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In our note, 'Re-Set, Re-Fi, Re-Light my Fire', published on 5 May 2021, we explored how favourable market conditions mean that CLO vehicles can re-finance debt cheaply. This enhances the value of Volta’s CLO equity positions, which have been increased substantially in recent years, and is expected to lift total returns by 1%-1.5% p.a. for several years. The higher cashflow further backs an already covered dividend, with a 2022E yield of 10.1%. With returns above the cost of the dividend, the NAV is growing (supporting further dividend growth). With income and capital growth appealing to a range of investors, the discount to NAV may narrow.
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