Interim Management Statement

RNS Number : 7066Q

NB Distressed Debt Invest. Fd. Ltd

09 November 2012

 



NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

9 November 2012

NB DISTRESSED DEBT INVESTMENT FUND LIMITED

INTERIM MANAGEMENT STATEMENT

NB Distressed Debt Investment Fund Limited (the "Company"), is publishing this Interim Management Statement in accordance with DTR 4.3 of the FSA Handbook.

This interim management statement has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the FSA's Disclosure and Transparency Rules. It should not be relied upon by any other party or for any other purpose.

This interim management statement contains information that covers the period between 1 July 2012 and the date of publication of this interim management statement, unless otherwise specified.

Investment Manager's Review

Summary

We were gratified to see the positive NAV momentum achieved in the third quarter, and also to see continuing growth in the fourth quarter-to-date.  In the third quarter we exited two additional deals, both of which contributed to an increase in our NAV.  We continue to see significant upside potential in the existing portfolio, which we expect to realise as we restructure and exit investments. In the third quarter, we reached key restructuring milestones on multiple investments which we anticipate will ultimately result in profitable exits.

Portfolio

As at 30 September 2012, approximately 82% of NBDDIF's NAV was invested in distressed assets, with investments in 45 companies diversified across 14 industries. We are actively looking to replace assets harvested in the first three quarters of the year, and are bidding on additional distressed loans. NBDDIF's NAV increased 7.4% in the first nine months of 2012, to $1.0384 from $0.9672 per share.  We believe our performance year-to-date compares favourably with other distressed debt managers, as indicated by the HFRI Distressed/Restructuring Index which has returned 5.7% in the same period. In the third quarter, NAV increased 2.3%, primarily due to the mark-ups of several positions which reached key restructuring milestones or made progress post-reorganisation.  During the quarter, we saw our ninth and tenth exits since inception: we sold the post-reorganisation securities of a shopping mall REIT and a telecommunications company.  We also added incrementally to existing names and initiated positions in the senior debt of a power generation plant and the post-reorganisation claims of a container company. As with our other investments, we believe we are creating a valuation basis in the company at a discount to comparable non-distressed investments.

As at 31 October 2012, the latest date prior to publication of this interim management statement, NBDDIF's estimated NAV was $1.0541 representing a year-to-date increase of 8.9%.

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Market Environment

The distressed debt market is providing a longer-term opportunity than we originally expected.  In 2012, we have seen a slowdown in bank asset sales in the wake of the European sovereign debt crisis and government actions to stabilise the financial system. However, over $1.9 trillion of nonperforming loans remain on banks' balance sheets and banks have announced over $2.0 trillion of asset reduction targets.  Non-performing loan portfolios are expensive from a capital perspective, and with the introduction of Basel III, the minimum capital standards are going to increase in the future.  Whilst country-by-country factors relating to their speed of disposal may vary, problem assets still need to come off bank balance sheets, leading us to opportunities that are of interest in the medium-term. Consequently, we expect year-end selling pressure from banks' balance sheets over the next few years, should result in continued compelling investment opportunities.  We continue to be confident about the current and future environment for distressed debt investing.

Investment Exits

In the third quarter we had two exits, bringing our total to ten exits since inception.

Investment 9

We purchased $5 million face value of a 1st lien term loan at a price of 66% of par, secured by incumbent network telecommunications assets in the Northeast United States.  The company had filed for bankruptcy due to excessive debt incurred to make an acquisition.  We believed that our entry point represented a discounted valuation versus comparable companies.   The company subsequently emerged from bankruptcy with a restructured balance sheet.  We exited the post-reorganisation debt and equity securities in the secondary market.  Total income from this investment was $0.5 million.

Investment 10

We purchased $26.6 million face value of 1st lien debt at a price of 59% of par, secured by shopping mall retail real estate in Australia and the United States.  We believed that the loan price undervalued the company's assets and that in a sale or restructuring we would recover significantly more than our purchase price.  The company subsequently divested its US assets which repaid a portion of the 1st lien debt.  The remainder of our debt was converted into equity which we sold in the secondary market.  Total income from this investment was $3.3 million.

