TIDMCCPG TIDMCCPE
RNS Number : 6173N
CVC Credit Partners European Opps.
30 September 2021
30 September 2021
FOR IMMEDIATE RELEASE
CVC Credit Partners European Opportunities Limited (the
"Company" or "CCPEOL")
(a closed-ended investment company incorporated in Jersey with
registration number 112635)
Registered Office: IFC 1, The Esplanade, St Helier, Jersey, JE1
4BP
2021 Half-Year Financial Report
The Board of Directors of CCPEOL is pleased to present CCPEOL's
Half Yearly Financial Report for the period ended 30 June 2021.
About the Company
CCPEOL is a closed-ended investment company that provides
shareholders with income and potential for capital upside by
focusing on European performing credit as well as select
opportunistic credit investments.
Key highlights
- The NAV total returns of 8.31% (31 December 2020: 1.71%)
(Euro) and 8.70% (31 December 2020: 2.80%) (Sterling) compared
favourably with the Company's medium-term average annualised total
return target of +8%.
- T he Euro Shares and Sterling Shares produced a dividend yield
of 4.58% (31 December 2020: 5.42%) and 4.23% (31 December 2020:
5.16%) respectively.(1)
- The Euro and Sterling Share prices as at 30 June 2021 were
EUR0.9550 and GBP1.0350 respectively (31 December 2020: EUR0.9000
and GBP0.9440 respectively).
- As at 30 June 2021, performing credit (including cash),
represented 44.1% (31 December 2020: 42.1%) of the Company's
underlying portfolio, delivering a 4.4% (31 December 2020: 4.4%)
cash yield, while credit opportunities represented 55.9% (31
December 2020: 57.9%) of the Company's underlying portfolio,
delivering a 7.3% (31 December 2020: 6.6%) cash yield.
- Increase to the Company's annual dividend, taking this to
GBP0.05 per Sterling Share and EUR0.05 per Euro Share (previously
GBP0.045 per Sterling Share and EUR0.045 per Euro Share).
- Reduction in the Investment Vehicle management fee of 0.1%,
taking the fee from 1% to 0.9% per annum of NAV, effective from 1
May 2021, as part of a revised fee structure including further fee
reductions relative to the value of the assets under
management.
Post period-end
Quarterly tenders
- On 16 August 2021, the June 2021 Contractual Quarterly Tender
completed with 1,732,113 Sterling Shares and 3,468,577 Euro Shares
repurchased and held as treasury shares.
- On 11 August 2021, the Company announced it had received
applications from shareholders to tender 290,323 Euro Shares and
9,402,308 Sterling Shares under the September 2021 Contractual
Quarterly Tender. This tender is due to settle on 16 November
2021.
Share conversions
- The Company's July 2021 share conversion completed on 30 July
2021 with the conversion of 545 Euro Shares to 436 Sterling
Shares.
- The Company's August 2021 share conversion completed on 31
August 2021 with the conversion of 1,000,000 Euro Shares to 795,401
Sterling Shares.
- On 18 August 2021, the Company announced that it had received
elections to convert 625,017 Euro Shares to Sterling Shares in
respect of its September 2021 share conversion. Based on a
conversion ratio of 0.798954 Sterling Shares per Euro Share, the
Company has made an application for the admission and listing of
499,360 Sterling Shares on 30 September 2021.
Dividend declaration
- On 29 July 2021, the Company declared a dividend of EUR0.01125
per Euro Share and GBP0.01125 per Sterling Share to shareholders on
the register as at 27 August 2021, having an ex-dividend date of 6
August 2021.
Directorate change
- David Wood, a Non-Executive Director of the Company, stepped
down as a Director of the Company with effect from 31 August
2021.
Positive Outlook for Loans
- The Investment Vehicle Manager believes the portfolio is
well-positioned to deliver the Company's immediate target return of
8% per annum.
- Despite the strong rally in credit markets, there continues to
be a large pipeline of opportunities that are being monitored, and
on a year-to-date basis (through to 31 July 2021), the Investment
Vehicle has deployed over EUR127m in opportunistic credit.
- With the outlook for economic growth still strong, the default
rate is anticipated to remain low for the near-term, thereby
reducing the risk of potential losses within the Company's
portfolios.
- Inflation effects are starting to flow through developed
economies and monetary policy is beginning to tighten. It is
expected that the consequence of this will inevitably be felt in
equity markets, however the Board sees these developments as being
particularly positive for the Company given the predominantly
floating rate exposure of the underlying Investment Vehicle
portfolio.
- The Board further believes the Investment Vehicle Manager is
particularly mindful of the possibility of inflation stress on
issuers and that the portfolio selection and will take full account
of the emerging macro environment.
Chair's Comment:
Richard Boléat, as Chair of the Board, detailed that:
"As a Board, we are delighted with how the Company has performed
during the first half of this year and the fund's year to date NAV
total return continues to compare favourably with its medium term
total return target of 8% per annum. It is clear that the
Investment Vehicle Manager positioned the portfolio well into the
year-end to benefit from the recovery of leveraged loans following
the period after the immediate impact of the Covid-19 pandemic in
2020.
"Our outlook remains positive for the remainder of the year,
particularly as the Company's underlying portfolio is predominantly
exposed to floating rate instruments. As we expect to see higher
levels of inflation moving into 2022, the fund's investments are
unlikely to be negatively impacted by any consequent monetary
policy tightening, unlike fixed rate products."
(1) Annual dividend yield per Euro Share and Sterling Share as
at 30 June 2021 and 31 December 2020 is based on the four quarterly
dividends announced and paid by the Company during the 12 months
prior to the period end / year end as applicable.
2021 Half-Year Financial Report
WHY INVEST in CVC CREDIT partners European opportunities?
Generating income and growing your capital
CVC Credit Partners European Opportunities Limited ("CCPEOL" or
the "Company") is an investment fund that aims to provide
shareholders with income and potential for capital upside by
focusing on European performing credit as well as select
opportunistic credit investments.
A part of the CVC Credit Platform, the CVC Credit Partners
Investment Management Limited (the "Investment Vehicle Manager")
has a strong track record in investing in these asset classes which
provides CCPEOL's investors with stability and inflation
protection. The key features of CCPEOL is its ability to provide
attractive, risk-adjusted returns which includes a reliable income
stream that allows the fund to enhance and preserve capital. The
Company also offers investors additional liquidity through its
quarterly tender mechanism.
What we offer
Reliable income Strong track record
We seek to generate high cash CCPEOL has a proven, long-term
income via a stable and attractive track record and has typically
dividend, as well as offer the outperformed during periods of
potential for capital appreciation. market volatility. Since the strategy's
CCPEOL distributes quarterly dividends inception in 2009 and the subsequent
to shareholders based on a target listing in 2013, we have achieved
of 5p / 5c per GBP and EUR share a net total return of 9.17%(1)
respectively per annum per annum.
Liquidity Inflation protection
In addition to the daily liquidity We mainly invest in loans, which
offered by the market, we offer are typically floating rate instruments,
investors liquidity via a quarterly which allows CCPEOL to act as
tender mechanism that allows redemptions a hedge against inflation risk.
at NAV less 1p / 1c per GBP / We believe now more than ever,
EUR share respectively. that it's the better place to
be, due to heightened inflation
risk and growing expectations
of rising central bank interest
rates.
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Capital Preservation Stability
Our focus is on downside protection Offering more security and less
and capital preservation. We invest volatility than equity markets,
primarily in senior secured credits CCPEOL offers investors a way
at the top of the capital structure, of accessing the European corporate
increasing the chance of strong credit loan markets, typically
recoveries in the event of a rise an asset class dominated by institutional
in defaults, and our portfolio investors. Since its establishment
typically holds around 100 positions in 1998, the Credit Suisse Leveraged
in large companies diversified Loan Index has only had one down
by geography and sector across year, demonstrating the stability
the UK, continental Europe and of the asset class.
the US.
-------------------------------------------
Attractive, risk-adjusted returns Part of the CVC Credit Platform
even in the current low-income The Investment Vehicle is managed
environment by CVC Credit, a leading global
CCPEOL targets attractive risk-adjusted investment management firm with
returns for its shareholders and over $28bn in AUM across performing
has a medium-term target return credit and private credit strategies,
of 8% per annum. We rotate our allowing shareholders the opportunity
portfolio between investing in to gain exposure to institutional-quality
senior secured loans and more credit investments. CVC Credit
opportunistic credit investments, is part of the CVC platform, a
meaning we're able to simultaneously world leader in private equity
target a reliable income while and credit with $114.8 billion
maintaining the potential to generate of AUM, $162.7 billion of funds
capital upside for our shareholders. committed and a global network
of 24 local offices.
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In executing it's investment strategy, the Investment Vehicle
utilises leverage and it's borrowings, as a percentage of the
Company's NAV(2) , as at 30 June 2021 stood at 30.60% (31 December
2020: 27.67%). The Investment Vehicle Manager is entitled to
receive a management fee of between 0.75% to 0.90% of NAV(3) and a
performance fee of 15% of performance that exceeds the higher of a
5% performance hurdle and a high water mark.
(1) up to June 2021
(2) Pro-rated for the Company's interest in the net assets of
the Investment Vehicle of 60.17% as at 30 June 2021 (31 December
2020: 58.71%).
(3) The Investment Vehicle management fee is 0.90%, which
reduces by a further 5 basis points each time the Investment
Vehicle's NAV exceeds EUR500m, EUR750m and EUR1bn respectively, to
a minimum of 0.75% per annum.
financial highlights
During the period, the NAV total return of 8.31% (Euro) and
8.70% (Sterling) compared favourably with the Company's medium term
average annualised total return target of +8%.
[Graphs and charts are included in the published 2021 Half-Year
Financial Report which is available on the Company's website at
https://ccpeol.com ]
For further information on the Company's dividend history and
total return metrics, please refer to the supplementary financial
information section below.
HALF YEARLY BOARD report
chairman's statement
Introduction
I am pleased to have the opportunity to report to you on the
Company's performance in respect of the half-year ended 30 June
2021.
Performance
Your board is very pleased with how the Company has performed
since the turn of the year. It is clear that the Investment Vehicle
Manager positioned the portfolio well into the year end to benefit
from the recovery of leveraged loans from the somewhat
indiscriminate markdowns that characterised the period subsequent
to the immediate impact of the Covid-19 pandemic during 2020. Net
asset value per share performance for the period was 6.43% for the
GBP share class and 5.88% for the EUR share class, and the
Company's shares moved commensurately, rising from GBP1.0299 to
GBP1.0961 and EUR0.9657 to EUR1.0225 for the GBP and EUR classes
respectively. Through August 2021, year to date net asset value per
share performance has been 6.81% (GBP class) and 6.10% (EUR class),
which compares favourably with our medium term average annualised
total return target of +8%.
Current Market Conditions and Outlook
For some time, and indeed through the 2020 financial year end,
our base case has been that monetary stimulus was expected to
remain largely unchanged, as economies recovered from the impacts
of the Covid-19 pandemic. This view is changing and doing so quite
rapidly now that inflation effects are starting to flow through
developed economies in particular, driven by a combination of
expanding demand across business and retail sectors set against
supply constraints of both physical goods and human capital. For
the first time in a very long time, we are starting to see monetary
policy tightening, and it is reasonable to assume that central
bankers are feeling pressure to revise their expectations around
both the speed of the current inflation shock, and its envisaged
future high point. Many commentators and analysts have discussed
the extent to which current inflationary effects are transitory or
structural, and the balance of opinion seems to be moving towards
the latter, at least in part. What all of this means, probably, is
that higher levels of inflation that we are used to are here to
stay, at least for the medium term. The consequence will inevitably
be felt in equity markets through a slowing of the exceptional
returns that have been seen through 2020/2021, and fixed rate
products will naturally experience the impact of their inverse
relationship with interest rates, but the board sees these
developments as being particularly positive for the Company given
the predominantly floating rate exposure of the underlying
portfolio. Of course, increasing interest rates have the potential
to put greater stress on issuers with weaker balance sheets and/or
challenged business models, but we know that the Investment Vehicle
Manager is very alive to this issue and we expect portfolio
selection to take full account of the emerging macro environment.
For the avoidance of doubt, we do not see any immediate risk of a
pickup in default rates amongst issuers in the Company's chosen
markets. The board will, of course, be closely monitoring this
metric.
Corporate Activities & Liquidity
The Company's tender programme has continued to operate without
any constraint derived from underlying markets during the period
under review, and no change is envisaged to this environment. The
Company's shares have continued to trade at a discount to net asset
value, continuing a trend which started in Q2/2019. The Board does
not regard the discount to net asset value as being appropriate,
given the liquidity characteristics of the Company's shares and
tender programme, and the positioning of the Company's portfolio,
and is considering a number of steps which it anticipates will
serve to diminish this discount over time.
Distribution Policy
The Company reviewed its distribution policy during Q2/2021, as
foreshadowed in my previous report, and amended the policy so as to
increase the annual dividend to 5p / 5c per share. There is no
present intention to consider a change to this policy position
within the next 12 months.
Corporate Governance and Social Responsibility
Considerations
The board continues to be active in sourcing portfolio data
points to enable investor transparency, but this remains
challenging given the nature of the asset class in which the
Company invests. It is the board's intention to provide
significantly enhanced reporting with effect from the 2022 annual
report cycle. To that end, I am pleased to report that the board
will shortly be announcing the appointment of two additional
directors, one of whom will be mandated expressly to lead this
reporting process. Shareholders will have noted that Company's
announcement on 18 August 2021 that David Wood stepped down from
this role as a non-executive director. David's expertise in credit
markets and leveraged finance has been intrinsic to the success of
the board's governance process since IPO in 2013, and our sincere
thanks go to him for the time and energy that he has devoted to his
role. Given the importance of credit market knowledge to our
governance process, the board is targeting the appointment of an
individual commensurate with that need. Shareholders may anticipate
that these appointments will enable the Company to satisfy its
stated objective of ensuring that the composition of the board of
directors be at least 30% female.
