Net Asset Value & Publication of Monthly Report
22 November 2022
The net asset value ("NAV") of Marble Point Loan Financing Limited ("MPLF") as at the close of business on 31 October 2022 is as follows:
October 2022 NAV per Ordinary Share (1)
September 2022 NAV per Ordinary Share (1)
Monthly Change in NAV per Share (1)
· MPLF's estimated NAV total return was 0.00% in October, compared to the total return of the Credit Suisse Leveraged Loan Index of 0.85%.
· Secondary loan prices rose slightly in October as persistent retail fund outflows were digested by new CLO creation and new loan issuance remained limited. Loan issuance declined slightly compared to September as the issuance generally reflected smaller add-on or incremental facilities as opposed to larger M&A and LBO transactions. As previously noted, new LBOs face significantly higher interest burdens as well as a diminished underwriting appetite from investment banks when contemplating transactions that might be financed in the syndicated loan market. Despite a rally in equity markets throughout the month, retail loan fund flows remained negative in October, with outflows higher month over month in a continuation of the broader risk-off mindset following determined Federal Reserve statements on interest rates increases.
· CLO equity valuations for the month declined slightly while quarterly distributions were received across the portfolios. The decline in CLO equity market value was generally offset by the magnitude of the quarterly payments.
· As noted in prior commentary, during these volatile markets Marble Point believes portfolio credit losses may be mitigated and long term value created from the recycling of principal proceeds within the CLOs into assets at attractive prices and spreads. Morningstar/LCD reported $20.0 billion of loan repayments during October for an annualized monthly prepayment rate of 16.7%. This was the highest monthly prepayment rate reported since April 2022.
· Quarterly distributions received by MPLF from its portfolio holdings totaled approximately $9.2 million in October, or 4.6 cents per share outstanding. October distributions for most CLOs were lower quarter over quarter due to a widening basis between 1 month and 3 month LIBOR that has impacted the excess spread available to CLO equity. In the face of these localized impacts during a volatile rate environment the portfolio continued to generate cash distributions in excess of the fund's quarterly dividend. Specifically, overall portfolio distributions at MPLF were roughly flat quarter over quarter due to Marble Point CLO XXIV making its first payment in October. In fact, this distribution was higher than projected due to a one time flush of excess par generated in part from Marble Point's relative value based active trading style.
· No constituents of the Morningstar/LSTA Index defaulted in October, and MPLF experienced no defaults in its underlying portfolios. The Index's lagging 12-month default rate by notional amount was 0.83% at October month end. As previously noted we expect defaults to increase off these historically low levels amidst broader market volatility and resulting adverse impacts to leveraged business models.
· The CSLLI delivered a 0.85% return in October as the average indicative bid price of the CSLLI increased to 91.78% at 31 October from 91.60% at 30 September. The weighted average indicative bid price of MPLF's underlying loans increased to 92.06% at 31 October from 91.88% at 30 September. Although headline index levels rose slightly during the month, certain tail risk measures increased in October. The percentage of loans bid below 80% in the index increased to 7.11% in October from 5.79% in September. This was in part caused by an increase in the incidence of ratings downgrades in the lower tier of the leveraged loan market.
· October CLO issuance totaled $8.7 billion across 20 new issue CLOs. Attractive loan entry points have allowed managers to opportunistically issue deals and accept wider CLO liability levels. Other issuances may reflect a desire from certain managers to term out shorter maturity warehouse financing into a securitization despite the higher financing costs.
· Institutional loan volume totaled $7.7 billion in October according to Morningstar/LCD. This was the fourth consecutive month where less than $10 billion of institutional issuance was reported, and year-to-date issuance has declined over 63% from 2021 volume through October. With rising interest rates and debt underwriting hesitancy from global investment banks, we expect syndicated loan issuance may face consistent headwinds over the near term.
· Retail loan funds experienced an outflow of approximately $8.0 billion in October, greater than the $6.8 billion outflow reported in September according to J.P. Morgan. This represented the largest monthly retail outflow since March 2020.
