Pre-results update from SQN Secured Income – Ahead of the release of their annual financial reprot, SQN Secured Income (SSIF) have released an investment update presentation.
Highlights:
- Direct loans represent 67.32% of the portfolio and have a gross yield of 10.9%
- Third party debt now represents 28.2% of total assets
- Peer to peer lending is at the lowest since SQN assumed management at 7%
- Dividend cover has doubled since SQN took over management rising from 0.52 in March 2017 to 1.01 in August 2019.
- Proposals for the future of the company are under review by the board and we are conducting test marketing with shareholders on options.
SSIF notes that it has been investing a higher allocation to traditional underwriting and has worked to stabilise the legacy portfolio inherited from the previous management in April 2017.
Portfolio update
SSIF says it is focused on underwriting of a high quality in the lower middle market segment of the market with thirteen loans now underwritten by the company, with an average of £2.6m deployed per loan and at an average interest rate of 10.9%. Each loan has bespoke legal documentation and is designed to fit to the company’s and the borrower’s requirements. There have been no late or missed payments in this portion of the portfolio and our covenant monitoring data is up to date. They note that the outlook for the performance of these loans remains very
good.
SSIF have made a change to the way in which they categorise the legacy portfolio. They have differentiated between peer to peer loans and those that are held in loan note structures with professional counterparties. These latter
loans are larger in quantum and we have a closer relationship with the underlying management companies. The totalnumber of loans via third parties have been reduced from 213 to 55 with a small number of loans amortising out of the portfolio each month. All non-sterling capital and income continues to be fully hedged.
About SSIF
SSIF aims to provide shareholders with attractive risk-adjusted returns predominantly through investment in a range of SME loan assets and secured lending opportunities, diversified by way of borrower, sector, duration and geography. It seeks investments collateralised by a broad range of assets including receivables, income streams, subsidies, grants, real property, tax credits and rebates, loan portfolios and other pools of financial assets. Investments are originated directly and through third-party relationships, including alternative finance platforms addressing underserved segments of the market. The fund has been specifically constructed to provide downside protection by way of structured collateral packages for each individually underwritten investment.
SSIF: Pre-results update from SQN Secured Income