As always, I would like to take the opportunity to thank my
co-directors, the portfolio management team at the Investment
Vehicle Manager, our advisors and investment bankers for their
support during the period.
Richard Boléat
Chairman
29 September 2021
investment vehicle manager's report
Summary
Financial markets started 2021 on the same tone as they finished
2020, with a strong rally in risk assets. Corporate earnings
rebounded sharply in H1 2021 as economies began to re-open and
consumers, who had accumulated considerable savings during
lockdown, changed their spending habits and bought goods rather
than services. As the roll-out of the vaccination programs gathered
pace globally - albeit at different paces - the pent-up demand for
services such as travel and restaurants, amongst others, became
apparent. On the back of the stronger than expected recovery, there
was evidence of some inflationary pressures appearing across all
major economies. Some of these are transitory in nature, as
companies re-stock amidst supply chain issues and labour shortages
caused by some of the remaining Covid-19 restrictions. Markets are
trying to understand how much of the inflation that's being seen is
transitory, and how much is permanent as a result of the large
stimulus programs that were implemented on the back of the global
pandemic. As most central banks believe that inflation is
transitory, the need to reduce stimulus programs hasn't yet
materialised. US equity markets ended the first half of the year at
or near all-time highs, driven by the combination of central bank
stimulus, a sharp rebound in corporate earnings, and visibility on
a strong second half.
Looking into the second half of 2021, the Investment Vehicle
Manager remains positive on the outlook for credit. The outlook for
economic growth remains strong and default rates in the European
sub investment grade markets remain low. The evidence from the UK
suggests that vaccination programs are effective in breaking the
link between new infections and hospitalisations/mortality, even
with the new Delta variant. The downside risks for financial
markets include new Covid-19 variants, China-US relations, central
bank policy mistakes or higher than expected inflation, and
potentially the German elections. However, at the time of writing,
all of these appear manageable for the European market and these
are factors that the Investment Vehicle Manager focuses heavily on
in its underwriting process.
Portfolio
As at 30 June 2021 the Investment Vehicle portfolio was invested
in-line with the investment policy, was diversified with 103
issuers(1) (of which a range of 40 - 60 typically represent the
core drivers of performance) (31 December 2020: 106) across 35 (31
December 2020: 24) different industries and 16 (31 December 2020:
13) different countries, and had exposure of no more than 4.7% (31
December 2020: 3.1%) to any single issuer.
Portfolio Statistics(2)
As at 30 June As at 31 December
2021 2020
Perce ntage of Po rtfo l io in
F l o ating Rate As se ts 76.7% 83.5%
------------- -----------------
Perce ntage of Po rtfo l io in
Fi x ed Rate A ss ets 22.2% 14.7%
------------- -----------------
Percentage of Portfolio in Other 1.1% 1.8%
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Weighted Average Price(3) 96.5 93.6
------------- -----------------
Y iel d to M aturity ("YTM") 8.4% 7.0%
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Current Y ield 8.0% 6.6%
------------- -----------------
W ei g h ted Av era ge F i x
ed Rate Coupon 6.4% 7.5%
------------- -----------------
W ei g h ted Av era ge F loa
t ing Rate p l us M argin 5.0% 5.2%
------------- -----------------
5 Large st Is suers as at 30 June 2021
Issuer % of Gross Industry Country
A ssets
Doncasters 4.7 Diversified/Conglomerate UK
Manufacturing
------------- ------------------------- --------
Colouroz 3.6 Chemicals, Plastics Germany
and Rubber
------------- ------------------------- --------
Civica 3.3 Electronics UK
------------- ------------------------- --------
European Camping 2.5 Leisure France
Group
------------- ------------------------- --------
D&G 2.4 Financial Intermediaries UK
------------- ------------------------- --------
5 Large st Is suers as at 31 December 2020
Issuer % of Gross Industry Country
A ssets
Colouroz 3.1 Chemicals, Plastics Germany
and Rubber
Manufacturing
------------- ------------------------------- ------------
Civica 2.9 Electronics UK
------------- ------------------------------- ------------
Keter Group 2.9 Chemicals, Plastics Netherlands
and Rubber
------------- ------------------------------- ------------
Concordia 2.6 Healthcare and Pharmaceuticals UK
------------- ------------------------------- ------------
Doncasters 2.5 Diversified/Conglomerate UK
Manufacturing
------------- ------------------------------- ------------
5 Large st Ind u stry Position s as at
30 June 2021(1)
Healthcare and Pharmaceuticals 16.5%
------
Hotels, Motels, Inns and Gaming 10.4%
------
Chemicals, Plastics and Rubber 7.5%
------
Electronics 6.0%
------
Finance 5.8%
------
5 Large st Ind u stry Position s as at
31 December 2020(1)
Healthcare and Pharmaceuticals 15.0%
------
Hotels, Motels, Inns and Gaming 10.7%
------
Chemicals, Plastics and Rubber 10.1%
------
Retail Store s 7.6%
------
Telecommunications 6.3%
------
G e ographi c al Br ea kdo wn As at 30 June As at 31 December
by issuer countr y(1) 2021 2020
UK 23.2% 27.2%
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U.S. 18.8% 12.5%
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Netherlands 17.0% 18.6%
------------- -----------------
Germany 11.4% 11.4%
------------- -----------------
France 9.2% 11.3%
------------- -----------------
Spain 4.1% 5.2%
------------- -----------------
Luxembourg 3.3% 3.1%
------------- -----------------
Sweden 2.7% 2.2%
------------- -----------------
Finland 2.6% 3.2%
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Other 7.7% 5.3%
------------- -----------------
Curr ency Breakdo wn As at 30 June As at 31 December
2021 2020
EUR 62.0% 66.2%
------------- -----------------
USD 21.7% 17.7%
------------- -----------------
GBP 16.3% 16.1%
------------- -----------------
A sse t Breakdo wn As at 30 June As at 31 December
2021 2020
Loans (1st Lien) 61.4% 68.5%
------------- -----------------
Senior Secured Bonds 19.9% 15.3%
------------- -----------------
Loans (2nd Lien) 5.6% 2.8%
------------- -----------------
Structured 4.7% 4.7%
------------- -----------------
Senior Unsecured Bonds 3.5% 2.6%
------------- -----------------
Cash -1.9% 4.4%
------------- -----------------
Other 6.8% 1.7%
------------- -----------------
(1) E x cl u d es 20 (31 December 2020: 23) str uctu r ed fin an ce positi o ns.
(2) Not e: all m e t rics e xclu de ca sh u nless oth e r wise
st ate d.
(3) A ve r age m ar k et price of the p o rtfolio weig hted a g
ainst t he size of e a ch p ositio n.
Performance
The Euro Shares and Sterling Shares NAV total returns for H1
2021 were 8.31% (31 December 2020: 1.71%) and 8.70% (31 December
2020: 2.80%) respectively.
The performing credit segment of the portfolio returned 4.0%
gross during H1 2021 (31 December 2020: 6.0%), while the credit
opportunities segment returned 16.1% gross during H1 2021 (31
December 2020: 2.8%). Based on an average allocation of 47% (31
December 2020: 41%) to performing credit and 53% (31 December 2020:
59%) to credit opportunities, this resulted in a gross contribution
of 1.8% (31 December 2020: 2.0%) from the performing credit segment
and 8.6% (31 Dec 2020: 1.6%) from the credit opportunities
segment.(4)
The Credit Suisse Western European Leveraged Loan Index, hedged
to EUR, was up 2.91% for H1 2021, as compared to being up 2.38% for
the year ended 31 December 2020. The Credit Suisse Western European
High Yield Index, hedged to EUR, was up 3.26% for H1 2021, as
compared to being up 1.95% for the year ended 31 December 2020.
(4) Excluding management and performance fees.
Market Review
The European sub-investment grade markets had a strong H1 2021,
similar to other asset classes. As noted above, the Credit Suisse
Western European Leveraged Loan Index, hedged to EUR, returned
+2.91% for the first half of the year. This performance was mainly
driven by the strong outperformance of CCC ratings. BB ratings
returned +1.28% in the first six months of the year and Bs returned
+2.47%. CCCs returned +10.32% however as the combination of search
for yield with improving fundamentals and low default rates made
this sub segment of the market highly attractive.(5)
The CS Western European High Yield Index, hedged to EUR,
returned +3.26% in H1 2021. Similar to the loan market, CCCs were
the standout performer in the period with a total return of 9.89%,
while BBs and Bs generated 2.34% and 3.57% respectively.(6)
Default rates in the European sub investment grade markets
remain very low. The last twelve months ("LTM") default rate in the
loan market is now 0.5%, down from 1.2% at the end of 2020 and in
the high yield market is now 1.4%, down from 3.3% at the end of
2020.(7) With the outlook for economic growth still strong, the
default rate is anticipated to remain low for the near term.
The first half of 2021 also saw record amounts of mergers and
acquisitions, which resulted in record amounts of issuance in the
loan market. Total issuance in Europe in H1 was EUR70bn, which is
the same amount that was issued over the entire 2019 year. The
record amount of issuance occurred in 2017 when just over EUR100bn
was issued, and we are well on track to beat that record this
year.(8)
There have been some positive developments seen in the sub
investment grade markets on the ESG side. In the European leveraged
loan market, there appears to be an increasing number of issuers
coming to market with ESG ratchets, where the coupon of the loan
can step up or down, depending on how a company performs against
certain ESG criteria. The Investment Vehicle also invested in the
first ever sustainability-linked bond, as well as the first ever
blue bond. The sustainability-linked bond, issued by Public Power
Corporation, has a 0.5% coupon step-up if the company does not cut
its CO(2) emissions by 40% over a 3-year time period.(9) The
proceeds of the blue bond, issued by Seaspan, must be used by the
company to finance eligible projects, which include amongst others
decreased marine pollution, decarbonisation, ship recycling and
accidental spill prevention.(10) This is the shipping equivalent of
a green bond to reduce water pollution in the oceans.
Portfolio Overview
The overall portfolio performed very well during the first half
of the year. The performing segment of the portfolio generated
returns in line with expectations. Given the large amount of loan
supply we have seen this year, the Investment Vehicle Manager was
able to continuously optimise the portfolio to target the best
risk-adjusted returns within that segment.
As of June close, performing credit (including cash) was at
44.1% of the portfolio with a weighted average price of 99.8,
trading at a YTM of 4.4%, delivering 4.4% cash yield to the
portfolio.
We have seen considerable turnover in the credit opportunities
segment of the portfolio, where some profits could be locked in or
where a number of positions were repaid at par. The proceeds of
these were deployed in new opportunities, thereby keeping the
convexity in the portfolio to generate capital upside over time. As
of June close, credit opportunities was at 55.9% of the portfolio,
trading at a weighted average price of 93.9 and a YTM of 8.5%,
whilst delivering a 7.3% cash yield to the portfolio.
Sources
(5) Credit Suisse Western European Leveraged Loan Index
(6) Credit Suisse Western European High Yield Index
(7) Credit Suisse Credit Strategy, Default Statistics - July
2021 and January 2021
(8) LCD, an offering of S&P Global Market Intelligence -
July 2021
(9) Public Power Corporation S.A. preliminary offering
memorandum - March 2021
(10) Seaspan Corporation preliminary offering memorandum - July
2021 and Seaspan Blue Transition Bond Framework - June 2021
Across the entire portfolio, as of June month end, the weighted
average market price was 96.5, trading at a YTM of 8.4%, and
delivering 8.0% cash yield (on a levered basis) versus a weighted
average price of 93.6, YTM of 7.0% and cash yield of 6.6% as of
December 2020. Floating rate instruments comprised 76.7% of the
portfolio. Senior Secured 81.3%. The portfolio had a cash position
of -1.9% (including leverage) with leverage at 1.3x assets.
Conclusion and Outlook
The Investment Vehicle Manager is pleased with the performance
in H1 2021 and remains constructive on the outlook for credit into
the second half of the year.
After the strong rally in credit markets, interesting
opportunities for the credit opportunities segment of the portfolio
are less abundant. However, as of the end of H1 2021, 55.9% of the
portfolio was invested in credit opportunities and, with a yield to
maturity of 8.4% on the blended portfolio, the Investment Vehicle
Manager believes the portfolio is well positioned to deliver the
target returns of 8% net through the cycle. Despite the market
rally, there continues to be a large pipeline of opportunities that
are being monitored, and on a year to date basis (through to 31
July 2021), the Investment Vehicle has deployed over EUR127m in
opportunistic credit.
The Investment Vehicle Manager remains focused on actively
identifying opportunistic investment that can create both income
and capital upside, while actively looking at relative value
opportunities to rotate the performing credit portfolio.
CVC Credit Partners Investment Management Limited
Investment Vehicle Manager
Pieter Staelens
Managing Director, Portfolio Manager
29 September 2021
Pieter joined CVC in 2018. He is
a member of the Performing Credit
team and based in London.
Prior to joining CVC, he worked
at Janus Henderson Investors in
London where he was involved in
various high yield strategies and
a credit long/short strategy.
Pieter is a graduate of the Université
Catholique de Louvain in Belgium.
He also holds an MSc in Finance,
Economics and Econometrics from
the Cass Business School and an
MBA from the University of Pennsylvania.
Disclaimer:
Past performance is not indicative of future results. There can
be no assurance that the Investment Vehicle will be able to
implement its investment strategy, achieve its investment objective
or avoid substantial losses.
The indices referred to herein (including the Credit Suisse
Western European High Yield Index hedged to Euro and the Credit
Suisse Western European Leveraged Loan Index hedged to Euro) are
widely recognised, unmanaged indices of market activity and have
been included as general indicators of market performance. The
Credit Suisse Western European High Yield Index is a market cap
weighted benchmark index designed as an objective proxy for the
investable universe of the Western European high yield debt market.
