1 | Edison Investment Research | Flash note | | 27 April 2012

Flash note
27 April 2012

Greenwich Loan Income Fund

Year End 12/08 12/09 12/10 12/11 Revenue (m) 20.9 6.9 17.1 10.0 PBT* (m) 16.4 2.0 11.1 3.2 EPS* (p) 38.2 3.9 12.7 3.3 DPS (p) 5.0 2.0 4.0 4.2 P/E (x) 1.3 12.4 3.8 14.7 Yield (%) 10.1 4.0 8.1 8.4

Price Market Cap

Share price graph

48.4p 48m

Note: *PBT and EPS are normalised, excluding intangible amortisation and exceptional items.

Investment summary: Q112 NAV, div and CLO

Greenwich Loan Income Fund (GLIF) has announced its Q112 NAV (47.8p vs 48.3p end December), which has fallen modestly with a 3% adverse dollar/sterling exchange rate swing over the period. The basis of the NAV is conservative, marking assets to market and liabilities at par. As a going concern, we believe this is unduly harsh as many loans that are expected to fully repay have a market price below par. It is more appropriate to consider the value of assets realisable over time (franchise value), which we estimate at 51.5p. The groups NAV reflects loans valued at 93.1% of par (December 92.3%). The last disclosure indicated that just 2% of loans were at risk of principal loss before any benefit of security or recoveries. The accounting valuation is thus extremely conservative. We estimate the real franchise value is closer to 51.5p. We derived this by taking the underlying loan assets at the expected realisable value as calculated within the CLO test, rather than at market value. We note that any issue of shares at the current price to fund acquisitions would see a modest improvement in the accounting NAV. As expected, all the quarterly CLO tests have been passed with the exception of a minimum required proportion of the portfolio in senior secured notes. This is a timing issue, as the repayment or sale of some investments saw an increase in cash balances, which are expected to be deployed back in senior secured notes imminently. We note a quarterly $3.5m release of cash from the CLO to GLIF. As expected, the GLIF dividend was maintained at the Q411 level of 1.15p (cost 1.1m).
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Share details Code Listing Sector Shares in issue Price 52 week High 49.8p

GLIF AIM, CISX AIC: Sector Specialist: Debt 98.6m

Low 38.2p

Business GLIF is a Guernsey domiciled, authorised, closed-ended investment company. Its objective is to produce a stable, predictable dividend yield, and long-term preservation of net asset value. It invests in senior, secured loans, primarily to the US mid-corporate market. Analysts Mark Thomas Martyn King

+44 (0)20 3077 5700 +44 (0)20 3077 5745

financials@edisoninvestmentresearch.co.uk

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