Interim Management Statement

RNS Number : 3828H

NB Distressed Debt Invest. Fd. Ltd

16 May 2014

 



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

16 May 2014

NB DISTRESSED DEBT INVESTMENT FUND LIMITED

INTERIM MANAGEMENT STATEMENT

NB Distressed Debt Investment Fund Limited ("NBDDIF"), is publishing this Interim Management Statement in accordance with DTR 4.3 of the FCA 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 FCA'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 January 2014 and the date of publication of this Interim Management Statement, unless otherwise specified.

Investment Manager's Review

Market Update

We continue to experience  an improving environment for distressed debt in our sectors of interest. The pipeline of opportunities in real estate, transportation and energy debt is particularly compelling, both in the U.S. and Europe. EU banks in particular have increased their disposal of European and U.S. loans and assets to €64 billion in 2013, versus €46 billion in 2012, €36 billion in 2011 and €11 billion in 2010. However, over €1 trillion of non-performing loans remain on EU banks' balance sheets. The ECB is scheduled to assume supervisory  authority for all euro-area lenders later in 2014. We believe that an ECB-sponsored harmonization  of NPL definitions across countries may facilitate further recognition and disposal of distressed loans. In the U.S. we continue to see a healthy pipeline of distressed assets in real estate, energy and other asset-intensive sectors.

Extended Life Shares

Summary

We were gratified to see the positive NAV movement achieved in the first quarter of 2014. We continue to see significant upside potential in the existing portfolio, which we expect to realise as we restructure and exit investments. We believe the pipeline of distressed debt opportunities remains robust in our sectors of interest.

Portfolio

As at 31 March 2014, 98.2% of the NBDDIF Extended Life Share Class NAV ("NBDX's NAV") was invested in distressed assets. Cash available for new investments and working capital ended the quarter at 1.8% of NAV. NBDX's NAV per share increased 3.1% in the first quarter, to $1.2601 from $1.2218 per share. During the quarter ending 31 March 2014 NBDX NAV was reduced by an accrual for performance fees of $0.0100 per share or approximately 0.8% of NAV. Performance comparison versus other distressed debt managers is indicated by the HFRI Distressed/Restructuring Index which returned 2.3% in in the first quarter and Bloomberg's BAIF-Distressed Securities benchmark which returned 3.6% over the same period.

The first quarter NAV increase was primarily generated by mark-to-market gains on positions which reached key restructuring milestones or made progress post-reorganization. There were no new exits in the quarter, although NBDX did receive distributions from multiple investments that are in the process of being wound down. We also added incrementally to existing names and initiated positions in the shipping, lodging & casinos and surface transportation industries. We continue to actively bid on additional distressed loans although we are more constrained by cash levels than earlier in the life of the fund.

Ordinary Shares

Summary

We were gratified to see the positive NAV movement achieved in the first quarter of 2014. The Company plans to make a capital distribution to shareholders in the second quarter of 2014.  We continue to see significant upside potential in the existing portfolio, which we expect to realise as we restructure and exit investments.

Portfolio

As at 31 March 2014, 90.2% of NBDDIF Ordinary Share Class NAV ("NBDD's NAV") was invested in distressed assets.  NBDD's NAV per share increased 1.5% in the first quarter, to $1.2367 from $1.2189 per share. During the quarter ending 31 March 2014 NBDD's NAV was reduced by an accrual for performance fees of $0.0357 per share, or approximately 2.9% of NBDD's NAV. At 31 March 2014, the total accrual for performance fees, including amounts previously accrued through 31 December 2013, was $0.0499 per share. Performance comparison versus other distressed debt managers is indicated by the HFRI Distressed/Restructuring Index which returned 2.3% in in the first quarter and Bloomberg's BAIF-Distressed  Securities benchmark  which returned 3.6% over the same period.

The first quarter NAV increase was primarily generated by mark-to-market gains on positions which reached key restructuring milestones or made progress post-reorganization. There were no new exits in the quarter, although NBDD did receive distributions from multiple investments that are in the process of being wound down.

