Portfolio Update - Global Shares

RNS Number : 3498X

NB Distressed Debt Invest. Fd. Ltd

19 November 2014

 



NB Distressed Debt Investment Fund Limited

Portfolio Update - Global 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 New Global Share Class ("NBDG") was created in March 2014 and aims to capture the growing opportunity in distressed debt globally. NBDG is subject to an investment period ending on 31 March 2017, following which the assets will be placed into run-off.

The New Global Shares are one of three classes of shares in NBDDIF. The other classes are the Ordinary Share Class and the Extended Life Share Class. The Ordinary Share Class is subject to an investment period which ended on 10 June 2013 and the Extended Life Share Class is subject to an investment period which will end on 31 March 2015. Separate factsheets are produced for those classes.

Summary

We remain 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 and geographies of interest.

Portfolio

As at 30 September 2014, we had deployed approximately 70.3% of NBDG's capital. NBDG had investments in 22 names across ten different industries. The largest sector concentrations were in power generation, lodging & casinos, shipping, and surface transportation. We believe that the level of deployment achieved in less than seven months is indicative of the healthy opportunity set in distressed debt in our sectors of interest. NBDG's NAV per share decreased 2.2% in the third quarter of 2014, to 94.18 pence from 96.25 pence per share.

The market environment for distressed debt was challenging in the third quarter, as indicated by the HFRI Distressed/Restructuring Index which declined 2.8% in the quarter.  We are working towards key restructuring milestones on existing investments, which we anticipate can ultimately result in profitable exits.

The primary drivers of NBDG's NAV decrease were secondary market price declines of acquired assets. NBDDIF positions are valued on the bid side immediately after acquisition, which was a factor in the mark-to-market decrease in the quarter. Additionally, in the third quarter, NBDG experienced the markdown of secured notes of a portfolio company which detracted 1.3% from NAV. This portfolio company reported that it had become the subject of an investigation relating to potential regulatory and criminal violations, resulting in a high degree of uncertainty in the restructuring process and leading to the mark-to-market loss in the quarter. In the third quarter we added new positions in the Surface Transportation, Commercial Real Estate and Oil & Gas industries.  We also added incremental exposure to existing names in the Utilities, Shipping, Lodging & Casinos and Metals industries.

Market Update¹

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. €44 billion of debt sales have occurred in the first six months of 2014, on a run-rate to exceed €80 billion for the full year. However, over €1 trillion of non-performing loans remain on EU banks' balance sheets. We believe that an ECB-sponsored harmonization of NPL definition across countries may facilitate further recognition and disposal of distressed loans.

Data as at September 30, 2014. Past performance is not indicative of future returns. All comments unless otherwise stated relate to NBDG.

1.         Source:  Data from PWC Market Update Reports dated March 2014 and July 2014.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited                               [phone]

Damian Holland

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.

 

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