Transcript Structured High Yield Fund

Structured High Yield Fund
Stable Experienced Team


Average experience of 12
Andrew Jones
Global Head of Infrastructure Debt
years
London
Sydney
Gerry Jennings
Principal
Simon La Greca
Principal
Richard Lane
Principal
Alison Forrest
Associate Director
Supported by deeply
resourced Legal and
Compliance Teams
Tim Whishaw
Senior Manager
Business Development
John Mitchell Director
- Business
Development
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Loan Administration
Tim Kapadia
Manager Loans
Administration
Portfolio Activity
Asset Writedowns
 2009: Approx 4% write down –
 Two loans written down to nil –
First Engineering & Paroc
Credit Rating
Closely Monitored Assets
 Air Serv – Further Capex required
to fund new contracts and
refinancing event in 2011
 Air Serv with external valuer
13.86%
5.27%
AA
BBB
BB
B
CCC
C
22.36%
11.14%
2.18%
2010: Approx 13.0% write down –
 Three loans written down to nil European Directories, Beston
and East London Buses.
45.19%
Average rating B+
 Zenith written down by 27%
As at 30 Nov 2010
 Godfreys written down by 88%
Active portfolio
management
Asset Realisation Activity
Positive Capital Restructurings
IPO & trade sales: Loscam (trade),
Miclyn (IPO)
 Mauser
$57.3m
 Materis
$43.7m
Refinancings: Collins (full), Perth
Airports, Casema (partial), BAA
(partial – Sept, completed Nov)
 Collins
$50m
 Xtralis
$70.9m
 Independent Liquor
$37.3m
 WFS
$18.3m
Total
$277.5m
Tegel sale process commenced
Thames and Signature potential to
refinance over next 12 months
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Fund Income & Distribution Position
2009/10: $244m cash distributed to investors & $135m debt repaid
2010/11: $190m cash distributed YTD
Cash Flow
Outlook
Prepayments
Currency Hedging Strategy
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•
•
•
$214m since 1 July 2009
Capital returned - $225m
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$45m in 2009/10
$145m in July 2010
$35m in October 2010
Distributions - $209m
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$199m 2009/10
$10m Sept 2010
Cash income/PIK income
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6.50% cash pay, 2.70% PIK
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•
Approx $150m - from writedowns
Capitalising Interest
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29% of running yield (Dec 10)
Continued use of forward fx swaps
Major positions reset to March 2011 & December
2011
$50m reserving of capital
$250m standby debt facility to cover out of the
money hedges
Distributable Cash
•
Currency volatility remains a risk to distributions
Asset Strength
•
Tax sheltered income (2010/11)
•
$106m in the money at 30 Sept 2010
•
Godfrey’s and Air-Serv are the two assets causing
most concern
Restructuring activity expected to slow
Portfolio Structure
Top 10 Holdings as at 30
th
November 2010
Amount
($m)
% of
SHY
Asset
Industry
1
Godfreys
Specialty Retail
111.2
7.5%
2
Macquarie UK Broadcast
Wireless telecommunication services
94.9
6.4%
3
Air Services
Diversified Consumer Services
78.6
5.3%
4
Thames Water
Water Utilities
76.5
5.2%
5
NZ Poultry
Food Products
75.7
5.1%
6
Maher Ports
Transportation infrastructure – marine ports and services
73.5
4.9%
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Xtralis (Vision Group)
Commercial Services & Supplies
73.3
4.9%
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Southern Water
Water Utilities
65.5
4.4%
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Premier Education
Diversified Consumer Services
56.8
3.8%
Mauser
Containers and Packaging
55.7
3.7%
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December 2010 Expected Maturity Profile
Pre-payments received over last 12 months and expected next 12 months
$450,000,000
$400,000,000
$350,000,000
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
Prepayments expected
18
-2
20
17
-1
20
17
-2
20
16
-1
20
16
-2
20
15
-1
20
15
-2
20
14
-1
20
14
-2
Prepayments received
20
13
-1
20
13
-2
20
12
-1
20
12
-2
20
11
-1
6
20
11
20
Maturity
-1
$0
Possible prepayments
Structured High Yield Fund performance
30th Nov 2010
AMP Capital Structured
High Yield Fund
UBSA Bank
Bill Index
Out
Performance
6 months
0.45%
2.43%
-1.98%
1 Year
2.62%
4.56%
-1.94%
3 Year (% p.a.)
6.20%
5.29%
+ 0.91%
5 Year (% p.a.)
7.93%
5.70%
+ 2.23%
Since Inception*
(% p.a.)
8.40%
5.70%
+ 2.7%
* As at 30 Nov 2010. Returns shown are before tax and fees, and assume distributions are reinvested. Interest Withholding Tax is not excluded.
Past performance is not a reliable indicator of future performance.
1 Inception date 31 August 1997
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Godfrey’s
Reasons for underperfomance
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Structural shift in consumer preference from bagged to bagless

