VPC Specialty Lending reported rising revenues but a capital loss in February as it continues with its share buyback programme designed to narrow the trust’s discount.
The alternative finance-focused investment company delivered a net return of 0.46 per cent during February, although capital returns for the month were down 0.1 per cent, driven by the recurring costs of its hedging programme.
The board began a share buyback programme in a move to bring in the trust’s discount, and this continued in February, with 1,375,000 shares repurchased at an average price of 77.43p per share. The trust’s discount to net asset value (NAV) stands at 15.8 per cent.
The company said its gross revenue returns were in line with expectations at 0.9 per cent, despite the refinancing of a holding in small business finance fintech Fundbox at the end of January. It used proceeds from Fundbox to pay down its gearing facility or reinvest into existing investments.
During February it also changed its terms with Elevate Credit, a key investment in the company’s portfolio with more than $1bn (£760m) in total commitments to Elevate. It changed the structure pricing to three-month LIBOR plus 7.5 per cent across all Elevate facilities from 1 February in a move it said should have a positive impact on the trust.
Meanwhile the trust’s exposure to online lender Borro should continue to decrease after the group paused any new loans while it evaluated the state of the secured lending market and the strategic direction of its business. During February, VPC’s exposure to Borro fell to 4.6 per cent of NAV.
The trust declared a dividend of 2p per share for the three months to 31 December 2018, taking total dividends for the year to 8p per share.
The investment managers have been refocusing the fund away from consumer loans originated by peer-to-peer lending platforms in favour of balance sheet loans from these platforms in a bid to improve performance.