The Credit Suisse Western European Leveraged Loan indices are
designed to mirror the investable universe of the Western European
leveraged loan market. There are significant differences between
the types of investments made or expected to be made by the
Investment Vehicle and the investments covered by the indices, and
the methodology for calculating returns. For example, the Credit
Suisse Western European High Yield Index does not take transaction
costs (bid-offer spreads) into account and for the month during
which a coupon is paid, the cash flow is reinvested at a fixed
money-market rate until the end of the month. Additionally, the
Credit Suisse Western European Leveraged Loan Index assumes that
coupon payments are reinvested into an index at the beginning of
each period. In contrast, the Investment Vehicle Manager may have
discretion whether to reinvest such payments during any relevant
investment period. It should not be assumed that the Investment
Vehicle will invest in any specific equity or debt investments,
such as those that comprise the indices, nor should it be
understood that there will be a correlation between the Investment
Vehicle's returns and those of the indices. It should not be
assumed that correlations to the indices based on historical
returns will persist in the future. No representation is made that
the Investment Vehicle will replicate the performance of any of the
indices. The indices are included for general, background
informational purposes only and recipients should use their own
judgment to appropriately weight or discount their relevance to the
Investment Vehicle.
executive REPORT
This Executive Report is designed to provide information about
the Company's business and results for the period ended 30 June
2021. It should be read in conjunction with the Chairman's
Statement and the Investment Vehicle Manager's report which gives a
detailed review of investment activities for the period and an
outlook for the future.
Corporate summary
The Company is a closed-ended investment company limited by
shares, registered and incorporated in Jersey under the Companies
(Jersey) Law 1991 on 20 March 2013, with registration number
112635. The Company's Share capital consists of Euro Shares and
Sterling Shares and is denominated in Euro and Sterling
respectively. The Company's Euro Shares and Sterling Shares are
listed on the Official List of the UK Listing Authority and
admitted to trading on the Main Market of the London Stock
Exchange. The Company also has two Management Shares in issue,
which are unlisted. Details of the shares in issue are detailed
below.
The Company is self-managed and the Directors have invested the
net proceeds from share issues into Compartment A of an existing
European credit opportunities investment vehicle, CVC European
Credit Opportunities S.à r.l. (the "Investment Vehicle"), managed
by CVC Credit Partners Investment Management Limited (the
"Investment Vehicle Manager").
The Company is a member of the Association of Investment
Companies ("AIC") and is regulated by the Jersey Financial Services
Commission ("JFSC").
Significant events during the six months ended 30 June 2021
Contractual quarterly tenders
The Company completed the following tenders under its
Contractual Quarterly Tender mechanism during the period. All of
the shares tendered were transferred into the Company's name and
held in treasury.
Quarterly Settlement Euro Shares Euro Share Sterling Sterling
tender date tendered tender price Shares Share
tendered tender price
December
2020 18/02/2021 4,804,474 EUR0.9557 23,256,443 GBP1.0199
March 2021 17/05/2021 5,926,910 EUR0.9832 8,710,330 GBP1.0521
On 14 May 2021, the Company announced that it had received
tender applications in respect of the June 2021 tender for
3,468,577 Euro Shares and 1,732,113 Sterling Shares. Refer to note
14 for details regarding the settlement of the June 2021
tender.
A description of the contractual quarterly tender mechanism can
be found below.
After further consideration, including the COVID-19 pandemic,
the Board considered it prudent to include additional powers in
respect of the Company's Contractual Quarterly Tenders to enable
the Board to:
-- Reduce the maximum number of shares that may be tendered for
purchase in any quarter below the current limit of 24.99% of the
shares in issue at the relevant tender record date;
-- Alter the timetable or any part thereof prospectively in
respect of any quarter or quarters at any time; and
-- Suspend any Contractual Quarterly Tender or the completion of
any Contractual Quarterly tender for one or more quarters at any
time.
These additional powers first received shareholder approval at
the Company's 2020 AGM on 1 May 2020, in respect of the Company's
Contractual Quarterly Tenders from June 2020 to March 2021. The
same additional powers were put forward for, and received,
shareholder approval at the Company's 2021 AGM on 22 April 2021, in
respect of the Company's Contractual Quarterly Tenders from June
2021 to March 2022. The Board intends to only use these powers when
it considers it appropriate and in response to the developing
situation in connection with the COVID-19 pandemic. The Board has
not exercised these additional powers to date.
Voluntary conversions
Following requests made by shareholders, the Company converted a
total of 1,000,000 Euro Shares into 796,589 Sterling Shares and
6,351,933 Sterling Shares into 7,788,876 Euro Shares under the
monthly conversion facility during the period ended 30 June
2021.
Dividend target
On 23 April 2021, the Company announced an increase to the
Company's annual dividend from GBP0.045 per Sterling Share and EUR
0.045 per Euro Share by GBP0.005 per Sterling Share and EUR 0.005
per Euro Share to GBP0.05 per Sterling Share and EUR0.0 5 per Euro
Share respectively. This will be effective for the next 12 months
starting from the dividends for quarter ended 30 June 2021 which
will be paid in Q3 2021. This announcement followed the conclusion
of the review of the Company's dividend policy with the Investment
Vehicle Manager described in the Company's 2020 Annual Report, with
a key focus being the determination of a stable level of dividends
that, based on current market conditions and the expected cash
yield, could reasonably be declared without recourse to capital for
a forward looking period of 12 months.
Refer to the "Alternative performance measures disclosure"
section below for the dividend yield per Euro Share and Sterling
Share as at 30 June 2021 and 31 December 2020.
Dividends
The Company announced and paid two quarterly dividends totalling
EUR 0.0225 and GBP 0.0225 per Euro Share and Sterling Share
respectively in the period ended 30 June 2021 (30 June 2020: EUR
0.0275 and GBP 0.0275 ). Refer to note 11 for full details of each
quarterly dividend.
Share capital and voting rights
The Company has two classes of ordinary shares, being Euro
Shares and Sterling Shares.
The Company held the following number of shares in treasury as
at 30 June 2021:
31,330,155 Euro Shares (31 December 2020: 20,598,771 Euro
Shares)
206,914,214 Sterling Shares (31 December 2020: 174,947,441
Sterling Shares)
Excluding shares held in treasury, the Company had the following
number of shares in issue as at 30 June 2021:
120,826,246 Euro Shares (31 December 2020: 124,768,754 Euro
Shares)
157,307,085 Sterling Shares (31 December 2020: 194,829,202
Sterling Shares)
Each Euro Share holds 1 voting right, and each Sterling Share
holds 1.17 voting rights. As at 30 June 2021, the total number of
voting rights of the Euro Shares of no par value is 120,826,246
(39.63%) (31 December 2020: 124,768,754) and of the Sterling Shares
is 184,049,289 (60.37%) (31 December 2020: 227,950,166). The total
number of voting rights in the Company is 304,875,535 (31 December
2020: 352,718,920).
Investment Vehicle Management Fee
On 23 April 2021, the Board announced a reduction in the
Investment Vehicle Management Fee of 0.1%, taking the fee from 1%
to 0.9% per annum of net asset value, effective from 1 May 2021.
This revised fee structure offers scope for further step-down
reductions based on the Investment Vehicle's total aggregate AUM.
Under the revised fee structure, the Investment Vehicle Management
Fee will be reduced by a further 5 basis points if the Investment
Vehicle's total aggregate AUM increases to EUR500 million, EUR750
million and EUR1 billion, thereafter capped at 0.75% per annum of
net asset value. Should one of the thresholds be met and
subsequently the Investment Vehicle's total aggregate AUM decreases
below the threshold (for example, due to investor redemptions), the
Investment Vehicle Management Fee is subject to future
increases.
Purpose
The Company is an investment company, and its scope is
restricted to that activity. In that context, the Company's purpose
is to provide investors with sustainable long term returns by
investing in a diversified portfolio of principally European
corporate debt. In fulfilling the Company's purpose, the Board
seeks to consider the views of all stakeholders and is mindful of
the impact that the Company has on wider society.
Investment Objective
The Company's investment objective is to provide shareholders
with regular income returns and capital appreciation from a
diversified portfolio of predominantly sub-investment grade
European corporate debt instruments.
Investment Policy
The Company's investment policy is to invest predominantly in
debt instruments issued by companies domiciled, or with material
operations, in Western Europe across various industries. The
Company's investments are focused on the senior secured obligations
of such companies, but investments are also made across the capital
structure of such borrowers.
The investment policy of the Investment Vehicle is subject to
the following limits (the "investment limits"):
-- A minimum of 50 per cent. of the Investment Vehicle's gross
assets will be invested in senior secured obligations (which, for
the purposes of this investment limit will include cash and cash
equivalents).
-- A minimum of 60 per cent. of the Investment Vehicle's gross
assets will be invested in obligations of companies/borrowers
domiciled, or with material operations, in Western Europe.
-- A maximum of 7.5 per cent. of the Investment Vehicle's gross
assets will be invested at any given time in obligations of a
single borrower subject to a single exception at any one time
permitting investment of up to 15 per cent. in order to participate
in a loan to a single borrower, provided the exposure is sold down
to a maximum of 7.5 per cent. within 12 months of acquisition.
-- A maximum of 7.5 per cent. of the Investment Vehicle's gross
assets will be invested in credit loan obligation securities.
-- A maximum of 25 per cent. of the Investment Vehicle's gross
assets will be invested in CVC Capital Portfolio Company debt
obligations calculated as invested cost as a percentage of the
Investment Vehicle's gross assets.
The Investment Vehicle is permitted to borrow up to an amount
equal to 100 per cent. of the NAV of the Investment Vehicle at the
time of borrowing (the "borrowing limit"). The Investment Vehicle's
borrowings as a percentage of the Company's NAV(1) as at 30 June
2021 stood at 30.60% (31 December 2020: 27.67%).
General
The investment objective and investment policy of the Investment
Vehicle are consistent with the investment objective and investment
policy of the Company. In the event that changes are made to the
investment objective or investment policy of the Company or of the
Investment Vehicle (including the investment limits and/or the
borrowing limit), the Directors will seek Shareholder approval for
changes which are either (a) material in their own right or, (b)
when viewed as a whole, together with previous non-material
changes, constitute a material change from the published investment
objective or policy of the Company.
Company borrowing limit
The Company may borrow up to 15 per cent. of the NAV of the
Company for the sole purpose of purchasing or redeeming its own
shares otherwise than pursuant to Contractual Quarterly Tenders. As
at 30 June 2021, the Company did not have any borrowings (31
December 2020: no borrowings).
Investment strategy and approach
The Company has given effect to its investment policy by
subscribing for Preferred Equity Certificates, (the "PEC's"),
Series 4 and 5, issued by the Investment Vehicle. Series 4 and 5
PECs are denominated in Euro and Sterling respectively and are
income distributing.
The Investment Vehicle Manager's investment strategy for the
Investment Vehicle is to make investments across approximately 40
to 60 companies based on detailed fundamental analysis of the
operations and market position of each company and its capital
structure.
The Investment Vehicle Manager invests in the debt of larger
companies and invests in companies with a minimum EBITDA of EUR50
million or currency equivalent at the time of investment. The
Investment Vehicle Manager believes that the debt of larger
companies offers a number of differentiating characteristics
relative to the broader market:
(i) larger, more defensive market positions;
(ii) access to broader management talent;
(iii) multinational operations which may reduce individual
customer, sector or geographic risk and provide diverse cash
flow;
(iv) levers such as working capital and capital expenditure
which can be managed in the event of a slowdown in economic growth;
and
(v) wider access to both debt and equity capital markets.
Based on the market opportunity, the Investment Vehicle Manager
invests in a range of different credit instruments across the
capital structure of target companies (including, but not limited
to, senior secured, second lien and mezzanine loans and senior
secured, unsecured and subordinated bonds). Assets are sourced in
both the new issue and secondary markets, using the sourcing
networks of the Investment Vehicle Manager and in certain
circumstances the CVC Group(2) more broadly. The Investment Vehicle
Manager's access to deals is supported by the network of contacts
and relationships of its leadership team and investment
professionals, as well as the strong positioning of the CVC Group
in the European leveraged finance markets. CVC Capital Portfolio
Companies are one of the largest sponsor led issuers of leveraged
loan deals in Europe(3) .
Each investment considered by the Investment Vehicle Manager is
built around an investment thesis and generally falls into one of
two categories:
1. Performing Credit(4) ; and
2. Credit Opportunities(5) .
The Investment Vehicle Manager analyses the risk of credit loss
for each investment on the basis it will be held to maturity but
takes an active approach to the sale of investments once the
investment thesis has been realised.
Further information in respect of the Investment Vehicle
portfolio and performance as at 30 June 2021 can be found in the
Investment Vehicle Manager's report above.
Director interests
Information on each Director is shown in note 6.
On 4 January 2021, Mr Boléat purchased 10,000 Sterling shares in
the Company. No other Directors transactions took place during the
period.
As at the date of approval of the Half Yearly Financial Report,
each Director held the following shares in the Company:
Director Sterling Shares
held
Richard Boleat 20,000
----------------
Stephanie Carbonneil 22,200
----------------
Mark Tucker 30,000
----------------
David Wood* 14,492
----------------
* held as at 31 August 2021, being the date David Wood stepped
down from the board of directors.
No Director has any other interest in any contract to which the
Company is a party.
Principal Risks and Uncertainties
When considering the total return of the Company, the Directors
take account of the risk which has been taken in order to achieve
that return. The Directors have carried out a robust assessment of
the principal risks facing the Company including those which would
threaten its business model, future performance, solvency or
liquidity.
The principal risks and uncertainties have not changed since the
publication of the Company's Annual Financial Report for the year
ended 31 December 2020. A summary of the principal risks and
uncertainties is set out below. For information concerning the
Company's emerging risks and how the Company mitigates both
principal and emerging risks, please refer to pages 18 to 22 of the
31 December 2020 Annual Financial Report (
https://www.ccpeol.com/media/1415/ccpeol-annual-financial-report-fy-2020.pdf
).
Principal Risk
COVID-19
The Company is exposed to financial losses stemming from the
impact on the Investment Vehicle's Portfolio and on markets
generally, arising from the spread of the COVID-19 disease and
its subsequent effect on global economic activity, supply chain
disruption, restrictions on human freedom of movement and consequential
constraints on issuer liquidity and the availability of market
financing.
