28th Jun 2016 12:40
LONDON (Alliance News) - Chenavari Capital Solutions Ltd on Tuesday said whilst it does not expect any immediate, direct consequences from the UK's vote to leave the European Union it noted two positions in its portfolio that might be hit.
The company noted that since the vote "markets have been characterized by extreme volatility in forex and equity, and credit markets are significantly down".
Chenavari noted two positions that are "highly correlated" to the performance of the UK economy.
The first, a secondary investment in a second-loss regulatory capital transaction backed by UK residential mortgages. Higher unemployment and lower house prices would result in an increase in defaults and losses, but it said this transaction has "significant cushion over our base case scenario".
The second is a primary investment in a first loss regulatory capital transaction issued by a UK clearing bank referencing large UK corporate borrowers.
"The underlying corporate borrowers are primarily large UK companies which might be significantly affected by a recession in the UK," Chenavari said. This investment represented around 11.1% of Chenavari's net asset value as at the end of May.
Shares in Chenavari were up 0.9% at 85.00 pence Tuesday.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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