VPC Specialty Lending Investments PLC has announced its unaudited half-yearly financial results for the period ended 30 June 2016. During the period under review, it delivered a total NAV return of 1.51% and paid quarterly dividends amounting to 3.5p per share.
The vast majority of investments have exhibited credit losses in line with expectations. However, returns in the period were negatively affected by isolated spots of credit underperformance in the marketplace loan portfolio and the effect of cash drag related to currency hedges. They have taken steps to mitigate the credit underperformance by exiting and winding down certain positions and redeploying capital to other, better performing opportunities.
During the period, the fund operated with an average cash balance of 18.8% of NAV, which created a slight performance drag. During the period, they made investments in proprietary balance sheet facilities, which offer significant credit enhancements, and featured attractive interest rates ranging from 12% to 16%. These new investments are highlighted below:
- In January, VPC Specialty Lending invested in Cognical, Inc., a lender that offers a straightforward point of sale, lease-to-own payment option for consumer goods in the U.S. The lender fully integrates with retailers’ storefront and online checkout processes to provide a unique lease-to-own financing alternative to underbanked, non-prime U.S. consumers, allowing them to purchase electronics, appliances, furniture, musical instruments and other large ticket items.
- In February, VPC Specialty Lending closed on an investment in FinanceFox, a digital insurance manager that provides a unique, hybrid product that is a cross between a software application and an in-person alternative to the modern insurance broker. The business operates in Germany and Switzerland, acting as an intermediary between major insurance providers and individual consumers. The investment is a manifestation of the Investment Manager’s thesis that significant disintermediation opportunities exist across the various traditional operators in the financial services sector.
- In March, VPC Specialty Lending made an initial investment pursuant to the Investment Manager’s $100 million credit facility commitment to Wheels Financial Group, LLC, a leading provider of auto title loans in the U.S. The lender provides consumers with quick and convenient access to liquid funds through instalment loans secured by an interest in the borrower’s vehicle. The products provide consumers with an affordable alternative to traditional higher cost lenders, which allow them to establish or rebuild positive credit.
- In May, VPC Specialty Lending made an initial investment in West Creek Financial, Inc., a provider of point of sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
- In June, VPC Specialty Lending made an initial investment in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. They also funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and instalment loans to U.S.
The investment manager plans to redeploy the majority of principal amortisation from the whole loan portfolio into balance sheet investments. Over time, they expect our balance sheet loans to make up a significant portion of the portfolio. In order to further demonstrate our commitment to the Company and our confidence in achieving targeted returns, the investment managers have agreed with the Board to modify our management agreement such that we will apply 20% of our monthly management fee to the purchase of shares in the company at the prevailing market price on an ongoing basis, provided the shares are trading at a discount to NAV.
VSL : Manager plans to reinvest 20% of fee in VPC Speciality Lending’s shares