Interim Management Statement
20 Juillet 2010 - 8:00AM
UK Regulatory
TIDMQWIL
RNS Number : 5529P
Queen's Walk Investment Limited
20 July 2010
Queen's Walk Investment Limited (the "Company")
20 July 2010
This interim management statement relates to the period from 31 March 2010 to 20
July 2010 and has been prepared solely in order to comply with the requirement
(pursuant to the EU Transparency Directive as implemented by the Disclosure and
Transparency Rules) for an interim management statement to be made by the
Company no earlier than 9 June 2010 and no later than 19 August 2010. The
Company is currently in the process of preparing its quarterly report for the
period ended 30 June 2010 which is expected to be released in September 2010.
Unless otherwise noted herein, the financial information provided in this
interim management statement (and the asset valuations underlying that financial
information) are as at 31 March 2010 and such financial information (and
underlying valuations) will be stated as at a more recent date in the Company's
forthcoming quarterly report.
Performance Summary
As at 31 March 2010, the Company's NAV was EUR3.73 per share up from a NAV of
EUR3.69 per share as at 31 December 2009 due to fair value write-ups of EUR0.1
million. The investment portfolio continued to generate more cash than the
amount estimated by the Company between 1 April 2010 and 30 June 2010. Cash
proceeds received from investments of EUR6.7 million in the quarter exceeded the
estimate of EUR4.0 million. During the quarter ended 30 June 2010, the Company
also realised additional cash proceeds of EUR10.5 million from the sale of the
Gate 06-1 and Gate 05-2 SME portfolios and one bond from the ABS bond portfolio.
The Company has made substantial progress in its strategy of repaying its
financing facility and increasing exposure to ABS ("asset-backed securities")
bonds. On 6 April 2010, the Company fully repaid its loan facility, which had
an outstanding balance of EUR29.5 million as at 31 March 2009. The final
repayment, nine months ahead of schedule, removes all leverage from the balance
sheet.
During the quarter ended 31 March 2010, the Company invested EUR6.5 million in
purchasing ABS bonds which accounted for 15.3% by net asset value of the
investment portfolio at the end of that quarter. Between 31 March 2010 and 30
June 2010 the Company invested a further EUR11.3 million purchasing ABS bonds,
increasing the total nominal value of the ABS bond portfolio to EUR46.3 million as
at 30 June 2010. The Company intends to continue its strategy of purchasing ABS
bonds in order to deliver an improved risk/reward profile to investors.
The elimination of debt repayments is expected to free up additional cash to
fund the Company's growth in future quarters. The Company expects the ABS bond
portfolio to increase as a percentage of overall assets in coming quarters, and
for residual income assets to fall as a proportion of overall assets. In line
with this goal, the Company sold the Gate 06-1 and Gate 05-2 SME portfolios
subsequent to the March 2010 quarter end at levels that were accretive to NAV.
Investment Portfolio
The tables below summarise the Company's investment portfolio as at 31 March
2010.
Portfolio Composition by Jurisdiction as at 31 March 2010*
*By reference to underlying asset jurisdiction, except for SMEs, where the
jurisdiction of the originator is used . Figures stated as a percentage of the
fair value of the Company's investment portfolio including accrued interest.
+--------------+-----------+
| Jurisdiction | % |
+--------------+-----------+
| Portugal | 36.0% |
| | |
| | |
+--------------+-----------+
| Germany | 24.3% |
| | |
| | |
+--------------+-----------+
| UK | 17.0% |
| | |
+--------------+-----------+
| Holland | 12.2% |
| | |
+--------------+-----------+
| Italy | 9.7% |
| | |
| | |
+--------------+-----------+
| France | 0.7% |
+--------------+-----------+
| Switzerland | 0.1% |
+--------------+-----------+
Portfolio Composition by Asset Type as at 31 March 2010*
*By reference to underlying asset collateral. Figures stated as a percentage of
the fair value of the Company's investment portfolio including accrued interest.
