Chenavari Capital Solutions has announced that it has re-invested approximately £3.5m in a repeat transaction replacing an exposure that recently matured in its portfolio. The transaction is a first loss exposure to SME and corporate loans extended by a large Swiss bank. The company says that this loan portfolio is “very granular” with over 1,500 reference entities and a maximum concentration of 0.5%. The company says that the large Swiss Bank has a long track record of lending in the Swiss SME and corporate market and has experienced extremely low loan losses over the last 10 years with minimal increase through the financial crisis. The managers also say that the Bank has issued several regulatory capital transactions (this is the fourth since 2013) which have exhibited strong performance and that the Company participated in one of these previous deals, in the secondary market, which redeemed in April 2016 with no tranche losses. The company says that this new primary purchase is effectively a replacement of that exposure.
The company says that the transaction, “is robustly structured with credit-linked notes being issued by a special purpose vehicle which significantly removes counterparty risk to the Bank”. The cash deposit will remain with the Bank but is subject to rating based triggers which provide protection to investors. The Bank will retain a significant percentage of each loan on their balance sheet, in excess of the regulatory minimum, in order to increase alignment of interest in the transaction. Upon acquisition, the transaction represents approximately 3% of the Company’s net asset value and the company says that, under the Investment Advisor’s base case, the anticipated return on the transaction is a double-digit internal rate of return.
Chenavari Capital Solutions announces new primary investment : CCSL