Since the start of the COVID-19 pandemic, governments and central
banks in Europe and the United States have engaged in a concerted
series of policy steps which have sought to provide financial
support to business. These steps have included further monetary
policy loosening, provision of capital markets liquidity and
direct and indirect support for business through subsidised
and guaranteed lending schemes, grants to support employment
and other measures. Any significant withdrawal of such features
in the absence of a sustainable long-term solution to the impacts
of the pandemic has the potential to cause material negative
consequences on the financial condition of individual issuers
and the liquidity of the markets in which the Company invests.
Supply and demand
The value of the investments in which the Company indirectly
invests are affected by the supply of primary issuance and secondary
paper on the one hand and the continued demand for such instruments
from buy side market participants on the other. A change in
the supply of, or demand for, underlying investments may materially
affect the performance of the Company.
Credit risk
The Investment Vehicle invests in sub-investment grade European
corporate issuers and therefore credit risk is greater than
would be the case with investments in investment grade issuers.
Liquidity
The Company relies on the periodic redemption mechanism offered
by the Investment Vehicle to realise its investment in PECs,
and on that mechanism operating in a timely and predictable
manner.
The Investment Vehicle's underlying investments are not inherently
liquid. Investments are generally bought and sold by market
participants on a bilateral basis and any reduction in liquidity
caused by a reduction of demand or market dislocation may have
a negative impact on the Company's ability to effectively conduct
its Contractual Quarterly Tenders.
Foreign exchange risk
Foreign exchange risk is the risk that the values of the Company's
and the Investment Vehicle's assets and liabilities are adversely
affected by changes in the values of foreign currencies by reference
to the Company's base currency, the Euro.
Macro-economic factors
Adverse macro-economic conditions may have a material adverse
effect on the performance of the Investment Vehicle's underlying
assets and liabilities and on the ability of underlying borrowers
to service their ongoing debt obligations.
Capital management risks
Shareholders may seek to redeem their shareholdings in the Company
using the Contractual Quarterly Tender facility, subject to
restrictions as detailed in note 11, which could result in the
NAV of the Company falling below EUR75 million and as such,
triggering the requirement for the Directors to convene an extraordinary
general meeting to propose an ordinary resolution that the Company
continues its business as a closed-ended investment company.
There is a risk that a continuation resolution will not be passed
which could result in the redemption by the Company of its entire
holding in the Investment Vehicle.
Emerging Risk
Interest rates
The increasing preponderance of negative interest rates in developed
economies is a new feature to which leveraged credit markets
have not materially been exposed in the past, and the effect
on market dynamics and demand for and supply of primary issuance
and secondary paper in that context cannot be fully analysed.
Consequently, the impact on shareholder returns cannot be properly
analysed with any degree of certainty.
Environmental Social Governance
("ESG")
Reputational damage stemming from the Company's ESG-related
activities and disclosures failing to meet the standard expected
by shareholders.
Reputational damage stemming from the Company's environmental
footprint or from the Company's deemed disregard of its use
of social capital.
Financial losses stemming from climate-related factors adversely
impacting the capital value of securities held within the Investment
Vehicle portfolio and/or the ability of those companies whose
securities are held to meet their financial obligations thereunder.
Reputational damage stemming from the Company's association
with companies whose securities are held within the Investment
Vehicle portfolio and whose ESG policies, activities or disclosures
fail to meet the standards expected by stakeholders.
Taxation
There is a risk that revisions to the taxation of the Investment
Vehicle through the introduction and implementation of new or
amended tax legislation will impact its ability to continue
to deliver current after-tax returns to the Company.
The Company may be exposed to additional risks not disclosed
above or within the Half Year Report as they are not considered by
the Board to be principal or emerging risks. The Company assesses
risks, and the mitigation thereof, on an ongoing basis and as part
of its formal business risk assessment process.
Going concern
Under the Listing Rules, the AIC Code of Corporate Governance
("AIC Code") and applicable regulations, the Directors are required
to satisfy themselves that it is reasonable to assume that the
Company is a going concern as at the date of approval of this Half
Yearly Financial Report.
The Directors have given regard to the ongoing impact of
Covid-19 and are actively monitoring its impact on the Company, the
Investment Vehicle and the underlying portfolio. In performing the
going concern assessment, the Directors have:
-- Assessed the current position and performance of the Company;
-- Assessed the impact of a reduction to investment income
received from the Investment Vehicle;
-- Assessed the effect of continuing to operate the Contractual
Quarterly Tender mechanism; and
-- Performed inquiries of the Investment Vehicle Manager, the
Administrator and the Registrar on their ability to execute
business continuity plans in order to continue providing services
to the Company.
Based on the results of the above assessments and inquiries, the
Directors do not believe Covid-19 creates a material uncertainty
over the Company continuing as a going concern.
In addition, after reviewing the Company's budget and cash flow
forecast for the next twelve months, the Directors are satisfied
that, at the time of approving these condensed financial
statements, no material uncertainties exist that may cast
significant doubt concerning the Company's ability to continue for
the period to 30 September 2022, which is at least twelve months
from the date of approval of the condensed financial
statements.
The Directors consider it appropriate to adopt the going concern
basis in preparing this Half Yearly Financial Report.
Future strategy
The Board continues to believe that the investment strategy and
policy adopted by the Investment Vehicle is appropriate for and is
capable of meeting the Company's objectives.
The overall strategy remains unchanged and it is the Board's
assessment that the Investment Vehicle Manager's resources are
appropriate to properly manage the Investment Vehicle's portfolio
in the current and anticipated investment environment.
Please refer to the Investment Vehicle Manager's report for
detail regarding performance of the Investment Vehicle's
investments and the main trends and factors likely to affect the
future development, performance and position of those
investments.
Climate-related Financial Disclosures
The Company has been a formal supporter of the Task Force for
Climate Related Financial Disclosures' ("TCFD") recommendations
since 2018. The Company believes that climate change will have
material impacts on the financial performance of companies in which
the Investment Vehicle Manager invests and on the universe of
companies in which the Investment Vehicle Manager may invest.
The Company is at the beginning of its TCFD implementation
journey and it expects full implementation to be achieved through a
multi-year process of collaboration with the Investment Vehicle
Manager.
The Company plans to report on progress in this regard twice a
year - through its Half Year and Annual Financial Reports.
Governance
The Company has integrated climate-related risks into its
governance structure. The Company has continued is dialogue with
the Investment Vehicle Manager and it is pleasing to see the
inclusion within the Investment Vehicle portfolio of two bonds with
enhanced ESG credentials. Details of these positions can be found
within the Investment Vehicle Manager's Market Review above.
Strategy
The Investment Vehicle Manager uses ESG RepRisk ratings to
benchmark issuers on ESG and business conduct related risks. The
RepRisk rating takes the form of a letter rating from AAA to D; NR
indicates exposure to issuers not currently monitored by RepRisk.
This data is reported externally to stakeholders on a monthly basis
via the Company's factsheet (
https://www.ccpeol.com/news-documents/ ). As at 30 June 2021, the
portfolio of the Investment Vehicle had the following RepRisk
ratings:
RepRisk ESG % of portfolio
Rating
AAA 44.5%
---------------
AA 31.7%
---------------
A 9.6%
---------------
BBB 6.4%
---------------
BB 1.9%
---------------
B 1.5%
---------------
CCC 0.1%
---------------
CC 0.0%
---------------
D 0.0%
---------------
NR 4.3%
---------------
The Company plans to continue its collaboration with the
Investment Vehicle Manager and to encourage the Investment Vehicle
Manager to collaborate with sponsors with a view to facilitating
continual improvement in the quantity and quality of the Company's
climate-related disclosures.
Risk Management
In mid-2020, the Company shared guidance and resources with the
Investment Vehicle Manager. This included a discussion framework
outlining a top-down approach to identify and better manage and
disclose climate-related risks and opportunities at a sector level
throughout the investment portfolio.
Metrics & Targets
The Company is working toward reporting and disclosing the
proportional operational (Scope 1 and 2) greenhouse gas emissions
of the investee companies that comprise the Investment Vehicle
investment portfolio along with metrics that evidence an intention
to reduce these emissions. The Company recognizes the importance of
value chain (Scope 3) emissions; however due to the higher
complexity of quantifying Scope 3, the Company will initially
prioritise Scope 1 and 2.
Given the type and structure of the Company, the Company's own
environmental impact is minimal.
During the period the Company engaged in an exercise to examine
the climate-related disclosures of the sponsors of the issues
represented within the investment portfolio of the Investment
Vehicle. The Board determined that the Principles for Responsible
Investment ("PRI") provided the most effective platform from which
the Company could draw the most relevant climate-related data. An
examination of that data, combined with the application of a
proprietary scoring system, has allowed the Company to measure, on
a look-through basis, its' compliance with the principles of
responsible investing as prescribed by the PRI. The Company will
keep these measures under review and expects to see increasing
compliance over time. Should this not occur the Company will seek
explanations, the results of which will be fed back to the
Investment Vehicle Manager for incorporation into their
decision-making processes.
Looking forward
The approach described above covers the assets of the Investment
Vehicle. The Company recognises that enhancements to this approach
will be needed in areas where the data to conduct the necessary
analysis is currently limited, or where the tools available remain
in a nascent stage of development. These are challenges the Company
is working to resolve and progress over time will be reported in
the Company's Annual and Half Year Financial Reports.
(1) Pro-rated for the Company's interest in the net assets of
the Investment Vehicle of 60.17% as at 30 June 2021 (31 December
2020: 58.71%).
(2) CVC Group being the Investment Vehicle Manager and CVC
Credit Partners Group Holding Foundation, together with its direct
and indirect subsidiaries and their respective affiliates and
excluding any funds managed and/or advised by the CVC Group.
(3) Source: S&P LCD, for the period between January 2017 and
March 2021.
(4) "Performing Credit" generally refers to senior secured loans
and senior secured high yield bonds sourced in both the primary and
secondary markets. The investment decision is primarily driven by a
portfolio decision around liquidity, cash yield and volatility.
(5) "Credit Opportunities" refers to investments where the
Investment Vehicle Manager anticipates an event in a specific
credit situation is likely to have a positive impact on the value
of its investment. This may include events such as a repayment
event before maturity, a deleveraging event, a change to the
economics of the instrument such as increased margin and/or fees or
fundamental or sentiment driven change in the value. The Investment
Vehicle Manager seeks relative value opportunities which involve
situations where market technicals have diverged from credit
fundamentals often driven by selling by mandate constrained
investors, CLO managers or hedge funds rebalancing their
portfolios, macro views affecting different credit instrument types
or sales by banks. The Investment Vehicle Manager has additional
flexibility compared to mandate constrained capital and believes
these assets have potential for capital gains and early cash flow
generation based on the acquisition prices.
Directors' Statement of Responsibilities
The Directors are responsible for preparing the Half Yearly
Financial Report in accordance with applicable Jersey law and
regulations.
The Directors confirm to the best of their knowledge that:
-- the unaudited condensed financial statements within the Half
Yearly Financial Report have been prepared in accordance with IAS
34 - Interim Financial Reporting, as adopted by the European Union
("EU") and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company as at 30 June
2021, as required by the Financial Conduct Authority's ("FCA")
Disclosure Guidance and Transparency Rule ("DTR") 4.2.4R; and
-- the Chairman's Statement, the Investment Vehicle Manager's
Report, the Executive Report and the notes to the condensed
financial statements include a fair review of the information
required by:
a) DTR 4.2.7R, being an indication of important events that have
occurred during the six months ended 30 June 2021 and their impact
on the unaudited condensed financial statements; and a description
of the principal risks and uncertainties for the remaining six
months of the year; and
b) DTR 4.2.8R, being related party transactions that have taken
place during the six months ended 30 June 2021 and that have
materially affected the financial position or performance of the
Company during that period.
Richard Bol é at Mark Tucker
Chairman Audit Committee Chairman
29 September 2021
INDEPENT REVIEW REPORT TO CVC CREDIT PARTNERS EUROPEAN
OPPORTUNITIES LIMITED
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the Condensed
Statement of Comprehensive Income, the Condensed Statement of
Financial Position, the Condensed Statement of Changes in Net
Assets, the Condensed Statement of Cash Flows, and the related
notes 1 to 15 to the Condensed Financial Statements. We have read
the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 "Interim Financial
Reporting" as adopted by the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting" as adopted by the European Union.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the Company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our conclusion, is based on procedures that are less
extensive than audit procedures, as described in the Basis for
Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
30 September 2021
CONDENSED Statement of comprehensive income
For the six months ended 30 June 2021
Six months Six months
ended ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
Notes EUR EUR
------------------------------------------------ ------ -------------- --------------
Income
Investment income 3 7,778,839 13,080,121
Tender fee income 3 475,676 1,091,101
Net gains/(losses) on financial assets
held at fair value through profit or
loss 7 18,853,412 (49,562,937)
Foreign exchange gain/loss on financial
assets held at fair value through profit
or loss 7 8,514,749 (19,412,317)
Foreign exchange (loss)/gain
on ordinary shares 11 (8,639,869) 19,647,714
Other net foreign currency exchange
gains/(losses) through profit or loss 113,382 (95,222)
27,096,189 (35,251,540)
------------------------------------------------ ------ -------------- --------------
Expenses
Operating expenses 4 (615,445) (624,360)
(615,445) (624,360)
------------------------------------------------ ------ -------------- --------------
Profit/(loss) before finance
costs and taxation 26,480,744 (35,875,900)
------------------------------------------------- ------ -------------- --------------
Finance costs
Share issue costs 5 - (3,524)
Dividends paid 5/11 (6,970,679) (11,135,804)
------------------------------------------------- ------ -------------- --------------
Profit/(loss) before taxation 19,510,065 (47,015,228)
------------------------------------------------- ------ -------------- --------------
Taxation - -
Increase/(decrease) in net assets attributable
to shareholders from operations 19,510,065 (47,015,228)
------------------------------------------------- ------ -------------- --------------
Basic and diluted profit/(loss)
per Euro Share 11 EUR0.066965 (EUR0.121790)
------------------------------------------------- ------ -------------- --------------
Basic and diluted profit/(loss) per 11
Sterling Share (Sterling equivalent) GBP0.057491 (GBP0.110617)
------------------------------------------------- ------ -------------- --------------
All items in the above statement are derived from continuing
operations.
