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Monthly report May 2022 - SCF I

Scandinavian Credit Fund I AB (publ) reports a NAV price for May of 102.69. It is an increase of 0.37 (0.3616%), it is a month that is a little weaker than expected.

The inflow for the month of May is SEK 31 million, thank you very much for that.

New lending in May is approximately SEK 30 million.

The reason for the slightly weaker NAV course is that we have written down the expected recovery in the bankruptcy estate for Trinitas. We previously had indications that our recovery could be around SEK 6 million, now after dialogue with the bankruptcy trustee we have adjusted it to SEK 2 million, that is the difference between an ok month and what we report in May. There is thus in practice no downside left there, however, the process continues against the organizer of the bond and the outcome of it we will see. I would like to get information about that development again.

The fund is still trading at a rate of plus 6 % at an annual rate.

One of our portfolio companies, Vimab AB, has been acquired by Headsent AB, which is listed on First North. The transaction will be finalized when it is approved by Headsent's shareholders at an Extraordinary General Meeting. We can not take up any possible price gain until it is ready and the deal completed. There is a press release from Headsent available in the market for those interested.

Our lending objects are still doing well given the information we currently possess, we of course follow all companies as closely as under covid. We continue with the work to liquidate companies that we have mortgaged and I will return when I can reveal more about this.

Given the situation the market is in, "cash" becomes more difficult to raise. We now receive inquiries from large fine companies that could otherwise raise capital in the bond market. It is thus a seller's market for those who have liquidity. It is possible to charge well for new lending now.

The market

It feels a bit annoying to write about inflation, central bank policy and the war in Ukraine. However, these are the factors that affect the market directly or indirectly now and for a long time to come.

The picture below shows aggregated forecasts from about twenty banks that make macro forecasts in Sweden.

What stands out is how quickly they believe that inflation will fall back and the strengthening of the krona that can be seen in the forecast. The Riksbank will certainly raise

the interest rate and the fixed income market forecast are higher than the economists'. However, such a large strengthening of the krone presupposes rising stock markets or at least that it calms down in the market and that may happen, but I personally think no earlier than 2023 and then maybe the second half.

We need to see that the rate of increase in price increases slows, the war in Ukraine is over or a ceasefire and that the central banks have clearly risen. I maintain that there will be unrest in the markets well into 2023.


Source: Bloomberg

Comparison

Below you see SCF I and its return since the start in comparison with a long bond fund. You can sell a long bond fund on the day, but you hardly get an interesting return if you compare with SCF I since its inception. It looks good to be able to present a curve that has given a steady and consistent return.