VSL board urges shareholders to back continuation of the investment trust
The Victory Park Capital Specialty Lending (VSL) board is urging shareholders to back the continued operation of the alternative finance-focused fund at its upcoming annual meeting.
It is due to hold a continuation vote at its annual shareholder meeting on 24 June and said it is “well positioned compared to its peers” to carry on operating.
Continuation votes are routinely held by investment trusts so shareholders can decide over a set period of time whether it is worth carrying on or if more value can be gained from the underlying assets.
There has been shareholder concern at the large discount to net asset value (NAV) of the fund and a focus on buybacks, with an open letter from one shareholder, Staude Capital, last week stating that the status quo is unacceptable.
However, the VSL board has defended the fund’s performance since shifting from marketplace to balance sheet lending in 2017 and was reassured by the investment manager’s risk mitigation measures during the coronavirus pandemic.
The board also said it believes that in the current market the timing would potentially be unfavourable to begin a liquidation of its assets should continuation be rejected by shareholders
It said it was committed to narrowing the discount to NAV through share buybacks and added that it would be reduced in less volatile markets.
Read more: Victory Park Capital shifts holdings from origination to collections
The board has, however, offered shareholders an exit opportunity for up to 100 per cent of the shares in issue immediately following the company’s annual general meeting (AGM) in 2023 if the NAV for the three-year period is less than 18 per cent.
It is also offering an exit opportunity for up to 25 per cent of the shares in issue immediately following the company’s 2023 AGM if the average discount to NAV at which the shares trade over the four-week period ending on 31 March 2023 is greater than 15 per cent.
VSL reported a NAV return of 11.34 per cent for 2019.
Its shares are currently trading at a discount to NAV of 34.8 per cent.
Read more: Victory Park Capital’s trust prepares portfolio for ‘severe and sustained recession’
Analysts at brokerage Numis said shareholders may be disappointed.
“The AGM notice does not contain any specific actions around discount control, which may disappoint some investors,” a Numis analyst note said.
“The board has highlighted its use of share buybacks, 12.5 per cent of share capital was repurchased in 2019, and that it believes that consistent performance and communicate are the best methods to narrow the discount.
“However, some investors may have been hoping for more.
“That said, we believe it is likely that the fund passes its continuation vote given an 18 per cent stake held by a SVS Opportunity Fund, which is managed by the listed fund’s investment manager, but this does raise questions over conflicts of interest, particular whether SVS should be able to vote.”
Numis said Victory Park is an experienced management group that “appears to have been proactive in managing the portfolio in the current difficult conditions.”
