2015 a difficult year for debt markets says Carador

During the year ended 31 December 2015, Carador Income Fund generated a total NAV return of -9.71% including distributions. The Credit Suisse High Yield Index lost 4.93% in 2015, the fourth-worst year in its 30-year history. The Credit Suisse Leveraged Loan Index fared better but still fell 0.38%, representing only the second negative annual return in its 24-year history. Investment grade bonds performed roughly in line with the overall US bond market with the Barclays Aggregate gaining 0.55% and US investment grade corporate bonds losing 0.68%. The sell-off in the loan and high yield markets led to a decline in CLO valuations. Post crisis BB and B CLO tranches lost 5.77% and 10.86%, respectively, and the average price of post crisis CLO equity tranches plunged 34% during 2015. The Credit Suisse Distressed Loan Index (facilities priced under $90) returned -25.91%. In 2016, excluding commodities, loan defaults are expected to be 1.5% for loans, below their long-term average of 3.3%.

Carador declared dividends totalling 10 cents per share representing approximately 92.5% of the net income for the year. The directors have announced a dividend target of $0.09 per share for 2016 on the basis of market conditions and the construction of the company’s portfolio. The reduction in the anticipated dividend for the year was driven primarily by a reduction in the portfolio’s allocation to Income Notes during 2015 in favour of an increase in the allocation to cash in order to offer some downside protection to the company’s net asset value. The directors also announced that should there be a reversion of the weighting between Mezzanine Notes and Income Notes during the year, as anticipated by GSO / Blackstone Debt Funds Management,  the investment manager, then the historic target annual dividend of $0.10 per U.S. Dollar share may be achievable.

CIFU : 2015 a difficult year for debt markets says Carador