Material Events and Transactions

There were no material events and transactions during the reporting period.

Report and Accounts

On 29 August 2012, the Company announced its interim results for the period ended 30 June 2012. On 31 August 2012, the Company posted its Interim Report and Financial Statements for the period ended 30 June 2012 to shareholders.

Financial Highlights

	31 October 2012	29 June 2012	30 March 2012	31 December 2011	30 September 2011
NAV per share - US ¢	105.41	101.53	99.44	96.72	96.07

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Investment Policy & Objective

The Company is a closed-ended investment company limited by shares registered and incorporated in Guernsey under the Companies Laws on 20 April 2010, with registration number 51774. The Company's primary objective is to provide investors with attractive risk-adjusted returns through long-biased, opportunistic stressed, distressed and special situation credit-related investments while seeking to limit downside risk by, amongst other things, focusing on senior and senior secured debt with both collateral and structural protection.

The financial information covered herein for the period between 1 July 2012 and the date of publication of this interim management statement has not been audited.

By order of the Board

BNP Paribas Fund Services (Guernsey) Limited, for and on behalf of

NB Distressed Debt Investment Fund Limited

as Company Secretary

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

This document and the information contained herein is not for release, publication or distribution (directly or indirectly) in or into the United States, Canada, Australia or Japan or to any "US person" as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act") or into any other jurisdiction where applicable laws prohibit its release, distribution or publication. It does not constitute an offer of securities for sale anywhere in the world, including in or into the United States, Canada, Australia or Japan. No recipient may distribute, or make available, this document (directly or indirectly) to any other person. Recipients of this document in jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements in their jurisdictions. In particular, the distribution of this document may in certain jurisdictions be restricted by law. Accordingly, recipients represent that they are able to receive this document without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which they reside or conduct business.

This document has been prepared by NB Distressed Debt Investment Fund Limited ("NBDDIF") and is the sole responsibility of NBDDIF. No liability whatsoever (whether in negligence or otherwise) arising directly or indirectly from the use of this document is accepted and no representation, warranty or undertaking, express or implied, is or will be made by NBDDIF or NBEL or Neuberger Berman Fixed Income LLC ("NBFI") or Oriel Securities Limited ("Oriel Securities") or Jefferies Hoare Govett ("Jefferies") or any of their respective directors, officers, employees, advisers, representatives or other agents ("Agents") for any information or any of the opinions contained herein or for any errors, omissions or misstatements. None of Neuberger Berman LLC, NBEL, NBFI, NBDDIF, Oriel Securities, Jefferies  nor any of their respective Agents makes or has been authorised to make any representation or warranties (express or implied) in relation to NBDDIF or as to the truth, accuracy or completeness of this document, or any other written or oral statement provided. In particular, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in this document and nothing in this document is or should be relied on as a promise or representation as to the future.

NBDDIF will not be registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act") and investors will not be entitled to the benefits of that Act. The securities described in this document have not been and will not be registered under the Securities Act, or the laws of any state of the United States. Consequently, such securities may not be offered, sold or otherwise transferred within the United States or to or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, applicable state laws and under

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circumstances which will not require NBDDIF to register under the Investment Company Act. No public offering of the securities is being made in the United States.

Neuberger Berman Europe Limited is authorised and regulated by the United Kingdom Financial Services Authority and whose registered address is at Lansdowne House, 57 Berkeley Square, London, W1J 6ER. Neuberger Berman LLC is a registered Investment Adviser and Broker Dealer and member of the New York Stock Exchange, the Financial Industry Regulation Authority and the Securities Investor Protection Corporation. Neuberger Berman Fixed Income LLC is a US registered Investment Adviser. Neuberger Berman is a registered trademark. All rights reserved. © 2012 Neuberger Berman.

 

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