+--------------+-------+
| Portfolio | |
| Composition | |
+--------------+-------+
| Prime | 46.8% |
| | |
+--------------+-------+
| SME | 30.3% |
| | |
+--------------+-------+
| Investment | 15.3% |
| Grade Bonds | |
| | |
+--------------+-------+
| SubPrime | 5.8% |
| | |
+--------------+-------+
| NearPrime | 1.8% |
| | |
+--------------+-------+
As at 30 June 2010, the securitisations to which the Company had exposure
through its residual income investment portfolio, in alphabetical order, were:
+------------------------------------------+-----------------------------------------------------------------------------+
| Issuer | Description of Underlying Assets |
+------------------------------------------+-----------------------------------------------------------------------------+
| Alba 2005-1 plc | UK non-conforming* and buy-to-let residential mortgages |
+------------------------------------------+-----------------------------------------------------------------------------+
| Alba 2006-1 plc | UK non-conforming residential mortgages, primarily first-ranking |
+------------------------------------------+-----------------------------------------------------------------------------+
| Amstel Corporate Loan Offering BV 2006-1 | Middle market corporate loans |
| | |
+------------------------------------------+-----------------------------------------------------------------------------+
| Cheyne CLO Investments I Limited | Investment grade CLOs |
| | |
+------------------------------------------+-----------------------------------------------------------------------------+
| Cheyne High Grade ABS CDO, Ltd | Investment grade ABS CDOs with exposure to the US sub-prime mortgage market |
| | |
+------------------------------------------+-----------------------------------------------------------------------------+
| Eirles Three Limited (Tranche 236B) | SME loans |
| | |
+------------------------------------------+-----------------------------------------------------------------------------+
| Eurosail 2006-1 plc | UK non-conforming and buy-to-let residential mortgages |
| | |
+------------------------------------------+-----------------------------------------------------------------------------+
| Lusitano Mortgages No. 1 plc | First-ranking, fully amortising Portuguese residential mortgages |
+------------------------------------------+-----------------------------------------------------------------------------+
| Lusitano Mortgages No. 2 plc | First-ranking, fully amortising Portuguese residential mortgages |
+------------------------------------------+-----------------------------------------------------------------------------+
| Lusitano Mortgages No. 3 plc | First-ranking, fully amortising Portuguese residential mortgages |
+------------------------------------------+-----------------------------------------------------------------------------+
| Magellan Mortgages No. 1 plc | First ranking, fully amortising Portuguese residential mortgages |
+------------------------------------------+-----------------------------------------------------------------------------+
| Newgate Funding plc | UK non-conforming residential mortgages, primarily first-ranking |
+------------------------------------------+-----------------------------------------------------------------------------+
| RASC Series 2006-KS2 Trust | US Sub-prime residential mortgages, primarily first-ranking |
| | |
+------------------------------------------+-----------------------------------------------------------------------------+
| RMAC 2004-NSP4 plc | UK non-conforming residential mortgages, primarily first-ranking |
+------------------------------------------+-----------------------------------------------------------------------------+
| RMAC 2005 NS3 plc | UK non-conforming residential mortgages, primarily first-ranking |
+------------------------------------------+-----------------------------------------------------------------------------+
| RMAC 2005 NS4 plc | UK non-conforming residential mortgages, primarily first-ranking |
+------------------------------------------+-----------------------------------------------------------------------------+
| Sestante Finance S.R.L. | First-ranking prime Italian residential mortgages |
+------------------------------------------+-----------------------------------------------------------------------------+
*Non-conforming relates to subprime and near prime residential mortgages.
As at 30 June 2010, the ABS Bond portfolio consisted of 46 bonds at a cost of
EUR26.1 million and a nominal value of EUR46.3 million. The following tables detail
the European ABS bonds purchased by the Company up to 30 June 2010. The
weighted average rating of the ABS bond portfolio (based on the invested amount)
is approximately BB+.
Percentage of Portfolio by Cost Price (as at 30 June 2010)
