London, UK, 30 August 2022
Edison issues review on Tetragon Financial Group (TFG)
Tetragon Financial Group's (Tetragon's) NAV declined 3.5% in H122 in total return terms, compared to a 20% fall in the MSCI ACWI Index (based on Refinitiv). The portfolio revaluation contributed 4.1pp to the decline, which was mostly due to a Q122 loss on Tetragon's direct exposure to a publicly quoted biotech company and the downward revaluation of Equitix on the back of public multiples contraction. The best-performing assets in the portfolio were collateralised loan obligations (CLOs, which also assisted the valuation of the CLO manager LCM). Tetragon's NAV total return was also supported by a NAV-accretive share repurchase (+3pp on NAV). Tetragon's one-year NAV performance to end-June 2022 stands at 10%, compared to a 15% decrease in the MSCI ACWI (based on Refinitiv).
At end-June 2022, Tetragon had cash commitments of US$96.5m, which are fully covered by the undrawn part of its credit facility (US$150m). The facility has been enlarged recently to US$400m from US$250m, with the drawn part translating into net gearing at 3.7% of NAV at end-June 2022. We also note that Tetragon receives recurring cash inflows from bank loan investments and TFG Asset Management, with a five-year average of US$115m and US$69m pa, respectively. Tetragon's average costs excluding incentive fees stood at US$49m pa over the last five years. In H122, Tetragon used US$42m for share repurchases close to market price and paid US$19.2m in dividends and we calculate that the latest dividend per share (DPS) of US$0.11 (up 10% y-o-y) implies a 4.3% yield, according to our calculations.
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