Portfolio Update - Extended Shares

RNS Number : 2655H

NB Distressed Debt Invest. Fd. Ltd

16 May 2014

 



NB Distressed Debt Investment Fund Limited

Portfolio Update - Extended Life Shares

NB Distressed Debt Investment Fund Limited ("NBDDIF") is a Guernsey-incorporated closed-ended investment company that launched in June 2010. NBDDIF'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.

NBDDIF owns holdings diversified across distressed, stressed and special situations investments, with a focus on senior debt backed by hard assets. The portfolio is managed by the Distressed Debt team at Neuberger Berman, which sits within what we believe is one of the largest and most experienced non-investment grade credit teams in the industry.

The Extended Life Share Class ("NBDX") was created in April 2013¹ 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 having been made in the first quarter of 2014.

The Extended Life Shares are one of three classes of shares in NBDDIF. The other classes are the Ordinary Share Class and the Global Share Class. The Ordinary Share Class is subject to an investment period which ended on 10 June 2013 and the Global Share Class is subject to an investment period which will end on 31 March 2017.  Separate factsheets are produced for those classes.

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 NBDDIF Extended Life Share 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 of 2014, 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 Index² which returned 2.3% in the first quarter and Bloomberg's BAIF-Distressed Securities benchmark³ 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.

Market Update⁴

We continue to experience an improving environment for distressed debt in our sectors of interest. We believe 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 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 bank's 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.

Data as at March 31, 2014. Past performance is not indicative of future returns. All comments unless otherwise stated relate to NBDX.

1.         The Extended Life Share Class was created in April 2013 when holders of Ordinary Shares were invited to convert those shares into Extended Life Shares.  The information in this fact sheet therefore relates to the Ordinary Shares up to April 2013 and to the Extended Life Shares thereafter.

2.         The HFRI Distressed/Restructuring Index reflects distressed restructuring strategies which employ an investment process focused on corporate fixed income instruments, primarily on corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged (par value) at maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings (provided by Hedge Fund Research, Inc.).

3.         The BAIF-Distressed Securities Hedge Funds Domiciled Globally Index is one of Bloomberg's Active Indices for Funds (BAIF) used to measure a fund's performance against its peers.  This index represents distressed securities hedge funds, domiciled globally.

4.         Source:  Data from PWC Market Update Report dated March 2014.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited                               [phone]

Damian Holland

Anji Stewart

Financial Dynamics                                                            [phone]

Neil Doyle            

Ed Berry

Laura Ewart

An accompanying factsheet on the information provided above can be found on the Company's website www.nbddif.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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