Direct lending sector company, Honeycomb (HONY), delivered an 8.2% annualised NAV return for the first six months of the year (30 June 2019: 7.5%). The portfolio has displayed solidity over the pandemic to-date, with the underlying returns increasing in Q2 2020. The manager notes that the portfolio has seen the majority of underlying customer loans (both owned directly and financed through structured facilities) move out of COVID-19 forbearance and making repayments.

It is also noted that non-bank lenders have also been tentatively re-entering the lending market with restricted scorecards as the economy has started to re-open.

Portfolio – focusing on cash collection

It is noted in the manager’s report that “since the onset of the COVID-19 crisis, the manager has prudently been focusing on cash collections. The portfolio remains highly diversified across two types of facilities, structured loans and whole loans, and three sectors, consumer, property and SME and the Manager is now seeing a number of attractive opportunities.

As at 30 June 2020, the portfolio of structured loans consisted of 21 facilities with an average balance outstanding per facility of £12.9m. The facilities have an average effective advance rate of 66% and typically benefit from robust covenants. The facilities are collateralised by over 400,000 underlying loans and receivables. The group’s portfolio of whole loans consists of 23 deals with an average balance outstanding per relationship c.£11.8m, 66% of whole loans are secured on property, average loan to value c70%. 33% are consumer unsecured and 1% are SME.”

Pollen Street Update

We also note that after it announced a possible merger with Pollen Street Secured Lending, on 6 August, it was confirmed by HONY’s board, on 3 September, that it did not intend to make a potential offer.

Top 10 holdings at 30 June

HONY: Honeycomb shows resilience