Greenwich Loan Income Fund

Greenwich Loan Income Fund (GLIF) has announced that Q312 accounting NAV rose to 49.7p, up from the 47.9p reported in June and despite a 3% adverse exchange rate effect. There has been asset appreciation and revenue more than exceeded costs and dividend payments. Our preferred franchise value rose to 54.3p. As in the past two quarters all the collateral tests in the CLO were passed, but once again continued prepayments have meant the fund is sitting on too much cash.

The quarterly NAV contained no surprises with a rising NAV reflecting market conditions and revenue more than exceeding costs and dividend payments. This is despite FX effects reducing the NAV by 3% (£:$1.57 end June, $1.61 end September).

The quarterly CLO tests were all passed again except for the proportion of senior secured loans being below the minimum percentage to be held. This was due to cash receipts of c $31.5m with early pre-payments continuing at a high level. This is the third quarter the fund has had too much cash and too few senior secured loans. It reflects the strong financial position of mid-corporate USA and its ability to arrange refinance. Investors should consider it a sign of the attractiveness of the core market and not a cause for concern.

We note the near-record distribution ($3.7m) from the CLO, which again reflects the strength of the core market and one that investors can take comfort in. GLIF normally makes its dividend announcement by the end of the month after the period end and we expect the latest payment to be announced within the next two weeks. There was no update on the active discussions on “value-accretive transactions” that the company announced with its interim results in mid-September.

To Read the Entire Report Please Click on the pdf File Below.