RM Secured Direct Lending (RMDL) is to focus on its existing portfolio rather than new investments for the rest of the year.
The investment trust had planned to source more healthcare and childcare opportunities but has revealed in its annual results that the current market environment and risk to borrowers caused by the coronavirus pandemic meant it would prioritise monitoring its portfolio and ensuring scheduled payments are received.
“Given the unique nature of this event, and the almost wholesale shut down to industry, we expect monthly trading performance of a number of our borrowers to be impacted, the degree and severity will be subject to both sector specific factors, macro ‘health’ factors and any structural credit support mechanisms built into the transaction,” a stockmarket updated from RMDL said.
“The investment manager in partnership with financial sponsors and borrowers will provide guidance and advice to holdings experiencing temporal stress, and aid in any workout situation as the case maybe.”
The alternative investment-focused fund reported a net asset value (NAV) total return of 8.2 per cent for the year and said its portfolio outperformed compared with many of its peers.
It focuses on social infrastructure and real estate backed lending, described as “the best place for capital at this point of the cycle.”
Analysts have expressed caution though.
“It remains hard to assess the outlook for the portfolio, particularly as a number of the largest investments appear to be in sectors that are likely to be hit hard by the current lockdown, including hotels, automotive parts manufacturer, forecourt operator and gym franchises,” a Numis analyst note said.
“However, we note that RMDL’s loans are typically secured and covenant heavy.”
RMDL is currently trading on a discount to NAV of 16 per cent but there are plans for share buybacks to reduce this.