New Global Shares

Summary

We are pleased with the distressed market environment and the capital deployment to date.  We see significant upside potential in the existing portfolio, which we expect to realise as we restructure and exit investments. We believe the pipeline of distressed debt opportunities remains robust in our sectors of interest.

Portfolio

As at 31 March 2014, we had deployed over 22% of NBDG's capital. NBDG had investments in nine names and in five different industries. The largest concentrations were in in the U.S. power generation and lodging & casino industries, while other industries included shipping, industrial equipment and chemicals. We believe that the level of deployment achieved in less than one month is indicative of the healthy opportunity set in distressed debt. Since quarter end we have added exposure to European hotel, shipping and infrastructure names as well as adding to existing positions.  As at 30 April 2014 deployment had reached approximately 36% of NBDG NAV.

NBDG's NAV per share decreased 0.5% in the first quarter of 2014, to £0.9755 from £0.9800 per share. The first quarter NAV decrease was primarily generated by mark-to-market decreases on positions which had been recently acquired. NBDDIF positions are valued on the bid side immediately after acquisition, which was a key factor in the mark-to-market decrease in the quarter. We are working towards key restructuring milestones on existing investments, which we anticipate can ultimately result in profitable exits.  There were no exits during the first quarter.

Material Events and Transactions

On 29 January 2014 (the "Redemption Date"), the Company made its maiden capital distributions for NBDD and NBDX. NBDDIF  returned a total (before expenses) of $48,885,179 to shareholders:

·     $28,000,000 in relation to NBDD (equivalent to approximately $0.2255 per NBDD share); and

·      $20,885,179 in relation to NBDX (equivalent to approximately $0.0593 per NBDX share).

A New Global Share Class was created on 4 March 2014 and is subject to an investment period ending on 31 March 2017. The creation of a New Global Share Class is not expected to impact the structure or strategy of the existing Ordinary Share Class and Extended Life Share Class.

In April 2014, the Board of the Company resolved to return $15.0 million (equivalent to approximately $0.1481 per share) to holders of NBDD shares by way of a compulsory partial redemption of NBDD shares. The planned capital distribution comprised all cash available to the NBDD share class, save for amounts deemed to be required to meet follow-on investments that may be required for existing positions and cash for working capital requirements. This brings the total returned to holders of NBDD to $43m.  The redemption date was 2 May 2014 and the payment date is 16 May 2014.

Other than as reported above, there were no additional material events and transactions during the reporting period.

Report and Accounts

On 28 April 2014, NBDDIF announced its annual results for the period ended 31 December 2013.

Financial Highlights

	7 May 2014	31 December 2013	31 October 2013	30 June 2013	14 May 2013
NAV per Ordinary Share
- US Dollars ($)	1.2699	1.2189	1.2071	1.1837	1.1788
NAV per Extended Share
- US Dollars ($)	1.2667	1.2259	1.2181	1.1824	1.1783
NAV per New Global Share
- GB Pound (£)	0.9610	n/a	n/a	n/a	n/a

Investment Policy and 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.

Extended Life Shares

The Extended Life Share Class was created in April 2013 and is subject to an investment period ending on 31 March 2015, following which the assets will be placed into run-off. NBDDIF will seek to return to the holders of Extended Life Shares all net capital profits arising from the exit of any assets attributable to those shares, at least every six months, with the first such distribution made on 29 January 2014.

Ordinary Shares

On 10 June 2013, the Investment Period of the NBDDIF Ordinary Shares expired. The assets of NBDDIF attributable to the Ordinary Shares were placed into run-off following the expiry of the Investment Period. The net proceeds from the realization of such assets will be distributed to Ordinary Shareholders in such times and amounts as determined by the Board of Directors, with the first such distribution made on 29 January 2014.

New Global Shares

The New Global Share Class was created on 4 March 2014 and is subject to an investment period ending on 31 March 2017, following which the assets will be placed into run-off.

The financial information covered herein for the period between 1 January 2014 and the date of publication of this interim management statement has not been audited.

By order of the Board

BNP Paribas Securities Services S.C.A., Guernsey Branch, for and on behalf of

NB Distressed Debt Investment Fund Limited

as Company Secretary

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 Winterflood Investment Trusts ("Winterflood") 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, Winterflood  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 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 Conduct 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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