Portfolio Update - Ordinary Shares

RNS Number : 2650H

NB Distressed Debt Invest. Fd. Ltd

16 May 2014

 



NB Distressed Debt Investment Fund Limited

Portfolio Update - Ordinary Shares

Portfolio

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.

On 10 June 2013, the Investment Period of the NBDD 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 distribution having been made in the first quarter of 2014 and the second scheduled to be made in the second quarter of 2014.

The Ordinary Shares are one of three classes of shares in NBDDIF. The other classes are the Extended Share Class and the Global Share Class, which both offer exposure to new opportunities in this asset class beyond 10 June 2013. The Extended Life Share Class is subject to an investment period ending on 31 March 2015 and the Global Share Class is subject to an investment period ending on 31 March 2017.  A separate factsheet is produced for those share classes.

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 NAV ("NBDD's NAV") was invested in distressed assets. NBDD's NAV per share increased 1.5% in the first quarter of 2014, 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 Index¹ which returned 2.3% in the first quarter and Bloomberg's BAIF-Distressed Securities benchmark² 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.

Capital Return

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 comprises 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.

Market Update³

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 NBDD.

1.         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.).

2.         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.

3.         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.

 

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