Marble Point Loan Financing (MPLF) has released its annual results for the 12 months ending 31 December 2023.

• Over the 12 month period MPLF’s ordinary share class returned a NAV total return of 17.5%, while its liquidating share class returned 18.3%. MPLF’s portfolio value fell from $145.5m to 118.4m, however this was due to dividend distributions and not investment performance.
• A large portion of MPLF’s returns came in the final months of 2023, with 2023 providing the highest annual returns since 2009. After Q1 2023, loan prices moved higher steadily amidst an improving economic backdrop, driven largely by historically weak new issuance.
• As at 31 December 2023, MPLF’s underlying portfolio consisted of 299 underlying issuers with a weighted average spread of 3.62% and a weighted average market value of 95.37%. Its portfolio has a weighted averaged loan maturity of 3.9 years, and remaining investment period of 2.3 years. Portfolio distributions totalled $42.3m, with MPLF distributing $21.7m in dividends.
• 16.6% of the ordinary shares and 36.6% of the liquidating shares’ NAVs were paid out as dividends over the year. Based on its 8% discount, as of 31 December 2023, MPLF’s ordinary shares had a dividend yield of 18%.
• Ordinary shares will have an opportunity to participate in a second liquidating share class on 15 December 2024 with subsequent conversion of ordinary shares to commence on 1 January 2025.

Thomas Shandell, CEO of Marble Point Credit Management, commented:

“As we move into 2024, we remain constructive on the potential for a soft landing as the Federal Reserve ends its interest hiking campaign. Earnings for many borrowers have been resilient despite the higher interest rate environment, particularly for larger issuers who have been more able to absorb the added interest expense. We expect headline default rates to increase but will be driven by idiosyncratic situations where market prices already indicate likely impairment. Stronger than expected market conditions in 2023 have allowed many borrowers to proactively address their capital structures, particularly as increased private credit financing options have added another avenue for debt management. We continue to expect lower recovery rates upon default and remain focused on proactively managing that risk across portfolios. Downgrade activity has moderated but we expect incremental agency actions may weigh on trading levels (18) Calculated based on the fair value of the Company’s CLO equity investments. of lower quality issuers. We expect the market for new syndicated loan issuance to improve in 2024, but issuance will remain concentrated in refinancing deals while banks and sponsors line up new M&A/LBO driven transactions. Private credit options will remain an important part of the financing universe for below investment grade borrowers, however we expect strong demand from CLOs and a better economic environment will set the table for more organic syndicated loan volumes. We have noted an increase in situations where private credit lenders, stretching to meet marketed yield hurdles, have refinanced lower quality loans across our portfolios and believe that is a healthy dynamic for overall loan markets and the vehicles that manage these assets. As always, we remain focused on diligent reunderwriting of credits and active portfolio rotations to optimise long term value for investors. Syndicated loans delivered historic returns in 2023 and remain an attractive risk adjusted asset class.

“We continue to believe in the benefits of the CLO financing structure, particularly in periods of volatility. Despite a loan market having its weakest issuance figures in over a decade, CLO demand has continued to create a stable buyer of syndicated loans and remains an important financing mechanism for businesses and sponsors across the globe. We remain vigilant in our research process and remain committed to a portfolio management strategy that relies on a relative value driven active trading approach. Consequently, the Investment Manager believes the Company’s portfolio is well positioned to take advantage of opportunities within dislocated markets and continue to achieve the Company’s investment objectives.”