Alcentra Limited, part of BNY Mellon Asset Management, is to launch the Alcentra European Floating Rate Income Fund Limited in early 2012.
The Guernsey closed ended investment company, will be listed on the Main Market of the London Stock Exchange and it will invest predominantly in senior secured loans and floating rate senior secured bonds issued by European corporates. The company aims to produce a quarterly dividend of 5.5% per annum in the first year of full investment. It is intended that a significant proportion of the portfolio will be sourced at a discount to par, allowing the opportunity for capital gains and that no leverage will be used to achieve returns. GBP and EUR currency share classes will, subject to investor demand, be available at launch.
David Forbes-Nixon, chairman and chief executive officer of Alcentra Limited, says: “We believe that current market conditions offer an extraordinary opportunity for investors. Since the global financial crisis in 2008, corporate balance sheets have strengthened and the leverage employed by sub-investment grade corporate borrowers in the United States and Europe has fallen. Yet the return on loans at new issue has risen over this period. We believe that lenders today are being paid more for taking less risk.
“We believe that Alcentra’s scale has historically afforded it superior access to investments. The combination of strong credit skills and superior access should give us the opportunity to build a higher quality portfolio. We are now excited to launch the Alcentra European Floating Rate Income Fund Limited which will bring our global expertise as one of the world’s top five largest active managers of sub-investment grade debt to investors seeking to benefit from what we believe is a compelling investment opportunity. The Company will aim to provide an attractive mix of steady dividends with some capital growth, combined with the downside protection of a secured asset class.”