The Company has no items of other comprehensive income, and
therefore the decrease respectively in net assets attributable to
ordinary shareholders for the period is also the total
comprehensive loss.
The notes below form an integral part of these condensed
financial statements.
CONDENSED statement of financial position
As at 30 June 2021
30 June 31 December
2021 2020
(Unaudited) (Audited)
Notes EUR EUR
----------------------------------------- ---- ------ -------------- --------------
Assets
Financial assets held at fair value
through profit or loss 7 321,373,018 341,742,461
Prepayments 71,472 45,421
Cash and cash equivalents 3,093,138 2,870,655
Total assets 324,537,628 344,658,537
----------------------------------------------- ------ -------------- --------------
Liabilities
Payables 8 (142,342) (118,290)
Total liabilities (142,342) (118,290)
----------------------------------------------- ------ -------------- --------------
Net assets attributable to shareholders 12 324,395,286 344,540,247
----------------------------------------------- ------ -------------- --------------
The condensed financial statements were approved by the Board of
Directors on 29 September 2021 and signed on its behalf by:
Richard Bol é at Mark Tucker
Chairman Audit Committee Chairman
The notes below form an integral part of these condensed
financial statements.
CONDENSED statement of changes in net assets
For the six months ended 30 June 2021 (Unaudited)
Net assets
attributable
to shareholders
Note EUR
------------------------------------------------------------- -----------------
As at 1 January 2021 344,540,247
-------------------------------------------------------- --- -----------------
Issuance and subscriptions arising from conversion
of ordinary shares 11 8,533,895
Redemption payments arising on conversion and tender
of ordinary shares 11 (56,828,790)
Increase in net assets attributable to shareholders
from operations 19,510,065
Net foreign currency exchange gain on opening ordinary
shares and ordinary
shares issued during the period 8,639,869
As at 30 June 2021 324,395,286
-------------------------------------------------------- --- -----------------
For the six months ended 30 June 2020 (Unaudited)
Net assets
attributable
to shareholders
Note EUR
------------------------------------------------------------- -----------------
As at 1 January 2020 537,324,231
-------------------------------------------------------- --- -----------------
Issuance and subscriptions arising from conversion
of ordinary shares 11 2,400,315
Redemption payments arising on conversion and tender
of ordinary shares 11 (116,332,359)
Decrease in net assets attributable to shareholders
from operations (47,015,228)
Net foreign currency exchange loss on opening ordinary
shares and ordinary
shares issued during the period (19,647,714)
As at 30 June 2020 356,729,245
-------------------------------------------------------- --- -----------------
The notes below form an integral part of these condensed
financial statements.
CONDENSED statement of cash flows
For the six months ended 30 June 2021
Six months Six months
ended ended
30 June 30 June
2021 2020
(Unaudited) (Unaudited)
Notes EUR EUR
------------------------------------------------------------------- ------ ------------- --------------
Cash flows from operating activities
Profit/(loss) from ordinary activities
before taxation(1) 19,510,065 (47,015,228)
Adjustments to reconcile profit/(loss)
before tax to net cash flows:
* Net (gain)/loss on financial assets held at fair
value through profit or loss 7 (18,853,412) 49,562,937
* Foreign exchange (gain)/loss on financial assets held
at fair value through profit or loss 7 (8,514,749) 19,412,317
* Foreign currency exchange loss/(gain) on ordinary
shares 11 8,639,869 (19,647,714)
* Share issue costs 5 - 3,524
* Dividends paid 11 6,970,679 11,135,804
Changes in working capital:
* Increase in prepayments (26,051) (6,795)
* Increase/(decrease) in payables 24,052 (2,205)
------------------------------------------------------------------- ------ ------------- --------------
Net cash provided by operating activities 7,750,453 13,442,640
------------------------------------------------------------------- ------ ------------- --------------
Cash flows from investing activities
Purchase and subscriptions of financial
assets held at fair value through profit
or loss(2) 7 - (348,681)
Proceeds from redemption of financial
assets held at fair value through profit
or loss(2) 7 47,634,932 112,624,622
Net cash provided by investing activities 47,634,932 112,275,941
------------------------------------------------------------------- ------ ------------- --------------
Cash flows from financing activities
Proceeds from issuance and/or subscription
arising from conversion of ordinary shares(3) 11 - 352,205
Payments for redemption of ordinary shares(3) 11 (48,192,223) (114,259,312)
Share issue costs paid 5 - (3,524)
Dividends paid 5/11 (6,970,679) (11,135,804)
Net cash used in financing activities (55,162,902) (125,046,435)
------------------------------------------------------------------- ------ ------------- --------------
Net increase in cash and cash equivalents
in the period 222,483 672,146
------------------------------------------------------------------- ------ ------------- --------------
Cash and cash equivalents at beginning
of the period 2,870,655 2,072,319
Cash and cash equivalents at the end
of the period 3,093,138 2,744,465
------------------------------------------------------------------- ------ ------------- --------------
(1) - Includes investment income of EUR7,777,207 (30 June 2020:
EUR13,080,121) and tender fee income of EUR475,676 (30 June 2020:
EUR1,091,101).
(2) - Cash flows arising from purchases and redemption of
financial assets above does not include subscriptions and
redemptions arising from conversion of EUR(8,533,895) (2019:
EUR(2,048,110)) and EUR8,636,567 (30 June 2020: EUR2,073,047)
respectively as these transactions have no associated cash
flow.
(3) - Cash flows arising from issuance and redemption of
ordinary shares above does not include subscriptions and
redemptions arising from conversion of EUR8,533,895 (2019:
EUR2,048,110) and EUR(8,636,567) (30 June 2020: EUR(2,073,047))
respectively as these transactions have no associated cash
flow.
The notes below form an integral part of these condensed
financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. General information
The Company was incorporated on 20 March 2013 and is registered
in Jersey as a closed-ended Investment Company. Euro Shares and
Sterling Shares were admitted to the Official List of the UK
Listing Authority ("UKLA") and admitted to trading on the Main
Market of the London Stock Exchange on 25 June 2013.
The Company's registered address is IFC1, The Esplanade, St
Helier, Jersey, JE1 4BP.
2. Accounting policies
The Annual Financial Report is prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority ("FCA") and with International Financial Reporting
Standards ("IFRS") as adopted by the European Union which comprise
standards and interpretations approved by the International
Accounting Standards Board, and interpretations issued by the
International Financial Reporting Standards and Standing
Interpretations Committee as approved by the International
Accounting Standards Committee which remain in effect. The Half
Yearly Financial Report has been prepared in accordance with
International Accounting Standards (IAS) 34 - Interim Financial
Reporting ("IAS 34"). They have also been prepared using the same
accounting policies applied for the year ended 31 December 2020
Annual Financial Report, which was prepared in accordance with
IFRS, except for new standards and interpretations adopted by the
Company as set out below. The Company has not early adopted any
other standard, interpretation or amendment that has been issued
but is not yet effective.
Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments to the above standards provide temporary reliefs
which address the financial reporting effects when an interbank
offered rate is replaced with an alternative nearly risk-free
interest rate. As the Company does not hold any instruments that
reference interbank offered rates, these amendments had no impact
on the condensed financial statements.
Several other amendments and interpretations became effective
for the first time in 2021 however, they do not have an impact on
the condensed financial statements.
2.1. Going concern
The Directors have given regard to the ongoing impact of
Covid-19 and are actively monitoring its impact on the Company, the
Investment Vehicle and the underlying portfolio. In performing the
going concern assessment, the Directors have:
-- Assessed the current position and performance of the Company;
-- Assessed the impact of a reduction to investment income
received from the Investment Vehicle;
-- Assessed the effect of continuing to operate the Contractual
Quarterly Tender mechanism; and
-- Performed inquiries of the Investment Vehicle Manager, the
Administrator and the Registrar on their ability to execute
business continuity plans in order to continue providing services
to the Company.
Based on the results of the above assessments and inquiries, the
Directors do not believe Covid-19 creates a material uncertainty
over the Company continuing as a going concern.
In addition, after reviewing the Company's budget and cash flow
forecast for the next twelve months, the Directors are satisfied
that, at the time of approving these condensed financial
statements, no material uncertainties exist that may cast
significant doubt concerning the Company's ability to continue for
the period to 30 September 2022, which is at least twelve months
from the date of approval of the condensed financial
statements.
2.2. Segmental reporting
The Directors view the operations of the Company as one
operating segment, being the investment business. All significant
operating decisions are based upon analysis of the Company's
investments as one segment. The financial results from this segment
are equivalent to the financial results of the Company as a whole,
which are evaluated regularly by the chief operating decision-maker
(the Board with insight from the Investment Vehicle Manager).
2.3. Seasonality of Operations
The Company's operations are not seasonal in nature. As such,
its performance is not subject to seasonal fluctuations.
3. Investment income
Six months Six months
ended ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
EUR EUR
Income distributions 7,778,839 13,074,831
Bank interest income - 5,290
-------------------------- -------------- --------------
Total investment income 7,778,839 13,080,121
-------------------------- -------------- --------------
Tender fee income
The tender price pursuant to the Contractual Quarterly Tender
facility is calculated based on the NAV per share (calculated as at
the final business day in each quarter or such other date as the
Directors in their absolute discretion may determine from time to
time) less GBP0.01 or EUR0.01 per share respectively (being 1% of
the original placing price of GBP1.00 and EUR1.00 per share (the
"Original Placing Price")) , which is retained by the Company. The
Company recognises retained redemption proceeds of 1% and the
administration fee as tender fee income.
During the period, 10,731,384 Euro Shares (30 June 2020:
4,260,209 ) and 31,966,773 Sterling Shares (30 June 2020:
91,667,625 ) have been tendered by shareholders which generated
tender fee income of EUR 475,676 (30 June 2020: EUR 1,091,101
).
Refer to note 11 for further details on the Contractual
Quarterly Tender facility.
4. Operating expenses
Six months Six months
ended ended
30 June 2021 30 June 2020
(Unaudited) (Unaudited)
EUR EUR
Administration fees 125,599 88,268
Directors' fees (see note 6) 117,680 118,015
Advisor fees 72,569 68,216
Regulatory fees 38,195 44,427
Audit fees 35,889 27,867
Non-audit fees paid to the Auditor 11,639 9,800
Professional fees 32,780 132,735
Registrar fees 27,584 41,741
Brokerage fees 27,075 24,913
Trustee fees 10,959 -
Sundry expenses 115,476 68,378
Total operating expenses 615,445 624,360
------------------------------------- -------------- --------------
Non-audit fees
Non-audit fees relate to interim review services amounting to
EUR11,639 (30 June 2020: EUR9,800) .
Advisor fees
CVC Credit Partners Investment Services Management Limited (the
"Corporate Services Manager") agreed to provide the services of Mr.
Justin Atkinson to assist with the marketing and promotion of the
Company's shares (the "Advisor fees"). The Corporate Services
Manager recharges the Company for a proportion of Mr. Atkinson's
cost. During the period, Advisor fees incurred were EUR72,569 (30
June 2020: EUR68,216).
Trustee fees
Trustee fees relate to fees paid to the trustee of the Trust
which facilitates the conversion of treasury shares as further
described in note 11. As the Trust was not engaged to convert
treasury shares during the period ended 30 June 2021, the Trust did
not earn any commission fee income for providing such services. As
such, the Board agreed to settle the expenses of the Trust, being
trustee fees of GBP9,525 ( EUR10,969) (30 June 2020: GBPnil (
EURnil)) which were paid to BNP Paribas Jersey Trust Corporation
Limited during the period.
5. Finance costs
Share issue costs
The costs of the sale of treasury shares and placing of new
ordinary shares have been expensed in the Statement of
Comprehensive Income and amounted to a total of EURnil (30 June
2020: EUR3,524).
Dividends paid
Refer to note 11 for further information on dividends paid.
6. Directors' fees and interests
The Directors of the Company are remunerated for their services
as follows:
Richard Boléat (Chairman) - GBP65,000 (2020 : GBP65,000) per
annum
Mark Tucker - GBP43,750 (2020: GBP43,750) per annum
Stephanie Carbonneil - GBP42,500 (2020: GBP42,500) per annum
David Wood - GBP42,500 (2020: GBP42,500) per annum
Mark Tucker in his capacity as the Chairman of the Audit
Committee receives an additional GBP6,250 (2020: GBP6,250) per
annum for his services in this role and Stephanie Carbonneil
receives an additional GBP5,000 per annum for her services as
Remuneration and Nomination Committee Chairwoman.
On 18 August 2021, the Company announced that David Wood, a
Non-Executive Director of the Company, had given notice that, with
effect from 31 August 2021, he would be stepping down from his role
on the board of directors of the Company.
Refer to note 4 for details of total Directors fees during the
period ended 30 June 2021 and 30 June 2020. Director's fees are
paid gross of any taxes and expenses incurred by each Director are
included within sundry expenses within note 4.
No pension contributions were payable in respect of any of the
Directors.
The Company has no employees.
Richard Boléat acts as the Enforcer of the CCPEOL Purpose Trust.
Please refer to note 13 for further detail.
On 4 January 2021, Richard Boléat purchased 10,000 Sterling
Shares at a price of GBP0.9556, with a total market value of
GBP9,556.
7. Financial assets held at fair value through profit or
loss
30 June 31 December
2021 2020
(Unaudited) (Audited)
EUR EUR
Preferred Equity Certificates ("PECs")
- Unquoted investment 321,373,018 341,742,461
----------------------------------------- ------------ ------------
The PECs are valued taking into consideration a range of factors
including the audited NAV of the Investment Vehicle as well as
available financial and trading information of the Investment
Vehicle and of its underlying portfolio; the price of recent
transactions of PECs redeemed and advice received from the
Investment Vehicle Manager; and such other factors as the
Directors, in their sole discretion, deem relevant in considering a
positive or negative adjustment to the valuation.
