FUND COMMENTARY-
The Coral Cove Private Credit Fund (the “Fund”) returned 0.86% (Class I Units) in March. Annualized returns since inception (January 2021) are 10.08%.
Fund Insights
The Fund’s underlying portfolio (the “Portfolio”) (as at March 31,2024) has exposure to approximately 102 invoice factoring, ABL, equipment finance, real estate, lender finance, specialty finance or similar type loans. Presently, the geographic weighting of the portfolio is approximately 79% to the US and 21% to Canada. Of these positions, the largest portfolio weights are 45.9% to commercial finance, (which includes asset-based lending, real estate and equipment financing), 31.1% to invoice factoring and 21.8% to lender finance.
Notes from Account Management
Although not something we tend to bring up, we feel there is value in discussing a refinancing notice we received recently.
We were notified that we are getting refinanced out of one of our largest positions within the portfolio in a few months’ time. Although most borrowers tend to stay with us for multiple years before getting refinanced by someone else, this borrower was added to the portfolio not that long ago. It is quite common and standard practice for us to charge an exit fee if a borrower leaves early, which will be the case with this loan file as well; however, the incentive to leave was just too large for the borrower. In this case, the client was offered a rate from a local bank which was more than 5% less than what we were charging the borrower. Given such, we fully understand the circumstances and are nothing but happy for them. Nothing had changed regarding the borrower’s circumstances other than the bank was now willing to fund them. There are a few points to take from this:
- We believe we have many files of similar quality within the portfolio and that the quality of the borrower is not necessarily dictated by the rate for which the borrower is charged
- Another is that there is a significant difference between the cost of capital of a bank lender vs a non-bank lender, a key factor in the determination of the rate that is charged and the difference between the two is vast. The above just provides a real-life example of this.
- We continue to see bankable borrowers not getting funding from the banks.
A significant component of providing loans successfully, at least for our area of focus on lending to businesses, revolves around the quality of the team. Years of experience, diversity of experiences, attention to detail, reading the situation and the people, and a mentality to separate fact from fiction, are a few of the many factors required to do the job well.
We are proud and incredibly pleased to share that recently, both Tammy Kemp and Erica Axani (two of the most senior members of our investment team) were recognized as being one of the Top Women in Specialty Finance by ABF Journal.
April Fund Commentary