Marble Point Loan Financing (MPLF) invests in US loans directly and indirectly through investments in collateralised loan obligation (CLO) equity and debt securities issued by Marble Point CLOs and Marble Point loan acquisition facilities.
The company released the following update this morning:
“As detailed in the company’s previous monthly reports, the quarterly cash distributions from its portfolio of CLO Equity, CLO Debt and other related investments have increased over the past several quarters. These quarterly distributions have funded company cumulative dividend payments of approximately $0.155 per share since the IPO and other cash uses including new investments. Further, in each of the past five quarters, portfolio cash distributions exceeded the quarterly dividend by a sound margin, in-line with the Board’s expectations in normal market conditions.
Given the ongoing uncertainty caused by the covid-19 pandemic, however, the board has resolved to temporarily suspend the declaration of dividends. The board and the manager recognise the importance of dividends for shareholders but believe preserving liquidity is the appropriate and prudent action considering the significant near-term uncertainties that exist.
The covid-19 pandemic and its unprecedented economic disruption have seen rating agencies downgrade CLOs’ underlying senior secured loan collateral at an accelerating pace which increases the risk of triggering provisions of CLOs’ tests which could impact near-term cash flows. Additionally, the heightened risk of higher than modeled default rates may impact the portion of distributions ascribed to income under the company’s effective yield methodology, thereby potentially affecting the magnitude of cash flows.
It is difficult to predict the full impact of the covid-19 pandemic on loan and CLO markets, but the Company remains focused on delivering long term value to shareholders and taking prudent actions in the near term in respect of this quickly changing market dynamic.
The manager believes the dislocation in credit markets may also create attractive investment opportunities beneficial to future investment portfolio cash distributions, with the goal of seeking to maximise shareholders’ total return over the long term. The company believes it is well positioned to take advantage of such dislocation. To the extent that income generated by the CLOs is not distributed but is available for reinvestment into additional collateral within the CLOs, given the current loan market environment, such reinvestment activities may build par and enhance potential distributions from the CLOs in the future.
In the event that cash flows in the near term are not impacted or should conditions in the loan market improve, the Board will consider the reinstatement of the quarterly dividend and other appropriate options.
The board will, in consultation with the manager monitor these developments and the performance of the company’s investments and make further announcements as appropriate.”
Robert Brown, chairman of MPLF, commented:
“With an average of over 29 years’ experience in leveraged credit markets, the manager’s senior management team has invested through several previous market dislocations. MPLF’s Board of Directors has confidence in the Investment Manager’s ability to manage the company’s investments through this period and deliver long-term value for shareholders.”
[Marble Point’s share price is a bit like Wile E. Coyote running off the edge of a cliff yet managing to stay up in the air. Other CLO funds that have suspended dividends have halved in value. After today’s 2.6% fall, Marble Point’s are off just 7% this year.]
MPLF: Update from Marble Point Loan Financing as it suspends dividend