Fund Commentary – November
The Coral Cove Private Credit Fund (the “Fund”) returned 0.85% (Class I Units) in November. Annualized returns since inception (January 2021) are 9.93%.
Fund Insights
The Fund’s underlying portfolio (the “Portfolio”) has exposure to approximately 120 invoice factoring, ABL, equipment finance, real estate, lender finance, specialty finance or similar type loans. Presently, the geographic weighting of the portfolio is approximately 78% to the US and 22% to Canada. Of these positions, the largest portfolio weights are 48% to invoice factoring, 38% to commercial finance (which includes asset-based lending, real estate and equipment financing), and 10% to lender finance.
Notes from Underwriting
As 2023 begins to close, we shift our focus to the new year and what 2024 will bring us. The past few years have been dynamic, to say the least, with global disruption stemming from the pandemic followed by an inflation surge, supply chain challenges, and interest rate spikes in North America and elsewhere. The outlook for 2024 is less than crystal clear, with numerous forecasts predicting a wide range of scenarios. We remain focused on finding places to lend our capital where an appropriate balance exists between the risk profile of the transaction and the yield we can generate. Our pipeline is robust and continues to demonstrate a good level of diversification across both industry sectors and underlying collateral.
Our ABL underwriting team is diligently closing a sizable (~US$10 million) transaction for an equipment rental company, where the equipment fleet will form part of the revolver collateral. This approach, carefully designed to satisfy the client’s desire to avoid amortization payments associated with their fixed assets, will not expose us unduly. We will frequently re-appraise the assets and reset our advance rate if values deteriorate.
In the same vein of caution, we are reviewing a lender finance transaction for an automotive leasing company. With its strong track record and disciplined focus on borrowers who use their vehicles as part of their livelihood, the company assures us of their motivation to keep payments up-to-date.
Lastly, we are exploring a term loan opportunity for a construction conglomerate in Eastern Canada. Despite construction firms’ challenges on the working capital side, this business’s abundance of fixed assets and available complimentary (and lower cost) bank financing to support their working capital needs reassures us.
April Fund Commentary