Sissener Corporate Bond Fund increased its bets on shipping bonds in March.
After buying bonds issued by leasing firm Ocean Yield and seismic vessel owner Shearwater, the fund now holds 8% in shipping compared with 5% in February.
“We continue to be selective in our approach and subscribed to the new bonds issued by the leasing company Ocean Yield and the seismic company Shearwater,” the fund said in the report for March.
The largest sector in the fund is energy with a 43% weight.
According to the report, the issuance market was significantly more active than in February.
In March, 27 new bond issues were made, amounting to about NOK 30bn ($2.8bn).
In April, SFL Corp and Color Group engaged banks for issues.
Ocean Yield was for a long time one of the fund’s largest positions, but during a buyback last year, it sold half of its holding back to the company.
“When they refinanced their existing hybrid loan in March, we opted to participate in a new perpetual loan with a first call option in five years and a credit margin of 535bp,” the fund said.
Sissener has also chosen to keep the remaining holding in the existing hybrid bond, bringing Ocean Yield back as the fund’s largest position at 5.1%.
“We expect the short loan to be redeemed in September, naturally reducing its portfolio weight to 3%,” the fund added.
Sissener also bought Shearwater’s new $300m five-year bond.
The position constituted about 3.7% of the fund at the end of March.
Sissener said: “Shearwater has become the leading global player in seismic ship leasing, supported by the strong, long-term shareholders Rasmussen Group, Schlumberger and GC Rieber.”
The new bond, which was part of a $700m refinancing alongside a bank loan and other facilities, does not pay amortisations.
“Instead, we are compensated in the coupon rate of 9.5%, and the risk decreases as the company amortises and removes pari passu bank debt,” Sissener said.
Sissener rose 0.8% in March, ending up 3% this year.
“We believe that the Norwegian and Swedish markets are developing differently, with still lower risk premiums in Norway and the opposite in Sweden, partially driven by increased defaults there,” the fund said.
According to Sissener, the short interest rate duration in the fund further reduces fluctuations in an otherwise volatile interest rate market.
“With a portfolio yield (effective interest rate to maturity) of 7.5% and primarily non-speculative investments in companies with relatively strong debt servicing capability, we are positive that the strong start to the year will continue in the coming months,” the fund added.