As at the period ended 30 June 2021, the Company held
119,554,092.47 Euro and 155,486,331.68 Sterling PECs (2020:
123,587,333.61 Euro and 193,056,156.64 Sterling PECs). Please refer
below for reconciliation of PECs from 1 January 2020:
Euro PECs Sterling PECs
As at 1 January 2020 130,144,171.50 324,425,319.07
------------------------ ---------------- -----------------
Subscriptions 346,649.89 -
Monthly conversions 7,564,999.22 (6,474,321.43)
Quarterly tenders (14,468,487.00) (124,894,841.00)
As at 31 December 2020 123,587,333.61 193,056,156.64
------------------------ ---------------- -----------------
Subscriptions - -
Monthly conversions 6,587,997.86 (5,483,643.96)
Quarterly tenders (10,621,239.00) (32,086,181.00)
As at 30 June 2021 119,554,092.47 155,486,331.68
------------------------ ---------------- -----------------
Fair value hierarchy
IFRS 13 'Fair Value Measurement' ("IFRS 13") requires an
analysis of investments valued at fair value based on the
reliability and significance of information used to measure their
fair value.
The Company categorises its financial assets and financial
liabilities according to the following fair value hierarchy
detailed in IFRS 13, that reflects the significance of the inputs
used in determining their fair values:
Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted
prices for identical or similar instruments in markets that are
considered less than active; or other valuation techniques where
all significant inputs are directly or indirectly observable from
market data.
Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable variable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are
valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.
As at 30 June 2021 Level 1 Level 2 Level 3 Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Financial assets EUR EUR EUR EUR
Financial assets held at
fair value
through profit or loss - - 321,373,018 321,373,018
-------------------------- ------------ ------------ ------------ ------------
Financial liabilities
-------------------------- ------------ ------------ ------------ ------------
Ordinary shares(1) 305,033,453 - - 305,033,453
-------------------------- ------------ ------------ ------------ ------------
As at 31 December 2020 Level 1 Level 2 Level 3 Total
(Audited) (Audited) (Audited) (Audited)
Financial assets EUR EUR EUR EUR
Financial assets held at
fair value through profit
or loss - - 341,742,461 341,742,461
---------------------------- ------------ ----------- ------------ ------------
Financial liabilities
---------------------------- ------------ ----------- ------------ ------------
Ordinary shares(1) 317,655,573 - - 317,655,573
---------------------------- ------------ ----------- ------------ ------------
(1) Please note for disclosure purposes only, ordinary shares
have been disclosed at fair value using the quoted price in
accordance with IFRS 13. As disclosed in note 2.4 of the 2020
Annual Financial Report, the Company classifies its ordinary shares
as financial liabilities held at amortised cost.
The fair value of investments is assessed on an ongoing basis by
the Board.
Level 3 reconciliation - Compartment A PECs
The following table shows a reconciliation of all movements in
the fair value of financial assets held at fair value through
profit or loss categorised within Level 3 between the beginning and
the end of the reporting period.
30 June
2021
(Unaudited)
EUR
---------------------------------------------------- ---- -------------
Balance as at 1 January 2021 341,742,461
---------------------------------------------------------- -------------
Purchases -
Subscriptions arising from conversion 8,533,895
Redemption proceeds arising from conversion (8,636,567)
Redemption proceeds arising from quarterly tenders (47,634,932)
Realised loss on financial assets held at fair
value through profit or loss (1,880,372)
Unrealised gain on financial assets held at fair
value through profit or loss 20,733,784
Foreign exchange gain on financial assets held
at fair value through profit or loss 8,514,749
Balance as at 30 June 2021 321,373,018
---------------------------------------------------------- -------------
Net loss on financial assets held at fair value
through profit or loss for the six month period
ended 30 June 2021 18,853,412
---------------------------------------------------------- -------------
During the six months ended 30 June 2021, there were no
reclassifications between levels of the fair value hierarchy.
31 December
2020
(Audited)
EUR
-------------------------------------------------------- ---- --------------
Balance as at 1 January 2020 535,409,935
-------------------------------------------------------------- --------------
Purchases 348,681
Subscriptions arising from conversion 8,093,584
Redemption proceeds arising from conversion (8,164,745)
Redemption proceeds arising from quarterly tenders (156,419,064)
Realised loss on financial assets held at fair
value through profit or loss (13,454,903)
Unrealised loss on financial assets held at fair
value through profit or loss (8,226,597)
Foreign exchange gain on financial assets held
at fair value through profit or loss (15,844,430)
Balance as at 31 December 2020 341,742,461
-------------------------------------------------------------- --------------
Net loss on financial assets held at fair value
through profit or loss for the year ended 31 December
2020 (21,681,500)
-------------------------------------------------------------- --------------
During the year ended 31 December 2020, there were no
reclassifications between levels of the fair value hierarchy.
Quantitative information of significant unobservable inputs -
Level 3 - PECs
30 June
2021
Valuation Unobservable Range (weighted
Description (Unaudited) technique input average)
EUR
------------- ------------- ------------- ------------------- ----------------
Adjusted Net Discount for
PECs 321,373,018 Asset Value lack of liquidity 0-3%
31 December
2020
Valuation Unobservable Range (weighted
Description (Audited) technique input average)
EUR
------------- ------------ ------------- ------------------- ----------------
Adjusted net Discount for
PECs 341,742,461 asset value lack of liquidity 0-3%
The Board believes that it is appropriate to measure the PECs at
the NAV of the investments held at the Investment Vehicle, adjusted
for discount for lack of liquidity if necessary. The Board has
concluded that no adjustment was necessary in the current period
(31 December 2020: none).
The net asset value of the Investment Vehicle attributable to
each PEC unit is EUR1.1685 (31 December 2020: EUR 1.0793).
Sensitivity analysis to significant changes in unobservable
inputs within Level 3 hierarchy - Level 3 - PECs
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 30 June
2021 and comparative are as shown below:
As at 30 June 2021 (Unaudited)
Description Input Sensitivity Effect on fair
used value
EUR
------------- ------------------- ------------ ---------------
Discount for lack
PECs of liquidity 3% (9,641,191)
------------- ------------------- ------------ ---------------
As at 31 December 2020 (Audited)
Description Input Sensitivity Effect on fair
used value
EUR
------------- ------------------- ------------ ---------------
Discount for lack
PECs of liquidity 3% (10,252,274)
------------- ------------------- ------------ ---------------
The sensitivity applied in the analysis above reflects the
possible impact of the worst case scenario in the 0-3% (2020: 0-3%)
range that is applicable to the discount for lack of liquidity.
Please refer to note 2.4 of the 2020 Annual Financial Report for
valuation methodology of PECs.
The following tables below, detail the investment holding of the
Company at the Investment Vehicle level, categorising these assets
according to the fair value hierarchy in accordance with IFRS 13
and detailing the quantitative information of significant
unobservable inputs of the Level 3 investments held. The below
disclosure has been included to provide an insight to shareholders
of the asset class mix held by the Investment Vehicle portfolio. It
is important to note that as at 30 June 2021, the Company held a
60.17% (31 December 2020: 58.71%) interest in the net assets of the
Investment Vehicle. This disclosure has not been apportioned
according to the Company's pro rata share of net assets, as the
Board believes to do so would be misleading and not an accurate
representation of the Company's investment in the Investment
Vehicle.
The below information regarding the financial assets at fair
value through profit or loss for the Investment Vehicle has been
included for information purposes only.
Financial assets and liabilities at fair value through profit or
loss - (for Investment Vehicle)
30 June 2021 (Unaudited)
------------------------------- ---------
Level Level
Level 1 2 3 Total
EUR '000 EUR '000 EUR '000 EUR '000
--------- --------- --------- ---------
Financial assets
Equity securities
Equities and warrants - - 7,955 7,955
Debt securities
Corporate bonds and other debt
securities 184,826 391,699 95,990 672,515
CLOs including ABSs - - 32,501 32,501
Derivative financial instruments
Forward currency contracts - 2,988 - 2,988
Total 184,826 394,687 136,446 715,959
========= ========= ========= =========
Financial liabilities
Corporate bonds and other debt
securities sold short - - - -
Total - - - -
========= ========= ========= =========
The carrying amounts of financial assets and financial
liabilities at amortised cost and PECs continued to approximate
their fair values as at 30 June 2021.
31 December 2020 (Audited)
------------------------------------------
Level Level
Level 1 2 3 Total
EUR '000 EUR '000 EUR '000 EUR '000
--------- --------- --------- ---------
Financial assets
Equity securities
Equities and warrants - - 12,304 12,304
Debt securities
Corporate bonds and other debt
securities 120,117 437,402 102,919 660,438
CLOs including ABSs - - 34,907 34,907
Forward currency contracts - 4,599 - 4,599
Total 120,117 442,001 150,130 712,248
========= ========= ========= =========
Financial liabilities
Corporate bonds and other debt
securities sold short - - - -
Total - - - -
========= ========= ========= =========
The carrying amounts of financial assets and financial
liabilities at amortised cost and PECs continued to approximate
their fair values as at 31 December 2020.
Transfers between Level 2 and Level 3 - (for Investment
Vehicle)
Overall, in the period to 30 June 2021, the Leveraged Loan and
High Yield markets continued to function well. Despite the fact
that COVID-19 was still impacting European economies, the
Investment Manager did not identify any new or additional risks
that could impact liquidity in the secondary market.
As of 30 June 2021, following further developments in the
liquidity of certain debt securities, investments of the Investment
Vehicle with a market value of EUR 3.2 million as at 31 December
2020 were reclassified from Level 2 to Level 3 (31 December 2020:
EUR 50.2 million) and EUR Nil were reclassified from Level 1 to
Level 3 (31 December 2020: EUR 9.5 million). There were also
investments with a market value of EUR 20.5 million as at 31
December 2020 that were reclassified from Level 3 to Level 2 (31
December 2020: EUR 32.9 million).
Level 3 reconciliation - (for Investment Vehicle)
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and the end of the reporting year.
Corporate
bonds and CLOs
Equities other debt (including
and Warrants securities ABSs) Total
-------------- ------------ ------------ ----------
EUR
'000 EUR '000 EUR '000 EUR '000
-------------- ------------ ------------ ----------
Balances as at 1 January 2020
(Audited) 16,315 115,933 41,999 174,247
-------------- ------------ ------------ ----------
Total (losses) / gains in Statement
of Comprehensive Income during
the year (3,014) (17,029) (1,467) (21,510)
Purchases / Subscriptions 3,696 45,938 19,205 68,839
Sales / Redemptions (5,803) (67,614) (24,830) (98,247)
Transfers into and out of Level
3 1,110 25,691 - 26,801
-------------- ------------ ------------ ----------
Balances as at 31 December 2020
(Audited) 12,304 102,919 34,907 150,130
-------------- ------------ ------------ ----------
Total (losses) / gains in Statement
of Comprehensive Income during
the year 2,015 17,780 826 20,621
Purchases / Subscriptions 76 33,878 6,099 40,053
Sales / Redemptions (6,440) (41,280) (9,331) (57,051)
Transfers into and out of Level
3 - (17,307) - (17,307)
-------------- ------------ ------------ ----------
Balances as at 30 June 2021 (Unaudited) 7,955 95,990 32,501 136,446
-------------- ------------ ------------ ----------
Total unrealised losses and gains
at 31 December 2020 included in
Statement of Comprehensive Income
for assets held at the end of
the year (7,030) (19,274) 1,918 (24,386)
-------------- ------------ ------------ ----------
Total unrealised losses and gains
at 30 June 2021
included in Statement of Comprehensive
Income for assets held at the
end of the year (1,159) 4,102 324 3,267
-------------- ------------ ------------ ----------
Quantitative information of significant unobservable inputs -
Level 3 - (for Investment Vehicle)
30 June 2021 Valuation Unobservable Range (weighted
(Unaudited) technique input average)
Description EUR '000
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Average EBITDA
multiple of peers
including discount
Equities and warrants 1,217 Market multiples to average multiple 5.5x
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Cash projection Discount rate on
and net present projected cash
Equities and warrants 3,431 value flows 15%
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Equities and warrants 3,307 Broker quotes / other Specific valuations N/A
methods of the industry:
expert valuation
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Corporate bonds and 95,990 Broker quotes/ Cost of market N/A
other debt securities Market multiples/ transactions /
Discounted Cash Flow Multiple of listed
companies /
Management
information
----------------------- ---------------------- ---------------------- --------------------- ----------------------
CLOs (including ABSs) 32,501 Broker quotes / other Specific valuations N/A
methods of the industry:
expert valuation
----------------------- ---------------------- ---------------------- --------------------- ----------------------
31 December 2020
(Audited) Valuation Unobservable Range (weighted
Description EUR '000 technique input average)
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Average EBITDA
multiple of peers
including discount
Equities and warrants 1,500 Market multiples to average multiple 5.7x
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Cash projection and Discount rate on
Equities and warrants 2,795 net present value projected cash flows 15%
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Equities and warrants 8,009 Broker quotes / other Specific valuations N/A
methods of the industry:
expert valuation
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Corporate bonds and 102,919 Broker quotes / Cost of market N/A
other debt securities Market multiples / transactions /
Discounted Cash Flow multiple of listed
companies /
management
information
----------------------- ---------------------- ---------------------- --------------------- ----------------------
Broker quotes / other Specific valuations N/A
methods of the industry:
CLOs (including ABSs) 34,907 expert valuation
----------------------- ---------------------- ---------------------- --------------------- ----------------------
The board of the Investment Vehicle and the Investment Vehicle
Manager have valued the CLO positions at bid-price as at 30 June
2021 and 31 December 2020, as they believe this is the most
appropriate value for these positions. The board of the Investment
Vehicle and the Investment Vehicle Manager believe that where
certain credit facilities are classified as Level 3 due to limited
number of broker quotes, there is still sufficient supporting
evidence of liquidity to value these at an undiscounted bid
price.