+-------------+----------+----------+----------+----------+----------+
| Rating by | 2004 | 2005 | 2006 | 2007 | Total |
| Vintage1 | | | | | |
+-------------+----------+----------+----------+----------+----------+
| AAA | 4.5% | 5.2% | 6.6% | 7.8% | 24.1% |
+-------------+----------+----------+----------+----------+----------+
| AA | 0.4% | 2.4% | 14.0% | 1.8% | 18.6% |
+-------------+----------+----------+----------+----------+----------+
| A | 4.6% | 4.8% | 11.7% | 6.4% | 27.6% |
+-------------+----------+----------+----------+----------+----------+
| BBB | 0.0% | 6.3% | 5.7% | 4.5% | 16.4% |
+-------------+----------+----------+----------+----------+----------+
| BB and | 0.0% | 1.4% | 9.5% | 2.5% | 13.4% |
| Below | | | | | |
+-------------+----------+----------+----------+----------+----------+
| Total | 9.5% | 20.1% | 47.4% | 23.0% | 100.0% |
+-------------+----------+----------+----------+----------+----------+
1. Vintage reflects the issue date of the bond. Rating at time of purchase.
Percentage of Portfolio by Cost Price (as at 30 June 2010)
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| Rating¹ | UK | UK | UK | Euro | UK | Euro | SME | Total |
| by Type |Prime | Buy |Non-Conforming |Prime |CMBS3 | CMBS | | |
| |RMBS² | To | RMBS | RMBS | | | | |
| | | Let | | | | | | |
| | |RMBS2 | | | | | | |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| AAA | 0.0% | 0.0% | 12.9% | 0.0% | 6.4% | 4.8% | 0.0% | 24.1% |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| AA | 0.0% |10.1% | 1.8% | 0.4% | 0.0% | 6.3% | 0.0% | 18.6% |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| A | 0.9% | 1.0% | 9.7% | 0.0% | 8.4% | 7.6% | 0.0% | 27.6% |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| BBB | 3.1% | 0.0% | 1.0% | 0.0% | 5.3% | 4.3% | 2.8% | 16.4% |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| BB | 0.0% | 0.0% | 1.7% | 0.0% | 2.3% | 9.4% | 0.0% | 13.4% |
| and | | | | | | | | |
| Below | | | | | | | | |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
| Total | 4.0% |11.1% | 27.1% | 0.4% |22.4% |32.3% | 2.8% |100.0% |
+---------+-------+-------+----------------+-------+-------+-------+-------+--------+
1. Rating at time of purchase
2. Residential Mortgage Backed Securities
3. Commercial Mortgage Backed Securities
Outlook
In the coming quarters, the Company will continue to focus on its ABS bond
portfolio with the aim of improving its overall risk-reward profile. The Company
plans to use the quarterly cash received from investments, which has been freed
up from debt repayment, to further its strategy of selectively purchasing
mis-priced bonds in the ABS markets, especially in the mezzanine segment of the
market. The Company is of the view that mezzanine bonds offer strong relative
value, though cash-flow payments are lower in the short term because they repay
no principal until related senior bonds are repaid.
The Company currently expects that market volatility over the coming months
should create opportunities to purchase undervalued ABS bonds. The Company
intends to only invest in bonds whose price is considered depressed due to
technical and liquidity issues.
The Company remains vigilant in monitoring the progress of Portuguese assets in
light of the continued concerns over the sovereign markets in Southern Europe.
The Company believes that high credit spreads should have no direct impact on
the Company's mortgage portfolios because most mortgage loans are indexed to
short-term Euribor rates. The key risk to asset value remains an increase in
unemployment and consequential mortgage defaults as a result of government
austerity measures.
The Company estimates cash balances of approximately EUR6.0 million at 30 June
2010. The Company projects cash flow of approximately EUR4.0 million per quarter
for the coming quarters. As at 1 June 2010, the loss adjusted gross cash flow
forecast is EUR168.0 million over the remaining life of the portfolio.
Investor Enquiries:
Public Relations:
Caroline Villiers / James Wallis
M:Communications Tel: +44(0)20 7920 2321
Website:
www.queenswalkinv.com
mail@queenswalkinv.com
Investor Relations:
Natalie Withers / Hannah Attride
Cheyne Capital Tel: +44(0)20 7968 7450
About Queen's Walk Investment Limited:
Queen's Walk Investment Limited (the "Company") is a Guernsey-incorporated
investment company listed on the Official List of the UK Listing Authority
and traded on the London Stock Exchange. The Company invests primarily in a
diversified portfolio of subordinated tranches of asset-backed securities,
including the unrated "equity" or "first loss" residual income positions
typically retained by the banks or other financial institutions which have
originated the loan assets that collateralise a securitisation transaction. The
Company makes such investments where its investment manager, Cheyne Capital
Management (UK) LLP ("Cheyne Capital"), considers the coupon or cash flows from
the investment to be attractive relative to the credit exposure of the
underlying asset collateral.
Disclaimer
This document contains forward-looking statements with respect to the financial
condition, results and business of the Company. By their nature,
forward-looking statements involve risk and uncertainty. The Company's actual
future results may differ materially from the results expressed or implied in
these forward-looking statements.
Any projections or analysis provided in this statement to assist the recipient
in evaluating the matters described herein may be based on subjective
assessments and assumptions and may use one among alternative methodologies that
produce different results. Accordingly, any projections or analysis should not
be viewed as factual and should not be relied upon as an accurate prediction of
future results. Furthermore, to the extent permitted by law, neither the
Company nor any of its agents, service providers or professional advisers assume
any liability or responsibility nor owes any duty of care for any consequences
of any person acting or refraining to act in reliance on the information
contained in this statement or for any decision based on it.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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