ICG-Longbow Senior Secured UK Property Debt (LBOW) has announced its annual results for the year ended 31 January 2022. LBOPW’s chairman, Jack Perry, says that at a domestic level, the UK property market has largely shaken off the effects of the Covid-19 pandemic with occupational, investment and finance market transactions returning to something like normal levels. Although the trends seen pre-Covid-19 which had especially impacted some sub-sectors of retail property have continued. Against this backdrop, several of the LBOW’s borrowers have been able to secure successful sales and refinancing of their property holdings and repay the LBOW’s loans in full. This, in turn, has allowed LBOW to commence its programme of returning capital to shareholders. As at 31 January 2022, LBOW had made capital distributions of 26p per share, while a further 6p per share was approved by the board on 18 May 2022.
The chairman says that, as the number of remaining investments reduces, LBOW’s investment manager has been focused on working closely with borrowers to establish likely exit timetables for the remaining loans, with a particular focus on the likelihood of any further early repayments. He says that, as the critical mass of the portfolio reduces, LBOW’s board and investment manager may explore the potential for negotiated early exits or other solutions which allow for an acceleration of capital return while preserving shareholder value.
Dividend
Despite the reduction in the size of its investment portfolio, LBOW has been able to maintain a robust level of quarterly dividends, with the total dividend declared of 5.6 pence per share in respect of the financial year to 31 January 2022. The dividend was fully covered and LBOW says that its earnings have been bolstered by the significant prepayment protection originally negotiated by the manager on the underlying loans, which has served to generate additional income for LBOW following some of the recent early repayments.
Portfolio
As at 31 January 2022, LBOW’s portfolio comprised six loans with a total principal balance outstanding of £80.5 million. LBOW received three full repayments during the year and, in July 2021, the remaining £5.7m balance of its Halcyon loan was repaid, following a refinancing of the underlying security portfolio. In October 2021 its £7.8m Knowsley loan was repaid, following a sale of the underlying property. The £16.3m remaining balance of the GMG loan was repaid in full in December 2021, again following a sale of the underlying property. The latter came with interest, exit and prepayment fees of £0.8 million, which was modestly accretive to LBOW’s overall NAV.
During the period, LBOW received a partial repayment of its Southport loan, representing the pay down of previously capitalised loan interest, and a series of partial repayments of the Quattro loan (which repaid in full after period end). Also, during the year LBOW’s manager negotiated a number of amendments to the RoyaleLife loan, with the associated amendment to fees being both accretive to NAV and improving the prepayment protection provisions.
Financial Summary
LBOW has provided the following key highlights from its financial performance:
- In line with its objective of an orderly realisation of its assets, during the year the Company returned £31.5 million of shareholder capital, equating to 26.0 pence per Ordinary Share.
- On 18 May 2022 the Directors approved a further return of capital equivalent to 6.0 pence per Ordinary Share.
- NAV of £87.77 million as at 31 January 2022 (31 January 2021: £119.25 million), equivalent to 72.35 pence per Ordinary Share (31 January 2021: 98.30 pence per Ordinary Share).
- Notwithstanding the capital returns, total income for the year ended 31 January 2022 was £9.52 million (31 January 2021: £9.95 million), and profit after tax was £7.34 million (31 January 2021: £7.41 million).
- Earnings per share of 6.05 pence (31 January 2021: 6.11 pence) with total dividends paid or declared for the year ended 31 January 2022 of 5.6 pence per share (31 January 2021: 6.0 pence per share).
- Following dividend distributions and the return of capital in the year, retained earnings increased by £57,597, representing 0.05 pence per Ordinary Share.
- There have been no credit losses or impairments in the investment portfolio.
Dividend and capital distribution summary
LBOW has provided the following key highlights on its dividend and capital distributions:
- Total dividends paid or declared for the year ended 31 January 2022 of 5.6 pence per share (31 January 2021: 6.0 pence per share), made up as follows:
- Interim dividend of 1.5 pence per share paid in respect of quarter ended 30 April 2021
- Interim dividend of 1.5 pence per share paid in respect of quarter ended 31 July 2021
- Interim dividend of 1.5 pence per share paid in respect of quarter ended 31 October 2021
- Interim dividend of 1.1 pence per share paid in respect of quarter ended 31 January 2022
- Total capital distributions paid or declared for the year ended 31 January 2022 of 26.0 pence per share (31 January 2021: nil), made up as follows:
- Return of capital equivalent to 5.5 pence per Ordinary Share paid in September 2021
- Return of capital equivalent to 6.5 pence per Ordinary Share paid in December 2021
- Return of capital equivalent to 14.0 pence per Ordinary Share paid in January 2022
- Total capital distributions paid or declared post year ended 31 January 2022 of 6.0 pence per share made up as follows:
- On 18 May 2022 the Directors approved a further return of capital equivalent to 6.0 pence per Ordinary Share.
Key highlights on the investment portfolio
LBOW has provided the following key highlights on its investment portfolio:
- As at 31 January 2022, the Company’s investment portfolio comprised six loans with an aggregate principal balance of £80.54 million, representing 91.77% of the shareholders’ equity (31 January 2021: nine loans with aggregate principal balance of £109.32 million, representing 91.67% of the shareholders’ equity).
- The weighted average coupon on drawn capital, before recognition of arrangement and exit fees, was 7.39% (31 January 2021: 7.19%).
- The portfolio weighted average LTV was 67.8% (31 January 2021: 69.1%), reflecting revaluations and changes to the composition of the loan portfolio.
- The portfolio weighted average residual term was 0.97 years (31 January 2021: 1.76 years).
- As a result of certain loan redemptions after the financial year end, the Company’s portfolio as at 19 May 2022 comprises five loans with an aggregate principal balance of £74.6 million.
- The pro forma portfolio weighted average LTV as at 19 May 2022 is 67.3%, the weighted average residual loan term is 0.75 years, and the weighted average loan coupon is 7.34%.
- The Directors do not consider there to have been any impairments or incurred losses on loan balances as at 19 May 2022.