ICG Longbow looks forward to covered dividend – ICG Longbow Senior Secured UK Property Debt’s NAV fell slightly to 98.2p over the year ended 31 January 2020. The shares were trading at a modest premium to that at the year end, at 99p. The dividend was maintained at 6p. Earnings per share were 5.04p (up from 4.36p) and so the company had to dip into capital reserves to pay the whole dividend. The statement says that, “with all legacy lower-yielding loans having now run off and the portfolio consisting exclusively of higher returning and accretive investments, the dividend is now fully covered on a pro forma basis and, subject to the impacts of Covid-19, the board anticipates the dividend will remain fully covered from profits in the near term, with the additional prospect of some medium-term NAV growth in line with the company’s investment objectives.”
There were 10 loans in the portfolio at the year end. Four of these were new transactions and these (totalling £58m of commitments) had a weighted average annual return of 9.4%. The company was geared with £5.2m of debt at the year end – cash drag (idle cash earning no return) has been a problem in the past. One new loan has been completed since the year end – an overall funding commitment of £7.8m, secured by an industrial property in the North West. Against that, a loan in the portfolio – the Meadow loan – was repaid. Bringing in £21.5m but also earning exit and prepayment fees of £0.7m.
Current trading
“The majority of the Group’s investments are secured by properties or portfolios backed by highly diversified cashflows from commercial and residential tenants. Across these investments, and despite the unprecedented market conditions, the Group’s borrowers as of 4 May 2020 report that rent collection for these properties has generally been robust and, as a result, interest payments have been made in full or (in one case where payment is not yet due) sufficient rents have been collected to make the interest payment.
Three of the investments are secured by operational assets or are in sectors which have been adversely affected by the ongoing UK lockdown. These investments account for approximately 45% of quarterly interest payments in aggregate. In these cases, the Group as a responsible lender has chosen to defer or capitalise the interest payments due in order to assist the underlying borrowers with working capital management during the lockdown period. The amounts do not materially affect portfolio LTV or expected returns. The Investment Adviser has conducted additional robust Covid-19 stress testing and has line of sight to resolution of these arrears in each case. The Group has a satisfactory equity cushion on all of its investments and does not expect any shortfall in either total interest receipts during the term of each loan or to any capital repayments by loan maturity.
As of 6 May 2020 the Group has cash of approximately £15 million and undrawn credit facilities of £25 million, giving total available liquidity of approximately £40 million. The Investment Adviser has seen a noticeable increase in pipeline enquiries over the past three weeks, and on a cautious basis is continuing to explore attractive new lending opportunities in line with the Group’s investment parameters.”
LBOW : ICG Longbow looks forward to covered dividend