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Alcentra EurFltRt Fd (AEFS)

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Tuesday 13 August, 2019

Alcentra EurFltRt Fd

Portfolio Update

RNS Number : 7851I
Alcentra European Fltng Rate Inc Fd
13 August 2019

Alcentra European Floating Rate Income Fund Limited


Market Commentary

The Fund was up +0.09% (gross) in July. The Credit Suisse Western European Leveraged Loan Index ("CS WELLI") (hedged to GBP) returned +0.55%[1] for the same period while the Credit Suisse Western European Leveraged Loan Index excluding USD returned +0.43%[2] for the month.


The European Loan market remained well supported in July, with continued strong demand for European Loans. However, with the increase in new issue volumes seen in July, investor focus was on the primary market. This meant there was less focus on the secondary market, and less secondary buying to drive prices tighter, despite continued strong CLO issuance. As such prices were broadly stable for the market in July.


The European Loan market saw a continued steady flow of issuance in July, with €9.1bn of deals pricing in the month, +11% up on the prior year[3]. This is the first month of 2019 where volumes have grown YoY, and leaves YTD issuance at €48.4bn[4]. While this is c.31% down YoY, it was mainly impacted by the quieter start to the year, with the last three months seeing steady monthly issuance of c.€9bn[5]. For the month, average new issue spreads stood at 394bps at a price of 99.52[6], indicating continued capacity to invest at attractive terms. While the new issue loan market is now likely to quieten down for the traditional August break, the pipeline for September and beyond continues to look firm. The S&P forward pipeline currently stands at €13.6bn and includes larger deals from Merlin Entertainment, BCA Marketplace and Cobham[7].


The pace of CLO issuance continues to be strong, with July seeing €5.4bn of new CLO issued, the largest monthly volume number on record and +19% Year-on-Year. This leaves YTD volumes at €20.1bn, +13% on last year[8]. CLO liability costs for higher rated tranches continue to see some tightening, aided by lower rates expectations, which is positive for the market in that it improves the tight arbitrage conditions. This should support CLO issuance in H2 2019 and, when coupled with supportive SMA/unleveraged fund demand, means we expect demand for the European Loan market to remain robust.


The S&P default rate for the 12 months ending July again remained at the record low level of 0.00% seen since January[9]. We continue to expect a return to a more normalised 1.5% - 2.0% rate in the medium term. This is backed up by the S&P distress ratio (share of performing issuers trading below 80) which stood at 3.01% for July[10].


Overall, we believe that the market remains balanced, with solid loan issuance supported by robust demand from new CLO formation and SMAs. Investors remain disciplined, with new issue loan pricing remaining broadly stable despite the strong demand. As such we believe that there remains continued opportunities to invest as attractive returns.



Portfolio Manager's Commentary


The top performing credits in the Fund were fixed rate bond positions, as the fixed rate market saw increased demand from speculation of renewed fiscal stimulus over the coming months. However, a number of loans were also up over 1%, benefitting from steady underlying demand. 


The two worst performing positions were a European retailer, which suffered from a weaker underlying market, and an agricultural products business, which saw some selling pressure following a disappointing earnings call.




For further information please contact:

Alcentra Limited

Simon Perry                            +44 20 7367 5272



An accompanying factsheet which includes the information above as well as wider commentary on the investments made by the Fund can be found on the Fund's website


Background Information

Alcentra European Floating Rate Income Fund Limited, a Guernsey Authorised Closed-Ended Collective Investment Scheme, regulated by the Guernsey Financial Services Commission and listed on the Main Market of the London Stock Exchange invests predominantly in senior secured loans and senior secured bonds issued by European corporates and targets returns (net of fees and expenses) of 7% to 10% per annum. The Fund targets a dividend yield of 5.5 pence per £1.00 issue price of the initial offering of shares in the Fund for the first full year of investment, paid quarterly.


Important Notices

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.


This report is aimed at existing investors in the fund and has not been approved by any competent regulatory authority.

The information contained in this document is given as at the date of its publication (unless otherwise marked) and is based on past performance. Past performance is not a guide to future performance and the value of investments and investment value can go down as well as up. The future performance of the Fund will depend on numerous factors which are subject to uncertainty. Including changes in market conditions and interest rates and exchange rates and in response to other economic, political or financial developments, investment return and principal value of your investment will fluctuate, so that when your investment is sold, the amount you receive could be less than what you originally invested. Past or current yields are not indicative of future yields.

This document does not contain any representations, does not constitute or form part of any solicitation of any offer to sell or invitation to purchase any securities of the Fund, nor shall it or any part of it or the fact of its distribution form the basis of or be relied upon in connection with any contract therefor, and does not constitute a recommendation regarding the securities of the Fund. Nothing in this document should be construed as a profit or dividend forecast.

This document includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements include, without limitation, statements typically containing words such as "believes", "considers", "intends", "expects", "anticipates", "targets", "estimates", "will", "may", or "should" and words of similar import. The forward-looking statements are based on the beliefs, assumptions and expectations of future performance and market development of Alcentra Limited ("Alcentra"), taking into account information currently available and made as at the date of this document. These can change as a result of many possible events or factors, not all of which are known or within Alcentra's control. If a change occurs, the Fund's business, financial condition, liquidity and results of operations may vary materially from those expressed in the forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future performance. Alcentra qualifies any and all of the forward-looking statements by these cautionary factors. Please keep this cautionary note in mind while reading this document.

An investment in the Fund is suitable only for investors who are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear losses (which may equal the whole amount invested) that may result from such an investment. An investment in the Fund should constitute part of a diversified investment portfolio. Accordingly, typical investors in the Fund are expected to be sophisticated and/or professional investors who understand the risks involved in investing in the Fund.

Alcentra gives no undertaking to provide recipients of this document with access to any additional information, or to update this document or any additional information, or to correct any inaccuracies in it which may become apparent including in relation to any forward-looking statements. The distribution of this document shall not be deemed to be any form of commitment on the part of Alcentra to proceed with any transaction.

This document is issued by Alcentra Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority and whose registered address is at 160 Queen Victoria Street, London, United Kingdom, EC4V 4LA.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

© 2019 The Bank of New York Mellon Corporation. All rights reserved. Trademarks and logos belong to their respective owners.



[1] Credit Suisse Western European Leveraged Loan Index, All Denom, hedged to GBP, 31 July 2019

[2] Credit Suisse Western European Leveraged Loan Index, Non USD, hedged to GBP, 31 July 2019

[3] S&P Global Market Intelligence, LCD Global Interactive Loan Volume Report, 5 August 2019

[4] S&P Global Market Intelligence, LCD Global Interactive Loan Volume Report, 5 August 2019

[5] S&P Global Market Intelligence, LCD Global Interactive Loan Volume Report, 5 August 2019

[6] S&P Global Market Intelligence, LCD European Leveraged Lending Review, 31 July 2019

[7] S&P Global Market Intelligence, Forward calendar: Pipeline hits highest level for a year, 5 August 2019

[8] S&P Global Market Intelligence, Quick take: Monthly CLO supply hits record high, 1 August 2019

[9] S&P Default Ratio, 1 August 2019

[10] S&P Distress Ratio, 1 August 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit

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