RM Secured Direct Lending PLC (LON:RMDL), the closed-ended investment trust established to invest in a portfolio of secured debt instruments, has issued an update with regards to the ongoing market uncertainty relating to the coronavirus.
It noted that the global effects of the spread of the coronavirus have significantly impacted both equity and credit market valuations as well as shut down major global economies.
RM Capital Markets Limited, the Investment Manager, has been working with its stakeholders, sponsors and borrowers to define and quantify the potential impact on the portfolio of loans which RMDL has investments in within the context of this rapidly developing situation.
The portfolio is marked by the valuation agent monthly with the net asset value (NAV) published on or around the 16th of each month.
However, given the recent volatility in credit spreads since the last published NAV, the investment manager aims to update investors on current valuations and provide further information on portfolio exposures.
It is the stated policy of the company to mark the portfolio to market, since such marks give investors monthly information as to the net asset value of the portfolio. This exercise was conducted by the investment manager and not the valuation agent in order to provide a timely indication for all stakeholders.
Within the group's last NAV release, the investment manager noted that, as at March 13, secondary credit spreads had softened, or widened. This spread widening continued and accelerated over the following week.
At close of business on March 19, RM Funds updated the marks of the portfolio to reflect values of portfolio investments. This was driven by actual valuations where there is some secondary price visibility or reference points, which applies to approximately 30% of the portfolio.
For those investments with no reference points, valuations were reviewed and updated to incorporate the material change in sentiment and/or any idiosyncratic risks arising from the current conditions.
The resultant change in mark-to-market following the valuation exercise was a drop in NAV of approximately 9.6p per share. The NAV as at February 29 was 98.74p per share. Updating for the ex-dividend effect of 1.7p per share and the recent marks, gives an implied NAV of circa 87.44p per share as at the market close on March 19, the group said.
It added that investors are invited to join the company on a call on Thursday March 26 at 2pm to run through the portfolio in greater detail, including investment metrics and the investment manager's outlook on addressing any stress which might be caused by the coronavirus pandemic.