BOUSSARD & GAVAUDAN HOLDING LIMITED A closed-ended investment company incorporated with limited liability under the laws of Guernsey with registration number 45582
Total value of the investments of BGHL based on the final NAV for the Euro & Sterling ordinary shares1 | €623 million as of 31 December 2015 | |
NAV per share | Euro ordinary share | Sterling ordinary share |
€20.6546 | £18.0947 | |
BGHL's portfolio | The proceeds of the initial and secondary public offerings have been invested into the Sark Fund (net of a certain amount retained by BGHL for working capital requirements and other requirements). Since 1 November 2010, BGHL is invested into the BG Fund (formerly known as Boussard & Gavaudan Fund). In addition to having substantially 100% of its assets under management invested into the BG Fund, BGHL has other investments. | |
Euro Shares | Sterling Shares | |
Shares issued | 30,387,568 | 494,962 |
Shares held in treasury | 829,415 | - |
Shares outstanding | 29,558,153 | 494,962 |
BG FUND
Note that trade examples detailed in each strategy below are among the best and worst performances of the month.
COMMENTARY AND HIGHLIGHTS
The Eurostoxx 50 finished December down 6.8% on the month, materially reducing the year-to-date performance to +3.8% overall. VDAX finished at 21.1%, up from 20.7% and the VStoxx at 22.2%, down from 23.7%. The Itraxx Crossover S24 widened 25bps over the month to close at 314bps and the ITraxx Subfin S24 widened by 10bps to close at 152bps.
Volatility StrategiesConvertible Bond Arbitrage
Convertible bond contribution (excl. mandatories) to the performance of the fund was positive in December.
With a falling equity market, the primary market for convertible bonds was limited in December. Overall, the convertible bond primary market delivered €21bn of issuance in 2015 (compared with €16bn in 2014). Non-
1 The total value of the investments of BGHL is based on the final NAV for the euro and sterling shares and the currency exchange rate for the Sterling vs. Euro.
dilutive CB issuance totalled €3bn while €17bn disappeared from circulation, mostly due to redemptions (€11bn).
In this context, as in November, most of our positions contributed marginally positively. On 21 December we tendered our Alcatel 2018 CB position and switched our short Alcatel shares into Nokia ones. We will receive Nokia shares on 8 January 2016 as the Nokia offer has been a success. This position contributed positively in December.
Mandatory Convertible Bond Arbitrage
Mandatory convertible bonds contributed positively this month, mostly from the Telefonica position. Unusually, some long only funds purchased mandatory convertible bonds and especially the Telefonica ones as they were looking for some telecom exposure in their portfolio.
Primary market was disappointing in 2015 with only €0.75bn being issued.
Volatility Trading
Trading volatility contributed negatively this month. December has been somewhat similar to the two previous months as it was more flow driven than macro driven. As a consequence, the correlations between assets were not stable and our macro hedges did not perform as well as expected. Convexity on S&P500 was the worst performing hedge over the month: the index was only marginally down and the increasing carry cost on the hedge due to higher volatilities meant that it did not offset the loss from a long Eurostoxx 50 bias at the beginning of the month.
Equity StrategiesIn December, our equity portfolio returned positively, while equity markets were significantly down. The Eurostoxx 50 finished the month down 6.8% as the investors were disappointed by the ECB announcements at the beginning of the month.
We believe 2 factors helped the performance of our portfolio in this difficult environment:
our longs are concentrated primarily on quality and defensive names, which outperformed in the down move
our extensive use of options performed very well in volatile markets.
From a stock specific point of view, Smith and Nephew rallied 7.4% during the month. On top of being a defensive name, the stock bounced back after a weak reaction in November to their Q3 release and badly perceived M&A announcement. It benefited also from renewed rumours of a bid from Stryker.
Dassault Aviation rallied 8.8% this month, benefiting from numerous positive brokers upgrades.
On the negative side, Electrolux finished down 20% as GE unexpectedly announced the termination of the agreement to sell their appliance business to Electrolux. This came after 15 months of negotiations between GE, Electrolux and the US Department of Justice which was opposing the deal.
Into the new year, we will try to keep our portfolio concentrated on our biggest convictions and we will continue to use options extensively as this has proved very efficient in the turbulent markets of 2015.
Credit StrategiesCredit Long / Short
Credit long / short strategies contributed negatively. December was a risk-off month for credit. The high yield market especially in the US experienced large outflows driven by renewed weakness in the commodity space, particularly the oil market. European markets outperformed given their lower exposure to this sector. Overall cash secondary flows were limited, and the primary market was very quiet as usual in December.
The main negative contribution this month came from our long exposure to French Geophysical services company CGG's high yield bonds. The bonds weakened along with the high yield energy sector despite the company announcing plans to raise €350m via a rights issue. The market discounted this capital plan as few details were announced on terms and underwriting of the issue. French State entities Bpifrance, with a 7.04% stake in CGG, and IFP both plan to subscribe to the capital increase in line with their current shareholdings. This should be equivalent to a combined 10.62% of shares, subject to the final terms of the transaction. In addition Total SA may also take up to 10% of the planned capital increase. CGG expects to start the process after approval by shareholders at a meeting on 11 January 2016.
