CONTENTS. I. Company info. II. High yield bonds

Transcription

1 HIGH YIELD BONDS

2 2 CONTENTS I. Company info Basic data Your contact... 3 Organisational diagram... 4 Principles II. High yield bonds High Yield Bond Investment-Selection- Process Features Purchase and sale criteria... 8 Example ideas... 9 Costs References Address... 12

3 I. Company info 3 BASIC DATA YOUR CONTACT Legal form Joint-stock corporation CH HR Basel-Stadt Corporate identification number (UID): CHE Total paid-up share capital CHF : n registered shares with a nominal value of CHF n 100 bearer stock with a nominal value of CHF Supervisory body/sro VQF, Zug member No President of the Administrative Board Alessandro Leo, Abtwil, CEO Sunstone Vermögen & Treuhand AG, Zug Carlos Zanotelli BSc Economics and Business Administration CEO (managing director), portfolio manager & market analyst with focus on convertibles and high yield bonds. Over 15 years of experience in portfolio management with independent asset managers before founding Chameleon Asset Management. Mauro Bärtsch Master of Arts HSG in Banking & Finance COO, portfolio manager & market analyst. Several years experience in the creation of investment strategies for institutional clients at a global asset manager and in the field Products & Trade at a renowned Swiss private bank. I. Company info

4 4 ORGANISATIONAL DIAGRAM Board of directors Alessandro Leo External auditing PwC AG (PricewaterhouseCoopers), Basel CEO Risk control & compliance (GwG) Carlos Zanotelli Portfolio Management COO CRM Fund Advisor Carlos Zanotelli (Mauro Bärtsch) Mauro Bärtsch (Carlos Zanotelli) Customer-specific mandates n Individual & mixed asset categories Special mandates n Convertibles n High Yield Bonds CEO: Chief Executive Officer CRM: Client Relationship Manager COO: Chief Operating Officer I. Company info

5 Information is the basis of our performance 5 PRINCIPLES n Transparency & ethics n Investments from a corporate, strategic perspective n Information is the basis of our performance n Asset performance target: return on investment above average and sustainable n Mandate target: 20 HNWIs at CHF 10 million max per staff member n Efficient management of other assets: through own funds I. Company info

6 II. High yield bonds 6 High Yield Bond Investment-Selection-Process Top-Down Approach Assessment of macro and microeconomic factors, the political environment and currency and interest trends. Bottom-Up Approach Systematic evaluation of the individual high yield bonds with a strategic focus on states, sectors, markets with stable earning situations or great potential for restructuring/growth. Based on fundamental analyses we sift out securities of companies which demonstrate upright management and outstanding products/processes. We place great emphasis on: n Political situation n Economic situation/raw materials n Market power/barrier to entry n Strategic shareholders/position n Improvement potential rating n M&A or LBO danger II. High yield bonds

7 RATING OVERVIEW Moody s S&P s Explanations Moody s S&P s Explanations Moody s S&P s Explanations Aaa AAA Very good: highest credit standing, almost no risk of default Aa1 Aa2 Aa3 AA+ AA AA- FEATURES Very good to good: high payment probability, low insolvency risk A1 A2 A3 Baa1 Baa2 Baa3 A+ A A- Good to satisfactory: appropriate coverage of debt services; low insolvency risk Sector distribution on the European high-yield market in 2008 BBB+ Satisfactory: appropriate coverage of debt A Banking BBB 2% services; 0% medium 6% insolvency risk B Basic Industry BBB- 3% (speculative characteristics, C lack Capital of protection K L against economic changes) D Consumer Cyclical M N A 13% Goods B 14% E Consumer Non-Cyclical J F Entergy 1% I C G Finance & Investment 11% H Media H I Real Estate 8% F G J Services Cyclical 1% E D K Services Non-Cyclical 2% L Technology & Electronics 7% 26% M Telecommunications N Utility Ba1 Ba2 Ba3 BB+ BB BB- Satisfactory to adequate: reasonable coverage of debt services, higher insolvency risk Sector distribution Sector on B+ the distribution European Adequate to high-yield poor: low coverage market of debt in 2008 on Bthe European services, high high-yield insolvency market risk in 2008 B1 B2 B3 B- A Banking 2% 6% 0% 6% A Banking 2% 6% B Basic Industry 3% 0% Caa (1- CCC Insufficient: M N 6% B Basic Industry M N A barely adequate 13% credit C Capital standing, L Goods 3% K 3) Ca CC A C D Capital Consumer Goods Cyclical very high insolvency B 13% risk C SD/D 14% K L D E Consumer Consumer Cyclical Non-Cyclical J B 14% E F Consumer Entergy C SD/D Insolvent: in default of payment Non-Cyclical J F G Entergy Finance or & Investment 1% I insolvency C 11% C G H Finance Media & Investment 1% IH 11% H I Media Real Estate 8% H F G I Real Estate 8% F G J Services Cyclical 1% E D J K Services Services Cyclical Non-Cyclical 1% 2% E D K L Services Technology Non-Cyclical & Electronics 2% 7% 26% L M Technology Telecommunications & Electronics 7% 26% M N Telecommunications Utility N Utility 7 Bonds from companies with poorer debtor quality due to high level of debt, a cyclical business or because the debtor is operating from an instable country. Bonds from developing countries or foreign currencies Risk premium for risky bonds Development of the global fault rates Sector % distribution on the 18 European high-yield market in % 6% 0% 6% 123% M N A 13% K 10 L B 14% 8 J 1% 6 I C 11% 4 H 8% 2 F G 1% E 2% 0 D 7% 26% A Banking B Basic Industry C Capital Goods D Consumer Cyclical E Consumer Non-Cyclical F Entergy G Finance & Investment H Media I Real Estate J Services Cyclical K Services Non-Cyclical L Technology & Electronics M Telecommunications N Utility Spread development of European high yields Spreads in Germany in base points 1800 Development 1600 of the global fault rates 1400 % BBB HY BB B 1920 Die Ausfallraten Development of the global fault rates 1932 Development % of the global fault rates % Spread development of European high yields 1995 Spreads development in Germany in base of European points high yields Spreads in Germany in base points Mar Sep Mar Sep Mar 1965 Sep Mar Sep Mar Sep Mar Sep Mar II. High yield bonds 1971 BBB HY BB B BBB HY BB B 1980

