Nordic Factoring Fund månadsrapport – februari 2023

Nordic Factoring Fund monthly report – February 2023

Nordic Factoring fund AB (publ) reports a NAV rate for February of 100.82. That's an increase of 0.43 %.

During February, the fund set up a new line of credit for financing invoices of approximately SEK 20 million and will pay out approximately SEK 135 million in new invoice loans during March. The fund has renegotiated the interest on the loans, which will positively affect the NAV from mid-March. The fund continues to see good opportunities for converting the liquidity and sees a positive development going forward.

Against the background of the weaker economic outlook for the market, the fund has tightened and continued to tighten its routines for monitoring outstanding invoices and the assessment of companies.

The market and the economy
The stock markets have consistently risen at the beginning of 2023, which has largely been attributed to the expectation that the economy will continue to be strong with a soft landing and that inflation will fall during the spring and thus reduce the risk of further increases in interest rates. GDP declined by a surprising -0.9 in the last quarter of 2022 in Sweden, which deviates from the rest of Europe's GDP figures. The risk also increases because the first quarter's GDP figure will be negative now that private consumption and the housing market are falling a lot.

The risk has further increased for more increases after inflation figures for February came in from France (+0.9%) and Spain (+1.0%). The unexpectedly high inflation puts further pressure on the ECB to raise interest rates in Europe earlier and more strongly than the market expected, which further increases the pressure also on the Riksbank to act more forcefully. The Riksbank has emphasized that the exchange rate is very important in order to bring down inflation, as a stronger krona lowers imported inflation. In order to strengthen the krona, an increased demand for krona is required, which is normally achieved by keeping the interest rate at a higher level than the rest of the world. If confidence in the Swedish economy deteriorates, this means that the interest rate differential should increase further so that the krona can be strengthened, which supports the thesis of more interest rate increases over a longer period. There are many indications of an interest rate increase of 0.5 % in April and at least 0.25 % in June.

All in all, there is a risk that regardless of the Riksbank's actions, it is likely that the economic downturn will continue while inflation remains at high levels with continued interest rate increases as a consequence. The fund sees that the market situation puts pressure on the companies and the economy in general, which can increase the risk of more bankruptcies over time.

The reserves in this fund are very low. The fund's entire exposure is in category 1 and the security is over 30,000 invoices pledged in favor of the fund. The invoices are rolled over in 30 to 90 days with credit insurance both with and without recourse. Furthermore, there is property insurance for an eventuality should false invoices appear.

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