On the positive side, our Tiscali position contributed positively this month. Following the merger with Aria, Tiscali made a capital increase of €40m which allowed them to repay 60% of their outstanding loans at par. The remaining loans should amortise over the next two years while the company retains a very acceptable debt / EBITDA profile.
This is another strong achievement for the fund, substantially reducing another illiquid position and which contributed positively for the year.
Capital Structure Arbitrage
Capital Structure arbitrage was flat this month.
Our portfolio remained very resilient in a more challenging environment.
Once again, commodities weakness and Fed rates hike were the main topics which have exacerbated the risk- off appetite. Both equities and credit suffered and moved roughly in line. With this backdrop, we traded around our positions, especially in the Rallye / Casino universe.
Investors were reassured by the deleveraging plan announced by Casino. Both stocks had an impressive rally with worries on emerging market exposures diminishing. The following day this was quickly hammered by Muddy Waters' report which sent shares and credit in Rallye/Casino down significantly. These fast market moves enabled us to add to our existing position.
TradingTrading contributed positively in December.
DIRECT INVESTMENTS OTHER THAN BG FUND
On top of its investment in BG Fund, BGHL has other investments. As of 31 December 2015, the net asset value of these investments represents approximately 11% of the net asset value of BGHL.
Rasaland Investors ("RLI")RLI is a Malta-based holding company structured as a private equity fund in terms of fees and organisation and managed by BK Partners. RLI is dedicated to investing in land, hotels and high-end resort developments in Mexico. RLI has invested and is developing the Mandarina, Xala & Seramai resorts in Mexico. RLI's initial business was, soon after launch, affected by several adverse events which have changed the exit solution and the time schedule considered initially. RLI has mitigated the risk of running out of cash by selling in 2012 a stake in one of its land projects to a large Mexican institutional pension fund, raising USD 80 million with the National Infrastructure Fund and by listing (IPO) in November 2015 RLI's hotel subsidiary on Mexico's exchange, raising a total of USD 27 million. The subsidiary is the owner of the Four Seasons hotel in Mexico City acquired in May 2013.
In February 2015 BK Partners entered into an agreement with Kerzner International Holdings Limited to develop and operate two new One&Only resorts in Mandarina and Xala, on the Pacific Coast of Mexico. RLI is currently focused on the development of the One&Only hotel of the Mandarina project. This development is likely to accelerate the liquidity to RLI's investment in Mandarina through the sale of land parcels as well as private residential estates.
GFI InformatiqueBGHL holds bonds issued by Infofin Participations and exchangeable for GFI shares. BGHL also holds GFI shares. BGHL has a directional exposure which is not hedged.
GFI is a major player in value-added IT services and software in Europe. GFI is listed on the Paris Euronext, NYSE Euronext (Compartment B) - ISIN Code: FR0004038099.
On 7 June 2013, BGHL signed a shareholders' agreement in order to act in concert with Apax France and Altamir.
On 23 November 2015, Mannai Corporation, together with Apax France (jointly with Altamir) and Boussard & Gavaudan, have announced they have entered into exclusive negotiations for Mannai to purchase a 51 percent equity stake in GFI at a price of €8.50 per share.
Please refer to Section V-A- Equity strategies for further details.
The press release is available here: http://www.bgholdingltd.com/uploadImages/File/ACTUS-0-42198- 151123_PR_Gfi_EN.pdf.
BOUSSARD & GAVAUDAN INVESTMENT MANAGEMENT UPDATE
TRANSA CTION IN T H E COMP ANY'S SECURIT IESPlease note that transactions in the Company's securities that have been performed by officers, directors and persons referred to in the section 5:60 of the Financial Supervision Act ("Wft") are reported:
directly on the AFM website: www.afm.nl (professionals > registers > notifications > insider- transactions 5:60 wft);
on the Company's website through a link to the AFM notification: www.bgholdingltd.com (Investment Manager > Regulatory information).
Transactions in the Company's own securities are also reported on:
the AFM website: www.afm.nl (professionals > registers > notifications > price-sensitive press releases);
the Company's website: www.bgholdingltd.com (Investor Relations > Financial announcements.
As of 1 January 2016, BG Group assets under management are at €2.36bn.
We would like to thank our investors for their trust this year and we wish you all a happy and prosperous 2016.
E. Boussard & E. Gavaudan
Contact information
Boussard & Gavaudan Investment Management, LLP 1 Vine Street, London W1J 0AH - United Kingdom
Boussard & Gavaudan Holding Limited issued this content on 2016-01-19 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 2016-01-19 15:13:04 UTC
Original Document: http://www.bgholdingltd.com/uploadImages/File/BGHL_Statement_December_2015.pdf