Sensitivity analysis to significant changes in unobservable
inputs within Level 3 hierarchy - Level 3 - (for Investment
Vehicle)
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 30 June
2021 are as shown below:
Effect on fair
Sensitivity value in
Description Input used EUR '000 (Unaudited)
--------------------------- ------------------------- ------------ ----------------------
Average EBITDA multiple
of peers including
discount to average
Equities and warrants multiple 1x 2,591 / (1,217)
--------------------------- ------------------------- ------------ ----------------------
Discount rate on
Equities and warrants projected cash flows 1% 102 / (131)
--------------------------- ------------------------- ------------ ----------------------
Discount to broker
quotes / valuation
Equities and warrants method 20% 661 / (661)
--------------------------- ------------------------- ------------ ----------------------
Discount to broker
Corporate bonds and other quotes / valuation
debt securities method 10% 9,599 / (9,599)
--------------------------- ------------------------- ------------ ----------------------
Discount to broker
CLOs (including ABSs) quotes / other methods 20% 6,500 / (6,500)
--------------------------- ------------------------- ------------ ----------------------
The significant unobservable inputs used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis as at 31 December
2020 are as shown below:
Effect on
fair value
in EUR '000
Description Input Sensitivity used (Audited)
------------------------------ ------------------------------------------------- ----------------- ----------------
Average EBITDA multiple of peers including
Equities and warrants discount to average multiple 1x 2,565/(1,500)
------------------------------ ------------------------------------------------- ----------------- ----------------
Equities and warrants Discount rate on projected cash flows 1 % 96/(131)
------------------------------ ------------------------------------------------- ----------------- ----------------
Equities and warrants Discount to broker quotes / valuation method 20 % 1,386/(1,386)
------------------------------ ------------------------------------------------- ----------------- ----------------
Corporate bonds and other
debt securities Discount to broker quotes / valuation method 10 % 10,292/(10,292)
------------------------------ ------------------------------------------------- ----------------- ----------------
CLOs (including Asset Backed
Securities) Discount to broker quotes / other methods 20% 6,981/(6,981)
------------------------------ ------------------------------------------------- ----------------- ----------------
8. Payables
30 June 31 December
2021 2020
(Unaudited) (Audited)
EUR EUR
Advisor fees 46,175 36,313
Auditor's fees 43,598 33,257
Administration fees 22,535 16,339
Other payables 30,034 32,381
----------------------- ------------ ------------
Total payables 142,342 118,290
----------------------- ------------ ------------
9. Contingent liabilities
As at 30 June 2021, the Company had no contingent liabilities or
commitments (31 December 2020: none).
10. Stated capital
Number of Number of
shares Stated capital shares Stated capital
30 June 30 June 30 June 30 June
2021 2021 2020 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
EUR EUR EUR EUR
-------------------
Management Shares 2 - 2 -
-------------------- ------------ --------------- ------------ ---------------
Management Shares
Management Shares are non-redeemable, have no par value and no
voting rights, and also no profit allocated to them for the
earnings per share calculation.
11. Ordinary shares
Number of Number of
shares(1) Stated capital shares(1) Stated capital
30 June 30 June 30 June 30 June
2021 2021 2020 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
EUR EUR
Euro Shares 120,826,246 122,608,023 128,296,074 129,788,434
Sterling Shares 157,307,085 202,089,269 233,781,473 275,201,900
------------ --------------- ------------ ---------------
Total 278,133,331 324,697,292 362,077,547 404,990,334
----------------- ------------ --------------- ------------ ---------------
(1) Excludes 31,330,155 (30 June 2020: 10,278,799) Euro Shares
and 206,914,214 (30 June 2020: 141,774,763) Sterling Shares held as
treasury shares.
Total(1)
(Unaudited)
EUR
Balance as at 1 January 2021 364,352,318
--------------------------------------------------------- -------------
Issue of ordinary shares -
Subscriptions arising from conversion of
ordinary shares 8,533,895
Redemption payments arising from conversion
of ordinary shares (8,636,567)
Redemption payments arising from quarterly
tenders of ordinary shares (48,192,223)
Foreign currency exchange loss on ordinary
shares 8,639,869
--------------------------------------------------------- -------------
Balance as at 30 June 2021 324,697,292
--------------------------------------------------------- -------------
(1) Excludes treasury shares.
Total(1)
(Unaudited)
EUR
Balance as at 1 January 2020 538,570,092
--------------------------------------------------------- --------------
Issue of ordinary shares 352,205
Subscriptions arising from conversion of
ordinary shares 2,048,110
Redemption payments arising from conversion
of ordinary shares (2,073,047)
Redemption payments arising from quarterly
tenders of ordinary shares (114,259,312)
Foreign currency exchange gain on ordinary
shares (19,647,714)
--------------------------------------------------------- --------------
Balance as at 30 June 2020 404,990,334
--------------------------------------------------------- --------------
(1) Excludes treasury shares.
The Company has two classes of ordinary shares, being Euro
Shares and Sterling Shares.
Each Euro Share holds 1 voting right, and each Sterling Share
holds 1.17 voting rights.
As at 30 June 2021, the Company had 152,156,401 (inclusive of
31,330,155 treasury shares) (31 December 2020: 145,367,525
(inclusive of 20,598,771 treasury shares)) Euro Shares and
364,221,299 Sterling Shares in issue (inclusive of 206,914,214
treasury shares) (31 December 2020: 369,776,643 (inclusive of
174,947,441 treasury shares)).
Sale of treasury shares
No treasury share sales were undertaken during the period ended
30 June 2021 (during the period ended 30 June 2020, the Company
completed the sale of 350,000 Euro treasury shares generating gross
proceeds of EUR 352,205 and net proceeds of EUR348,681 after taking
into account issue costs of EUR3,524).
Voluntary conversion
The Company offers a monthly conversion facility pursuant to
which holders of ordinary shares of one class may convert such
shares into ordinary shares of any other class, subject to
regulatory considerations.
Such conversion will be effected on the basis of the ratio of
the NAV per class to be converted (calculated in Euro less the
costs of effecting such conversion and adjusting any currency
hedging arrangements and taking account of dividends resolved to be
paid), to the NAV per class of the shares into which they will be
converted (also calculated in Euro), in each case on the relevant
conversion calculation date being the first business day of the
month. During the period, 1,000,000 (30 June 2020: 729,704) Euro
Shares were converted into 796,589 (30 June 2020: 602,084) Sterling
Shares and 4,068,933 (30 June 2020: 1,355,238) Sterling Shares were
converted into 4,942,957 (30 June 2020: 1,660,373) Euro Shares.
Treasury share convertor mechanism
At the 2016 Annual General Meeting the Company requested, and
received, shareholder approval to create a mechanism whereby
treasury shares held by the Company be converted from one currency
denomination to another in accordance with the procedure set out in
the Articles. As the conversion cannot take place while the
treasury shares are held by the Company, it was proposed that a
facility be created so that some or all of the treasury shares be
sold to a related party, who would be willing to facilitate the
conversion of the treasury shares from one currency denomination to
another. The treasury share convertor mechanism was put in place to
provide the Company with a means of converting one class into
another to meet demand in the market from time to time.
Accordingly, on the 11 September 2017, the Company established
the CCPEOL Purpose Trust (the "Trust"), a business purpose trust
established under Jersey law. The purpose of the Trust is the
facilitation of the conversion of the treasury shares by the
incorporation of a company, the Conversion Vehicle, who would
purchase treasury shares from the Company, convert them into shares
of the other currency denomination and sell those converted shares
back to the Company. The Chairman of the Company was appointed as
the Enforcer of the Trust.
The treasury share convertor mechanism was not utilised during
the periods ended 30 June 2021 or 30 June 2020.
Contractual Quarterly Tender facility
As the Company has been established as a closed-ended vehicle,
there is no right or entitlement attaching to the ordinary shares
that allows them to be redeemed or repurchased by the Company at
the option of the shareholder.
The Company has, however, established a Contractual Quarterly
Tender facility that enables shareholders to tender their shares in
the Company in accordance with a stated contracted mechanism.
T he Directors believe that the Company's Contractual Quarterly
Tender facility provides shareholders with additional liquidity
when compared with other listed closed-ended investment
companies.
The offer of Contractual Quarterly Tenders is subject to annual
shareholder approval and subject to the terms, conditions and
restrictions as set out in the prospectus. The Company is subject
to annual shareholder approval to tender each quarter for up to
24.99 per cent. of the shares of such class in issue at the
relevant quarter record date, (being the date on which the number
of shares then in issue will be recorded for the purposes of
determining the restrictions), subject to a maximum annual limit of
50 per cent. of the shares of such class in issue.
After further consideration, including the COVID-19 pandemic,
the Board considered it prudent to include additional powers in
respect of the Company's Contractual Quarterly Tenders to enable
the Board to:
-- Reduce the maximum number of shares that may be tendered for
purchase in any quarter below the current limit of 24.99% of the
shares in issue at the relevant tender record date;
-- Alter the timetable or any part thereof prospectively in
respect of any quarter or quarters at any time; and
-- Suspend any Contractual Quarterly Tender or the completion of
any Contractual Quarterly tender for one or more quarters at any
time.
These additional powers first received shareholder approval at
the Company's 2020 AGM on 1 May 2020, in respect of the Company's
Contractual Quarterly Tenders from June 2020 to March 2021. The
same additional powers were put forward for, and received,
shareholder approval at the Company's 2021 AGM on 22 April 2021, in
respect of the Company's Contractual Quarterly Tenders from June
2021 to March 2022. The Board intends to only use these powers when
it considers it appropriate and in response to the developing
situation in connection with the COVID-19 pandemic. The Board has
not exercised these additional powers to date.
It is important to note that Contractual Quarterly Tenders, if
made, are contingent upon certain factors including, but not
limited to, the Company's ability to finance tender purchases
through submitting redemption requests to the Investment Vehicle to
redeem a pro rata amount of Company Investment Vehicle
Interests.
Factors, including restrictions at the Investment Vehicle level
on the amount of PECs which can be redeemed, may mean that
sufficient Company Investment Vehicle Interests cannot be redeemed
and, consequently, tender purchases in any given quarter may be
scaled back on a pro rata basis.
Shareholders should therefore have no expectation of being able
to tender their shares to the Company successfully on a quarterly
basis.
In addition to the Contractual Quarterly Tender facility, the
Directors seek annual shareholder approval to grant them the power
to make ad hoc market purchases of shares. If such authority is
subsequently granted, the Directors will have complete discretion
as to the timing, price and volume of shares to be purchased.
Shareholders should not place any reliance on the willingness or
ability of the Directors so to act.
In the absence of the availability of the Contractual Quarterly
Tender facility shareholders wishing to realise their investment in
the Company will be required to dispose of their shares on the
stock market.
Accordingly, shareholders' ability to realise their investment
at any particular price and/or time may be dependent on the
existence of a liquid market in the shares.
Liquidity risks associated with the Contractual Quarterly Tender
facility are set out in note 8.2 of the 2020 Annual Financial
Report.
During the period 10,731,384 (30 June 2020: 4,260,209) Euro
Shares and 31,966,773 (30 June 2020: 91,667,625) Sterling Shares
were redeemed as part of the Contractual Quarterly Tender facility
and subsequently held by the Company in the form of treasury
shares. Refer to Significant events during the six months ended 30
June 2021 section above for details. Treasury shares do not carry
any right to attend or vote at any general meeting of the Company.
In addition, the Contractual Quarterly Tenders and the voluntary
conversion facility are not available in respect of Treasury
shares.
Dividends
The ordinary shares of each class carry the right to receive all
income of the Company attributable to such class of ordinary share,
and to participate in any distribution of such income made by the
Company and within each such class such income shall be divided
pari passu among the shareholders in proportion to the
shareholdings of that class.
Please refer below for amounts recognised as dividend
distributions to ordinary shareholders in the periods ended 30 June
2021 and 31 December 2020.
Ex-dividend
date Payment date GBP equivalent EUR
Euro - EUR0.01125 per
share(1) 04/02/2021 26/02/2021 1,371,742
Sterling - GBP0.01125
per share(1) 04/02/2021 26/02/2021 1,911,608 2,202,800
Euro - EUR0.01125 per
share(1) 06/05/2021 28/05/2021 1,327,003
Sterling - GBP0.01125
per share(1) 06/05/2021 28/05/2021 1,795,612 2,069,134
6,970,679
Euro - EUR0.01375 per
share(2) 06/02/2020 28/02/2020 1,779,806
Sterling - GBP0.01375
per share(2) 06/02/2020 28/02/2020 3,422,457 3,850,776
Euro - EUR0.01375 per
share(2) 14/05/2020 05/06/2020 1,773,850
Sterling - GBP0.01375
per share(2) 14/05/2020 05/06/2020 3,206,426 3,607,710
Euro - EUR0.01000 per
share(2) 06/08/2020 28/08/2020 1,241,591
Sterling - GBP0.01000
per share(2) 06/08/2020 28/08/2020 2,063,199 2,321,408
Euro - EUR0.01125 per
share(2) 12/11/2020 04/12/2020 1,372,756
Sterling - GBP0.01125
per share(2) 12/11/2020 04/12/2020 2,217,922 2,495,496
18,443,393
(1) Recognised in the period ended 30 June 2021
(2) Recognised in the year ended 31 December 2020
Please refer to note 14 for further information subsequent to
the reporting period.
Profit/(loss) per share
30 June 30 June 30 June 30 June
2021 2021 2020 2020
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP equivalent EUR GBP equivalent EUR
Euro Shares
Increase/(decrease) in net
assets for the period - 8,137,492 - (15,802,414)
Basic and diluted profit/(loss)
per share - 0.066965 - (0.121790)
Sterling Shares
Increase/(decrease) in net
assets for the period 9,763,543 11,372,574 (28,349,514) (31,212,814)
Basic and diluted profit/(loss)
per share 0.057491 0.066965 (0.110617) (0.121790)
Profit/(loss) per share has been calculated on a weighted
average basis. The weighted average number of ordinary shares held
during the period ended 30 June 2021 was 291,346,915 (2020:
386,035,834), comprising 121,518,453 (2020: 129,751,531) Euro
Shares and 169,828,461 (2020: 256,284,303) Sterling Shares.
