SCFI månadsrapport – mars 2023

SCFI Monthly Report – March 2023

Scandinavian Credit Fund I AB (publ) reports a NAV rate for March of 100.64. That's an increase of 0.19 %

The fund has not had any new lending during March, however, two lifts have been carried out on already granted credits corresponding to approximately SEK 11.5 million. The fund will pay out at least SEK 150m, corresponding to 100 % of redemptions from November and 18 % of redemptions from December. The fund will find out exactly how much is paid out this period in mid-April.

The fund is still closed for deposits and withdrawals due to large redemptions during November and December as previously communicated. The fund's hope and expectation is still that redemptions will be handled during April, but the fund also sees difficulties with refinancing and sales in the market, which complicates the process of collecting repayments. The fund will continuously update applicable redemptions if new information arises during the month.

NAV influencing factors for March are the value of the fund's listed shareholdings, which has decreased while the fund continues to see that the risks in the market are increasing. Reserves and borrowers are evaluated monthly to act and adjust the value in the fund if risks rise or changes in the market affect sectors or borrowers. When the redemption is handled, the fund continues to see very good opportunities in the market for the asset type direct loans. The fund receives a lot of requests for a good return, which will positively affect the NAV if capital for lending is available.

The market and the economy
After the major banking crisis at the beginning of March, which led to great turbulence and a sharp decline in both the stock market and interest rates, market confidence has returned. The authorities' and Central Banks' quick and strong intervention to secure market confidence and ensure that the crisis is stopped from spreading as well as protecting depositors' money in affected banks has led most people to believe that the banking crisis is over, which, however, may be a bit early to say for sure. But the focus will now again shift to inflation. The US saw a reduction in inflation and is now the lowest since September 2021, however core inflation appears to be more difficult to bring down. The inflation figures for Europe will guide the interest rate setting from the ECB and preliminary figures indicate a reduction in inflation, what will also have a big effect here is the underlying core inflation. Sweden publishes inflation figures in mid-April and even there core inflation will be a big factor.

The latest producer prices to come out of the Eurozone show a decline of 0.5% for February which was slightly more than expected. The underlying inflation, has low volatility and prices very rarely fall once they have been raised unless the economy goes into a major review. This means that we still have an underlying inflation which in many cases is rising on an annual basis despite the reduced activity in the economy. Inflation will probably have to be fought harder, which will lead to further interest rate increases going forward, the expectation for April is 0.5 % by the Riksbank.

The market is volatile and uncertain, and the pressure on companies and households is increasing as a result of inflation and interest rate increases. The currency will need to be strengthened through interest rate increases in order not to import inflation, which could affect refinancing and bond markets. The risks in the market should lead to increased problems for companies and an increase in bankruptcies.

The fund continues to see increased risks in the market, which is reflected in the provisions, but has not identified any major changes during March.

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