Portfolio Update - Ordinary Shares

RNS Number : 5673O

NB Distressed Debt Invest. Fd. Ltd

29 May 2015

 

NB Distressed Debt Investment Fund Limited

Portfolio Update - Ordinary 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.

On 10 June 2013, the investment period of the NBDD Ordinary Share Class ("NBDD") 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 five distributions having been made in 2014 and so far in 2015.

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

Summary

We remain satisfied with the portfolio's performance to date.  Given the volatility of the distressed debt markets in 2015 to date, we were gratified to preserve our investors' capital while exiting positions that contributed positively to NAV.  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 2015, 88.8% of the NBDDIF Ordinary Share NAV ("NBDD's NAV") was invested in distressed assets. NBDD's NAV per share decreased 0.3% in the first quarter of 2015, to $1.2483 from $1.2521 per share. We believe that performance comparison versus other distressed debt managers is indicated by the HFRI Distressed/Restructuring Index¹ which returned 0.8% in the first quarter of 2015.  During the first quarter we saw two additional exits, bringing the total to 29 since inception.

Capital Return

On 27 April 2015, the Board of NBDDIF resolved to return $12.5 million (equivalent to approximately $0.1760 per share) after expenses to holders of NBDD shares by way of a compulsory partial redemption of NBDD shares. The current return comprises all cash available to NBDD, save for amounts deemed to be required for existing positions and for working capital requirements. This distribution is expected to be made in the second quarter of 2015.

Exits

In the first quarter of 2015, we saw our 28th and 29th exits since inception. These exits generated $2.0 million of total return and gains for NBDD.

Investment 28: We purchased $7.6 million face value of a defaulted loan at 32.2% of par, secured by an independent living facility in the Midwest of the U.S.  Our investment thesis was that the underlying real estate was worth an amount significantly in excess of price of the debt acquisition.  Subsequent to our purchase, we converted the loan into ownership of the property via a deed-in-lieu of foreclosure and installed a new management team.  After enhancing operations and making incremental capital improvements, we sold the property.  Total return from this investment was $1.3 million generating an IRR of 10%.

Investment 29: We purchased $4.5 million face value of a defaulted loan at 59.12% of par, secured by a condominium development located in the South of the U.S.  Our investment thesis was that the underlying real estate was worth an amount significantly in excess of price of the debt acquisition.    Subsequent to our purchase, we converted the loan into ownership of the property via foreclosure and commenced selling units.  Ultimately all units and the associated land were sold.    Total return from this investment was $0.7 million generating an IRR of 17%.

Data as at March 31, 2015, unless otherwise stated. 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.).

-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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