There have been no new share issues of the Company's Euro or
Sterling Shares between 30 June 2021 and 29 September 2021.
12. Net asset value per share
30 June 30 June 31 December 31 December
2021 2021 2020 2020
(Unaudited) (Unaudited) (Audited) (Audited)
GBP equivalent EUR GBP equivalent EUR
Euro Shares
NAV - 123,548,339 - 120,487,361
NAV per ordinary
share - 1.0225 - 0.9657
Sterling Shares
NAV 172,430,414 200,846,947 200,656,354 224,052,886
NAV per ordinary
share 1.0961 1.2768 1.0299 1.1500
Net assets attributable
to shareholders - 324,395,286 - 344,540,247
NAV per share has been calculated based on the share capital in
issue as at period end, excluding shares held in treasury. The
issued share capital as at 30 June 2021 comprised of 120,826,246
Euro Shares (31 December 2020: 124,768,754 ) and 157,307,085
Sterling Shares (31 December 2020: 194,829,202 ).
13. Related party disclosure
The Directors are entitled to remuneration for their services
and all Directors hold Sterling shares in the Company. Please refer
to note 6 for further detail.
No transactions between the Company and the Trust and Conversion
Vehicle occurred during the period ended 30 June 2021.
Richard Boleat acts as the Enforcer of the Trust, a business
purpose trust established under Jersey law and settled by the
Company. The role has arisen as a result of the implementation of
the resolution passed at the Company's Annual General Meeting on 4
April 2016 which authorised the Company to make arrangements to
enable the conversion of treasury shares held by the Company from
time to time from one currency denomination to another. The
position is unremunerated and represents an alignment of interests
with those of the Company.
14. Events after the reporting period
Management has evaluated subsequent events for the Company
through 29 September 2021, the date the financial statements were
available to be issued, and has concluded that the material events
listed below do not require adjustment of the condensed financial
statements.
June 2021 Contractual Quarterly Tender
In accordance with the announcement made on 14 May 2021 where
the Company announced it had received applications from
shareholders to tender 1,732,113 Sterling Shares and 3,468,577 Euro
Shares under the June 2021 Contractual Quarterly Tender, the
Company, on 21 July 2021, announced a tender price per share of
GBP1.0861 and EUR1.0125 respectively. On 16 August 2021, the June
2021 Contractual Quarterly Tender completed with 1,732,113 Sterling
Shares and 3,468,577 Euro Shares being repurchased and transferred
into the Company's name and held as treasury shares.
September 2021 Contractual Quarterly Tender
On 11 August 2021, the Company announced it had received
applications from shareholders to tender 290,323 Euro Shares and
9,402,308 Sterling Shares under the September 2021 Contractual
Quarterly Tender.
Dividend declaration
On 29 July 2021, the Company declared a dividend of EUR0.01125
per Euro Share and GBP0.01125 per Sterling Share to shareholders on
the register as at 27 August 2021, having an ex-dividend date of 6
August 2021.
July ordinary share conversion
On 18 June 2021, the Company announced it had received
applications from shareholders to convert 545 Euro Shares into
Sterling Shares on 30 July 2021. On 26 July 2021, the Company
subsequently announced the applicable conversion ratio was 0.80
Sterling Shares per Euro Share and that an application will be made
for the admission of 436 Sterling Shares to the Official List of
the UKLA and to be admitted to trading on the main market of the
London Stock Exchange. Dealings in the shares will commence on 30
July 2021.
August ordinary share conversion
On 20 July 2021, the Company announced it had received
applications to convert 1,000,000 Euro Shares into Sterling Shares
on 31 August 2021. On 24 August 2021, the Company subsequently
announced the applicable conversion ratio was 0.795401 Sterling
Shares per Euro Share and that an application will be made for the
admission of 795,401 Sterling Shares to the Official List of the
UKLA and to be admitted to trading on the main market of the London
Stock Exchange. Dealing in the shares will commence on 31 August
2021.
September ordinary share conversion
On 18 August 2021, the Company announced it had received
applications to convert 625,017 Euro Shares to Sterling Shares on
30 September 2021. On 22 September 2021, the Company subsequently
announced the applicable conversion ratio was 0.798954 Sterling
Shares per Euro Share and that an application will be made for the
admission of 499,360 Sterling Shares to the Official List of the
UKLA and to be admitted to trading on the main market of the London
Stock Exchange. Dealings in the shares will commence on 30
September 2021.
Directorate Change
On 18 August 2021, the Company announced that David Wood, a
Non-Executive Director of the Company, had given notice that, with
effect from 31 August 2021, he would be stepping down from his role
on the board of directors of the Company.
15. Controlling party
In the Directors' opinion, the Company has no ultimate
controlling party.
SUPPLEMENTAL FINANCIAL INFORMATION
The below details the information presented in the "Financial
Highlights" section above.
Dividend history
Year ended Total dividend paid Total dividend paid
per Euro Share per Sterling Share
2014 EUR0.03500 GBP0.03500
2015 EUR0.05000 GBP0.05000
2016(1) EUR0.06250 GBP0.06250
2017(2) EUR0.05250 GBP0.05250
2018 EUR0.05500 GBP0.05500
2019 EUR0.05500 GBP0.05500
2020 EUR0.04875 GBP0.04875
The Company declared and paid dividends totalling EUR0.0225 per
Euro Share and GBP0.0225 per Sterling Share during the six months
ended 30 June 2021.
Alternative performance measures disclosure
In accordance with ESMA Guidelines on APMs the Board has
considered what APMs are included in the Annual Financial Report
and financial statements which require further clarification. An
APM is defined as a financial measure of historical or future
financial performance, financial position, or cash flows, other
than a financial measure defined or specified in the applicable
financial reporting framework. APMs included in the financial
statements, which are unaudited and outside the scope of IFRS, are
deemed to be as follows:
NAV total return vs benchmark
The NAV total return measures how the NAV per Euro Share and
Sterling Share has performed over a period of time, taking into
account both capital returns and dividends paid to shareholders.
The Company quotes NAV total return as a percentage change from a
certain point in time, such as the initial issuance of Euro and
Sterling Shares or the beginning of the period, to the latest
reporting date, being 30 June 2021 in this instance. It assumes
that dividends paid to shareholders are reinvested back into the
Company therefore future NAV gains are not diminished by the paying
of dividends.
The Board monitors the Company NAV total return against the
Credit Suisse Western European High Yield Index (hedged in Euros)
Total Return and Credit Suisse Western European Leveraged Loan
Index (hedged in Euros) Total Return. The total return results for
both the Company's NAV and the benchmark over certain time periods
are presented below:
Total Return
3 Months 6 Months 12 Months Since inception
Euro NAV Total Return(3) 4.11% 8.31% 20.33% 48.71%
Sterling NAV Total Return(3) 4.28% 8.70% 21.40% 57.84%
Credit Suisse Western European High Yield Index (hedged in Euros)
Total Return 1.63% 3.26% 11.72% 45.71%
Credit Suisse Western European Leveraged Loan Index (hedged in
Euros) Total Return 1.16% 2.91% 9.52% 33.51%
The Company's Euro Share and Sterling Share NAV capital return
is calculated by dividing the difference between the closing NAV
per share and the opening NAV per share, divided by the opening NAV
per share. The income return is calculated by adding each dividend
paid back to the NAV per share on the ex-div date (being the date
dividends are deducted from the NAV of the Company). This amplifies
the value of each dividend paid by the capital return and
demonstrates the effect of reinvesting dividends back into the
Company at the ex-div date. The total return is then determined by
adding the capital and income return. The total return calculations
for 31 June 2021 and 31 December 2020 are presented overleaf.
2021 30 June 2021 dividend per share
Euro share
NAV per share as at 31 December 2020 EUR0.96570
NAV per share as at 30 June 2021 EUR1.02250
-----------
Capital return 5.88%
-----------
Income return EUR0.02250 2.43%
-----------
Total return 8.31%
-----------
Sterling share
NAV per share as at 31 December 2020 GBP1.02990
NAV per share as at 30 June 2021 GBP1.09610
-----------
Capital return 6.43%
-----------
Income return GBP0.02250 2.27%
-----------
Total return 8.70%
-----------
2020 2020 Annual dividend per share
Euro share
NAV per share as at 31 December 2019 EUR1.00127
NAV per share as at 31 December 2020 EUR0.96570
-----------
Capital return (3.56)%
-----------
Income return EUR0.04875 5.27%
-----------
Total return 1.71%
-----------
Sterling share
NAV per share as at 31 December 2019 GBP1.05340
NAV per share as at 31 December 2020 GBP1.02990
-----------
Capital return (2.23)%
-----------
Income return GBP0.04875 5.03%
-----------
Total return 2.80%
-----------
NAV to market price discount
The NAV per share is the value of the Company's assets, less any
liabilities it has, divided by the total number of Euro and
Sterling Shares. However, because the Company ordinary shares are
traded on the London Stock Exchange's Main Market, the share price
may be higher or lower than the NAV. The difference is known as a
premium or discount. The Company's premium or discount to NAV is
calculated by expressing the difference between the period end
respective share class price (bid price) and the period end
respective share class NAV per share as a percentage of the
respective NAV per share.
At 30 June 2021, the Company's Euro Shares and Sterling Shares
traded at EUR0.9550 (2020: EUR0.9000) and GBP1.0350 (2020:
GBP0.9440) respectively. The Euro Shares traded at a discount of
6.60% (2020: 6.80% discount) to the NAV per Euro Share of EUR1.0225
(2020: EUR0.9657) and the Sterling Shares traded at a discount of
5.58% (2020: 8.34% discount) to the NAV per Sterling Share of
GBP1.0961 (2020: GBP1.0299).
Dividend yield
The dividend per Euro and Sterling Share is expressed as a
percentage of the Euro and Sterling Share price (bid price).
30 June 31 December
2021 2020
Euro Shares
Annual dividend per Euro
Share(4) 0.04375 0.04875
Share price (bid price) 0.9550 0.9000
Dividend yield 4.58% 5.42%
Sterling Shares
Annual dividend per Sterling
Share(4) 0.04375 0.04875
Share price (bid price) 1.0350 0.9440
Dividend yield 4.23% 5.16%
(1) As a result of the Company amending the frequency of its
dividend payments to a quarterly basis rather than a semi-annual
basis during 2016, shareholders received an additional EUR0.0125
and GBP0.0125 dividend per Euro and Sterling Share
respectively.
(2) During 2017, the Company increased its target annual
dividend to 5.5 cents per Euro Share and 5.5 pence per Sterling
Share.
(3) The NAV total return measures how the NAV per Euro Share and
Sterling Share has performed over a period of time, taking into
account both capital returns and dividends paid to shareholders.
The Company quotes NAV total return as a percentage change of NAV
from the start of the period to the end of the period. The
calculation also includes dividends paid out to shareholders and
calculates the effect of reinvesting those dividends back into the
Company.
(4) Annual dividend yield per Euro Share and Sterling Share as
at 30 June 2021 and 31 December 2020 is based on the four quarterly
dividends announced and paid by the Company during the 12 months
prior to the period end / year end as applicable.
Company information
Directors Registered Office
Richard Boléat (Chairman)
(appointed 20 March 2013) IFC1, The Esplanade
Mark Tucker (appointed 20 March St Helier, Jersey
2013)
Stephanie Carbonneil (appointed JE1 4BP
21 February 2019)
David Wood (appointed 20 March
2013) (resigned 31 August 2021)
Advocates to the Company (as
Investment Vehicle Manager to Jersey law)
CVC Credit Partners Investment
Management Limited Bedell Cristin
26 New Street
111 Strand, London St Helier, Jersey
WC2R 0AG JE2 3RA
Corporate Services Manager Auditor
CVC Credit Partners Investment
Services Ernst & Young LLP
Management Limited 25 Churchill Place
1 Waverly Place, Union Street
St Helier, Jersey Canary Wharf
JE1 1SG London, E14 5EY
Administrator, Company Secretary
Corporate Brokers and Custodian
Goldman Sachs International BNP Paribas Securities Services
Peterborough Court, 133 Fleet S.C.A.,
Street Jersey Branch
IFC1, The Esplanade
London St Helier, Jersey
EC4A 2BB JE1 4BP
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House BNP Paribas Securities Services
25 Dowgate Hill S.C.A. Jersey Branch is regulated
London by the Jersey Financial Services
EC4R 2GA Commission.
Solicitors to the Company Registrar
Computershare Investor Services
(as to English law) (Jersey)
Herbert Smith Freehills LLP Limited
Exchange House 13 Castle Street
Primrose Street St Helier
London Jersey
EC2A 2EG JE1 1ES
For Investors in Switzerland:
The Prospectus, the Memorandum and Articles of Association as
well as the annual and Half Yearly Financial Reports of the Company
may be obtained free of charge from the Swiss Representative. In
respect of the Shares distributed in and from Switzerland to
Qualified Investors, the place of performance and the place of
jurisdiction is at the registered office of the Swiss
Representative.
Swiss Representative: FIRST INDEPENDENT FUND SERVICES LTD.,
Klausstrasse 33, CH-8008 Zurich, Switzerland.
Swiss Paying Agent: Helvetische Bank AG, Seefeldstrasse 215, CH-8008 Zurich, Switzerland.
Availability of the 2021 Half-Year Financial Report
A copy of the Company's Half Yearly Financial Report will
shortly be available on the Company's website
(https://www.ccpeol.com), and on the National Storage Mechanism (
https://data.fca.org.uk/#/nsm/nationalstoragemechanism ). This will
also be provided to those Shareholders who have requested a printed
or electronic copy.
Enquires:
CVC Credit Partners European Opportunities Limited: +44 (0)1534 625 522
Richard Boléat
BNP Paribas Securities Services S.C.A. Jersey Branch: +44 (0)1534 813873/
+44 (0)1534 709178
Media Enquiries
Prosek Partners
Henrietta Dehn / Ryan Smith
pro-ccpeol@prosek.com
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END
IR EBLFXFKLLBBE
(END) Dow Jones Newswires
September 30, 2021 11:30 ET (15:30 GMT)
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