris Hickling | |
Shaun Robert | |
Tel: 01481 737600 | |
Tulchan Group - Financial PR | |
James Macey White | |
Elizabeth Snow | |
Tel: 0207 353 4200 | |
PraxisIFM Fund Services (UK) Limited - Administrator and Company Secretary | |
Brian Smith | |
Ciara McKillop | |
Tel: 020 7653 9690 | |
Nplus1 Singer Advisory LLP - Financial Adviser and Broker | |
James Maxwell | |
Lauren Kettle | |
Peel Hunt LLP - Financial Adviser and Broker | |
Luke Simpson | |
About RM Secured Direct Lending | |
RM Secured Direct Lending Plc ("RMDL" or the "Company") is a closed-ended investment trust established to invest in a portfolio of secured debt instruments. | |
The Company aims to generate attractive and regular dividends through loans sourced or originated by the Investment Manager with a degree of inflation protection through index-linked returns where appropriate. Loans in which the Company invests are predominantly secured against assets such as real estate or plant and machinery and/or income streams such as account receivables. | |
For more information, please see | |
https://rmdl.co.uk/investor-centre/monthly-factsheets/ | |