· Since the end of October, the average indicative bid price of the CSLLI has increased by 0.60% to 92.38% (as at 17 November 2022). A better than expected November CPI print caused the loan market to rally on the bet that the Federal Reserve may lower the pace of future interest rate hikes in its effort to curb inflation.
· As previously reported, on 19 October Marble Point priced Marble Point CLO XXV ("MP25") a $300 million CLO, at which time MPLF committed to roll its $8.0 million investment in the loan accumulation facility ("LAF") and invest an incremental $6.8 million for a 67.8% interest in the equity tranche of the deal. In connection with the pricing of the deal Marble Point continued ramping assets in the LAF; the total amount of assets in the LAF was $246.2 million as at 31 October 2022. The closing of MP25 is expected to occur on 23 November 2022.
MPLF's October 2022 Monthly Report is available on its website: www.mplflimited.com
Marble Point Loan Financing Limited
T: +44 (0) 20 7259 1500
Stifel Nicolaus Europe Limited
T: +44 (0) 20 7710 7600
(1) NAV figures are provided for informational purposes only and are unaudited, estimated by Marble Point Credit Management LLC ("Marble Point"), the investment manager of MPLF, and subject to adjustment. Marble Point estimates MPLF's NAV on a monthly basis as at the end of each month. Estimates with respect to a date falling on a calendar quarter end are subject to revision when the quarterly NAV is determined. NAV is calculated as the sum of the value of MPLF's investment portfolio, any cash or cash equivalents and other assets less liabilities. NAV is reduced by the amount of a dividend to the extent the ex-dividend date occurs during the period presented. NAV total return figures shown are estimated, unaudited and subject to adjustment and reflect the net total NAV return, inclusive of dividends, for the periods shown and as from MPLF's admission to the Specialist Fund Segment of the main market of the London Stock Exchange on 13 February 2018, after taking into account applicable listing and offering costs and pre-admission profits and loss. Monthly and cumulative performance figures are non-annualised and such results reflect the deductions of applicable management fees and expenses at the underlying investment levels.
(2)Figures shown for effective yield are estimated, unaudited, subject to change and based on the analysis of Marble Point Credit Management LLC, the investment manager of MPLF, as at the Closing Date. The estimated effective yield is provided for illustrative purposes only. The actual effective yield, as recorded by MPLF or other entity holding the investment may vary over time.
Past performance is not indicative or a guarantee of future performance.
This release contains inside information.
About Marble Point Loan Financing
Marble Point Loan Financing Ltd. (LSE Ticker: MPLF LN (USD); MPLS LN (GBX)) is a Guernsey-domiciled closed-ended investment company. MPLF's investment objective is to generate stable current income and grow net asset value by earning a return on equity in excess of the amount distributed as dividends.
MPLF is invested in a diversified portfolio of US dollar denominated, broadly syndicated floating rate senior secured corporate loans owned via collateralised loan obligations ("CLOs") and related vehicles managed by Marble Point Credit Management LLC.
About Marble Point Credit Management LLC
Marble Point Credit Management LLC ("Marble Point") is a specialist asset manager focused exclusively on leveraged loans. Marble Point was founded by Thomas Shandell in partnership with Eagle Point Credit Management, a leading investor in CLO securities.
Marble Point Loan Financing Limited (the "Company") is a closed-ended investment company incorporated in Guernsey with its ordinary shares ("Shares") admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange (ticker: MPLF.LN). The Company is invested in a diversified portfolio of US dollar denominated, broadly syndicated floating rate senior secured corporate loans via CLOs, loan accumulation facilities and other vehicles managed by Marble Point Credit Management LLC ("Marble Point") or its affiliates. Marble Point is an investment adviser registered with the U.S. Securities and Exchange Commission.
This document is provided for informational purposes only and does not constitute an offer to sell any Shares, notes or other securities (collectively, "Securities") issued by the Company or a solicitation of an offer to purchase any such Securities in the United States, Australia, Canada, the Republic of South Africa, Japan or any other jurisdiction. This document may not be relied upon, and should not be used, for the purpose of making any investment decision. This document and the information and views included herein do not constitute investment advice or a recommendation or an offer to enter into any transaction with the Company or any of its affiliates. Any recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of any investment and should consult its own legal counsel and financial, actuarial, accounting, regulatory and tax advisers to evaluate any such investment. This document has been issued by the Company and is the sole responsibility of the Company.
The Securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold in the United States to, or for the account or benefit of, U.S. persons unless they are registered under applicable law or exempt from registration. The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, and investors will not be entitled to the benefits of such Act.
The information shown herein is estimated, unaudited, for background purposes only, representative as of the dates specified herein, subject to adjustment and not purported to be full or complete. Nothing herein shall be relied upon as a representation as to the current or future performance or portfolio holdings of the Company or any strategy or investment vehicle. Certain information presented herein has been obtained from third party sources and is believed to be reliable. However, neither the Company nor Marble Point represents that the information contained in this document (including third party information) has been independently verified or is accurate or complete, and it should not be relied upon as such. Index information, if any, has been provided for illustration purposes only. Any such information does not reflect the effect of transaction costs, management fees or other costs which would reduce returns. An investor cannot invest directly in an index.
There is no guarantee that any of the goals, targets or objectives described in this document will be achieved. The investment strategies of the Company may not be suitable for all investors and are not intended to constitute a complete investment program. Neither Marble Point nor the Company makes any representation or warranty (express or implied) with respect to the information contained herein (including, without limitation, information obtained from third parties) and each of them expressly disclaims any and all liability based on or relating to the information contained in, or errors or omissions from, these materials; or based on or relating to the use of these materials; or any other written or oral communications transmitted to the recipient or any of its affiliates or representatives in the course of its evaluation of the information herein.
Any of the views or opinions expressed herein are current views and opinions only and may be subject to change. Statements made herein are as of the date of this document and should not be relied upon as of any subsequent date. All information is current as of the date of this document and is subject to change without notice.
Past performance is not a reliable indicator of current of future results. The value of investments may go down as well as up and investors may not get back any of the amount invested. The value of investments designated in another currency may rise and fall due to exchange rate fluctuations in respect of the relevant currencies. Adverse movements in currency exchange rates can result in a decrease in return and a loss of capital.
A Note on the Use of Indices as Benchmarks. The indices shown have not been selected to represent a benchmark for MPLF's performance, but rather to allow for comparison of MPLF's returns to those of known, recognized and/or similar indices. The Credit Suisse Leveraged Loan Index (CSLLI) tracks the investable universe of the U.S. leveraged loan market. The ICE BofAML US High Yield Index (ICE BAML HYI) tracks the performance of USD-denominated below investment grade corporate bonds publically issued in the U.S. domestic market. The Standard & Poor's 500 Index (S&P 500) tracks the performance of U.S. public equity markets and is based on the market capitalization of 500 large companies having common stock listed on NYSE or NASDAQ. The performance of any index is not an exact representation of any particular investment as you cannot invest directly in an index.
A Note on Forward Looking Statements. This document includes forward-looking statements. Forward-looking statements include all matters that are not historical facts. Actual results may differ materially from any results projected in the forward-looking statements and are subject to risks and uncertainties. Such statements are based on current expectations, involve known and unknown risks, a reliance on third parties for information, and other factors that may cause actual results to differ materially from the anticipated results expressed or implied by such forward-looking statements. The Company and Marble Point caution readers not to place undue reliance on such statements. Neither the Company nor Marble Point undertakes, and each specifically disclaims, any obligation or responsibility, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement. Actual results may differ materially from the Company's and/or Marble Point's expectations and estimates.
None of the Company, Marble Point or any of their respective parent or subsidiary undertakings, or the subsidiary undertaking of any such parent undertakings, or any of such person's respective partners, shareholders, directors, members, officers, affiliates, agents, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any information or opinions presented or contained in this document nor shall they accept any responsibility whatsoever for, or make any warranty, express or implied, as to the truth, fullness, accuracy or completeness of the information in this document (or whether any information has been omitted from the document) or any other information relating to the Company, Marble Point or their respective subsidiaries or associated companies, in any form whatsoever, howsoever transmitted or made available or for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith. This shall not affect any liability any such person may have which may not be excluded under applicable law or regulation.