Lost significant market share due to Dyson bagless product range
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Did not have a viable bagless product until 12 months ago
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Starting to reverse market share loss however will never fully recover
Increased competition from big box electrical retailers

Founder sale and associated spotlight on category
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Dyson heavily promoted in the Good Guys and Harvey Norman
Rise of Dyson
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Does not sell to Godfreys
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Created bagless category
Underperformed management teams / execution issues

Replaced two sets of management teams
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Sponsors slow to act on bagless deficiency
Store network outdated and is need of refurbishment
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CAPEX plan to refurbish stores is approximately $12m
Current issues / Next Steps
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Business is over geared due to declining earnings and capitalising
nature of subordinated debt
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Capital restructure is necessary

Inject fresh funds to pay for CAPEX
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Adjust debt covenants
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Extend debt maturities to allow business to recover before a sale is necessary

Senior banks have appointed an Investigative Accountant (IA) to
independently report on the financial condition of the business

Likely valuation timing prior to year end
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AIR-serv
Reasons for underperformance

Performance impacted by the prolonged recession in the US

Most severe decline in driver miles ever recorded by the Federal Highway
Administration (started 1971)

Unemployment rate increase from 4.6% in June 2007 to 9.5% in June 2010

Revenues per machine impacted by lower driving hours and
increase in petrol prices

Capex facility locked up since June 2008 due to leverage levels
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Equity injected over $40m over the last 2 years to support capex and pay down
senior debt
Competition from smaller US competitors has continued to increase
Current Issues / Next Steps

Senior debt matures mid 2011

Capital restructure needed
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to capture current growth potential as the economy recovers, and improve the
prospects for realising 100% coverage of our debt in a sales process
Change in Equity Adviser in October
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has meant that the Equity holders are less willing to support a further equity
injection

Senior banks have seen declining potential for equity support and
are becoming more aggressive in their demands

KPMG to value our investment in the business
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Team continues to work hard to maximise value for our investors
Business Outlook

Worth supporting a restructure for a number of reasons
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Not a good economic environment for maximising sales price
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Recent vend price increases need to flow through the revenue line

Growth opportunities in the UK and Europe require capital – from an equity
injection or an easing of the capex restrictions
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Business forecasting a slow recovery over next 2 years
Important note:
The offer of units in the AMP Capital Structured High Yield Fund (ARSN 104 312 290) is made in a
product disclosure statement issued by AMP Capital Investors Limited. The product disclosure
statement is available from AMP Capital Investors. Investors in this product should consider the
product disclosure statement in deciding whether to acquire, or to continue to hold, units in the
product.
Neither AMP Capital Investors Limited, AMP Limited, nor any other company in the AMP Group
guarantees the repayment of capital or the performance of any product or any particular rate of
return from any product referred to in this presentation. Past performance is not necessarily an
indicator of future performance.
While every care has been taken in the preparation of this document, AMP Capital Investors
Limited makes no representation or warranty as to the accuracy or completeness of any statement
in it including, without limitation, any forecasts.
This presentation has been prepared without taking account of your objectives, financial situation
or needs and because of this you should, before making any investment decisions, consider the
appropriateness of the information in this presentation, and seek professional advice, having
regard to your objectives, financial situation and needs.
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