8 8 PURCHASE AND SALE CRITERIA Purchase criteria Sale criteria Issue volumes > 100 million Investor type Management significantly involved in company? Financial ratios n Net debt to EBITDA Ration < 5 n EBITDA Interest expense ratio > 3.5 Stable margins, operational profit YTM (Yield to maturity or call) > 7% Purpose of money borrowing n Bank debt conversion financing n Expansion n Acquisition Currency Customer reference currency, foreign currency only preferred if upside potential more than compensates for foreign currency risk. Other factors n Stable, continuous development n Market position n Customer diversification n New entrance obstacles Finance parameters Finance parameters which are deteriorating Yields Rise in market prices due to strong improvement in results/ratings and thus a consequent drop in yields to under 7%. Private Equity (locusts) Pay attention if debt expansion is only used to pay new dividends II. High yield bonds

9 BERTIN EXAMPLE: MEAT AND LEATHER PRODUCER 9 EXAMPLE IDEAS Interest coupon Very attractive Sector Meat processing Market share n Next to Friboi, the No.2 n Leading slaughterhouse and exporter of meat and leather products Rating B+, normal for companies from emerging markets, high yield bonds figures n 3rd quarter 07 n EBITDA $ 97 million (+200%) n 2007 approx. $2.7 billion n EBITDA $ 328 million Costs Brazil is the most cost-efficient producer of meat Currency US Dollar $ Conclusion Highly attractive investment II. HIGH YIELD BONDS

10 10 COSTS Portfolio management mandate Extended simple consultancy mandate Simple consultancy mandate Fixed 1% Performance bonus 10% Threshold 5% Strategy setup, formulation and handover to the customer, implementation by the customer themselves. Includes co-monitoring and recommendations concerning attractive new opportunities. Fixed 1% Strategy setup, formulation and handover to the customer as an Excel file, implementation by the customer themselves. No long-term monitoring. CHF /hr, or flat fee Custodian account fees Negotiable depending on the value of the custodian account. Mostly custodian account fee of 0.1 to 0.3% plus discounted transaction costs/lump-sum. Custodian banks General banks Credit Suisse, UBS Private banks Bank Julius Baer & Co. II. High yield bonds

11 11 References Bank Julius Bär & Co. Ltd. Merchant & custodian bank Chameleon Asset Management AG Family Office Custodian bank ALFRED SCHWEIZER Deputy Director Wealth Management Switzerland Fiduciaries & Lawyers Baarerstrasse 14a CH-6300 Zug Tel Specific basic data on demand CHRISTOPH SUTTER Executive Director Freie Strasse 107 CH-4001 Basel Tel II. High yield bonds

12 chameleon asset management ag Theaterstrasse 4 CH-4051 Basel Phone +41 (0) Fax +41 (0) info@chameleon-asset.ch Member of the VQF Financial Services Standards Association (VQF) July 2014