News
- Home
- VPC Specialty Lending benefits from resilient credit performance
VPC Specialty Lending (VSL) has released its annual results for the year ended 31 December 2022. During the period, VSL’s NAV per share decreased by 6.97% on a total return basis, comprising a NAV per share reduction from 114.14p to 98.19p, plus the 8.00p of dividends paid in 2022, while the share price fell from 92.20p to 83.10p. Dividends paid during the year were in line with the target dividend of 8.00p per year set out in the IPO Prospectus, and were fully covered by the revenue returns (and paying dividends in line with the target continues to be the near-term target of the company).
The manager says that it was a year of significantly different investment performance between the debt and equity portfolios. Credit performance was resilient and, during the year, the weighted average coupon on VSL’s asset backed investments increased to 14.65% at 31 December 2022 from 10.41% at 31 December 2021 as VSL saw a rise in short-term interest rates. Key financial highlights are as follows:
VSL’s Board made a commitment to shareholders in 2020 to offer an exit opportunity, for up to 25% of the shares in issue, following the June 2023 Annual General Meeting, should VSL’s shares continue to trade at an average discount greater than 5% over the first quarter of 2023. Three measures of future performance were also put in place in 2020, with the intention of offering the 25% Exit Opportunity in the event that all three measures could not be met. Various steps were taken from 2020 through 2022 to reduce the discount to NAV and while some of these bore fruit, the discount to NAV nonetheless remained stubbornly wide.
The board says that it recognised in 2022 that two of its three measures of future performance would be achieved, but the third measure – reducing the discount to NAV – would not be met. The Board and its advisers took the view that the 25% Exit Opportunity alone would not have a lasting impact on the discount and that it might have a potentially detrimental impact on the Company’s Shareholders. If the 25% Exit Opportunity was realised, the Company would shrink in size, resulting in the Company’s shares potentially becoming less liquid and the ratio of fees and other costs potentially increasing as a proportion of NAV. After further consultation with its major Shareholders, the Board announced on 22 December 2022 that it would be in the best interests of the Company and Shareholders to put forward formal proposals to Shareholders for a managed wind-down of the entire Company instead of the 25% Exit Opportunity.
The Company expects shortly to issue a circular inviting shareholders to vote on two resolutions – the first to approve revisions to the investment policy of the Company so that the Company’s assets can be realised in an orderly manner in order to provide a managed exit over time for all Shareholders; and the second (to be voted on by independent shareholders) to approve proposed amendments to the terms of the Investment Management Agreement between the Company and the Investment Manager, principally concerning the way in which the Investment Manager is remunerated. The purpose of this is to reflect the change in the Company’s investment objective and policy and to better align the interests of the Shareholders and the Investment Manager. The resolution relating to the Investment Management Agreement will be voted on by independent shareholders only because it is a related party transaction under the Listing Rules
Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.
Due to data protection policies, USA residents can not access our data.
Your content has been curated