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Monthly update SCFI September 2024

Scandinavian Credit Fund I AB (publ) reports a NAV rate for September of 62.29, a decrease of -0.5587% since the previous month. The fund's managed capital amounts to SEK 1,681.4 million at the end of the month. As mentioned in previous monthly letters, the fund has stopped currency hedging the holdings as it was considered too expensive and that it also has a liquidity effect in connection with the realization of the currency futures. The outcome in the portfolio is affected after we stop currency hedging both up and down depending on how the currencies change.

The Swedish krona strengthened for the second month in a row against all currencies to which the fund has exposure except the pound. The Norwegian krone weakened by -0.6% and the dollar weakened by -1.0%, the change in the fund's currencies is shown below. The decrease in NAV during the month by -0.5587% is partly affected by currency changes as the holdings in foreign currency lost value when revalued to Swedish kronor.

Loans and shares in the portfolio before reserves are distributed in underlying currencies as below.

According to the model that the fund applies for reserving the loans, the reserving amounts per category as follows.

Since the closure, we have moved more engagements into category 3, which has also increased the provision for credit losses as the assessed security value has decreased.

Events during the month

We work actively with all holdings. Of course more with those where we are the owner but also with the engagements where we only have lending. It takes a lot of time but it has also resulted in some positive events that we can pass on.  

During September, a restructuring was announced in a listed company where the fund owns bonds. Negotiations with the company and the owners took place during the third quarter. The company will carry out a targeted new share issue, which will bring approximately SEK 78 million in new liquidity to the business at the same time as loans from the European Investment Bank and all outstanding bonds are converted into shares. The transactions are conditional on each other. Through this, the company is supplied with new liquidity at the same time as the balance sheet is significantly strengthened. The reconstruction is good for all parties and hopefully the fund can in the future see an increase in the value of the shares that will be allocated. The company has called an extraordinary general meeting at the end of October for approval by the shareholders. Delivery of the shares is expected to take place during November/December. When in time the fund's shares will be able to be sold remains to be seen depending on developments.  

Another listed company to which the fund has loans announced on October 8 that it has entered into a share transfer agreement for the sale of all of the company's significant subsidiaries to a Norwegian IT player. As a creditor to the company, the fund negotiated during September with the company and the buyer of the business. Provided that the conditions for the implementation of the transaction are met, access is planned for November. The purchase price in the transaction will be paid partly in cash and partly through the redemption of the company's debt to the fund. SCFI's claim amounts to a total of SEK 50 million plus interest. The deal was originally planned with another counterparty and even then with the intention of settling the fund's loan during December. The company has subsequently moved on with the new buyer with whom it has now reached an agreement. The proceeds from the redemption of SCFI's loan are included as part of the repayment to the fund's investors which is planned to take place at the end of Q4 or the beginning of 2025.

A third listed company in which the fund owns shares made public on 3 October that a subsidiary in the group had received an order worth SEK 825 million. The order concerns the delivery of batteries to a solar power plant in Europe. The market reacted positively to the announcement and the share rose after the month's NAV setting. However, the liquidity in the share is limited, so after the first "expression of joy" the share has now returned to a more normal level just above the rate at which the share was valued in September's NAV. On a positive note, the company has nevertheless succeeded in taking such a large order in a future area such as solar energy storage. We are working here with the management to be able to divest our holding in the long term.

A final piece of positive news concerns one of the properties that the fund owns. During September, a new agreement was signed with Kronans Apotek. Negotiations took place during the third quarter. Occupancy is planned for Q1 2025. The agreement runs over seven years and is a nice addition to the property, which has had a vacancy in the premises for some time.

Repayment of capital

As previously communicated in connection with the publication of the half-yearly report and in previous monthly letters, a repayment is expected to be able to take place during the end of Q4 or the beginning of 2025. We will return with further information as it approaches for payment.

More information and Q&A is available on the Fund's website: https://kreditfonden.se as well as in previous monthly newsletters.

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Emma Westerberg

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