Volta Finance Limited

Net Asset Value as at 31 May 2020 (Replacement)

Volta Finance Limited (VTA / VTAS) – May 2020 monthly report

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR PART, IN OR INTO THE UNITED STATES

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Guernsey, 15 July 2020

AXA IM has published the Volta Finance Limited (the “Company” or “Volta Finance” or “Volta”) monthly report for May. The full report is attached to this release and will be available on Volta’s website shortly (www.voltafinance.com).

The following amendments have been made to the Net Asset Value as at 31 May 2020 announcement released on 10 June 2020 at 17:00:00hrs (BST), to subtract from the Net Asset Value the first interim dividend of €0.10 per share declared by the Company as the ex-dividend date was 21 May 2020.

Volta’s NAV as at the end of May 2020 has been adjusted from €204.6m to €200.9m and the NAV per share from €5.59 to €5.49.

The full amended text is shown below.

PERFORMANCE and PORTFOLIO ACTIVITY

May was the second month of good performance after April, helping further to recover the mark-to-market impact of the COVID-19 pandemic. Volta’s NAV* total return performance in May was +4.5%.

The monthly performances** were, in local currency: +1.9% for Bank Balance Sheet transactions, +5.7% for CLO Equity tranches; +5.8% for CLO Debt; -3.5% for Cash Corporate Credit deals (this bucket compromises of funds that have a one-month delay in publishing their NAV); and +0.8% for ABS.

At the end of the month, the average price for CLO Equity tranches was 42.6% and 38.3% respectively for USD and Euro positions, 63.2% for USD CLO debt (only one new Euro CLO debt position was purchased in the secondary market in May).

Even though almost all market participants revised downward the impact of the COVID 19 crisis in terms of the outlook for default for loans and high yield markets, prices for our holdings are still very depressed. We believe that there is more to come in terms of price appreciation. For example, the pricing of new CLO BB tranches tightened by almost 150bp between the last days of May and the time of writing this commentary.

Concerning defaults, at the end of May, the Last-12-Month default rate is close to 3.5% for US loans and slightly below 2% for European loans. Expectations for the end of 2020 are in the area of 5% for the U.S. and 3.5% for Europe (far lower than levels feared only a few weeks ago when some investors expected rates close to 10%).

In the same vein we are accumulating, day after day, evidence that the most active/solid CLO managers can re-arrange their books, sometimes being able to reduce the CCC bucket without any significant cost in terms of subordination (as measured by CLO Over Collateralization tests). Using May trustee reports as a reference, close to 20% of US CLOs were breaching their reinvestment test (the test that causes a partial diversion of the cash flow due to the equity tranche).  None of the USD CLO Equity positions held in Volta were breaching such tests.