Portfolio Update - Ordinary Shares

RNS Number : 9053N

NB Distressed Debt Invest. Fd. Ltd

01 November 2016

 

1 November 2016

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 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 the harvest period following the expiry of the investment period. To date, $111.2 million has been approved for distribution (income and capital) to shareholders since the realisation phase for this share class or 89% of investors' original capital.

The Ordinary Share Class is one of three classes of shares in NBDDIF. The others are the Extended Life Share Class and the New Global Share Class, which both offer exposure to new opportunities in this asset class beyond 10 June 2013. The Extended Life Share Class was 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.

Manager Commentary

During the third quarter markets generally recovered from the volatility following the UK's surprise June vote to leave the European Union while stable global economic data provided the catalyst for a continued recovery into October. Despite post-crisis lows in unemployment, potential US interest rate increases by the Federal Reserve appear to have been delayed until December at the earliest, giving investors a reprieve from the volatility that plagued the markets in early 2016. However, liquidity in our markets remains strained as investment banks continue to pull back their proprietary investing activities due to regulatory changes. 

NBDD had one exit and received $2.0 million (principal repayments and distributions) from activity in existing investments during the quarter. Including the $2.8 million income distribution declared on 28 October 2016 to be paid in the fourth quarter, $111.2 million (equivalent to 89% of original capital) will have been distributed to investors to date. At quarter-end, the ratio of total value (distributions and current NAV) to original capital was 119%. We remain focused on maximising the value of the portfolio as we work to restructure, realise exits and return capital to NBDD investors. As we begin the fourth quarter, we remain confident about the investments in the portfolio and hope to generate positive returns from the current valuations.  

Portfolio Update

NBDD's NAV was essentially flat during the third quarter, ending September with NAV per share of $1.1432 as compared to $1.1434 at the end of June. Unrealised gains in packaging and shipping investments were offset by unrealised losses in power and real estate investments. The portfolio is made up of 24 issuers across 12 sectors. NBDD's investments were stable during the quarter; certain notable corporate events are highlighted below¹:

·      An investment in senior secured debt backed by a portfolio aircraft received debt repayments of $1.6 million from the sale of all but one of the aircraft. The sale of the remaining aircraft is expected to close during the fourth quarter.

·      NBDD received a $0.4 million dividend from a reorganised container and packaging company.

·      To avoid dilution and protect NBDD's investment in a restructured shipping company, NBDD invested $0.1 million in the company.

Significant Value Change (approximately 0.5% of NBDD NAV or +/- $200,000)²

Industry	Instrument	Q3 16 Total Return	Comment
Containers and Packaging	Private equity	$0.5m	Improving operations
Building and Development	Private equity	($0.2m)	No fundamental change in company

Exit 32

NBDD invested $3.1 million in multiple tranches of the secured bank debt of a homebuilding company that had filed for Chapter 11 bankruptcy protection. NBDD received cash and equity upon execution of the company's plan of reorganisation. NBDD also participated in the exit financing for the homebuilder which was ultimately repaid at par. The homebuilder was ultimately sold to a public homebuilding company and received a distribution from the sale. Total return on the investment was $0.5 million generating an IRR of 5% and ROR of 15%.

Cash Invested	Cash Received	Total Return	Holding Period	IRR	ROR
$3.1 million	$3.6 million	$0.5 million	74 months	5%	15%

Distribution

On 28 October 2016 the Board announced an income distribution of approximately $2.8 million, $0.0793 per share, to be paid to shareholders. Once paid, this will bring total distributions (capital and income) to $111.2 million, equivalent to 89% of original capital.

Factsheet

An accompanying factsheet on the information provided above can be found here http://www.rns-pdf.londonstockexchange.com/rns/9053N_-2016-10-31.pdf or 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.

-ENDS-

For further information please contact:

Neustria Partners                                                         [phone]

Nick Henderson

Charles Gorman

Rob Bailhache

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Data as at 30 September 2016. Past performance is not indicative of future returns. All comments unless otherwise stated relate to NBDD.

Source: Bloomberg, except where otherwise stated.

1. Notable corporate events may or may not result in an increase or decrease in the value of an NBDD investment or a change in NBDD's NAV per share. Please note that an investment may experience a change in value (positive or negative) during the quarter whether or not it was subject to a notable corporate event. Not all events involving existing investments are disclosed above. In addition, certain corporate events may not have been disclosed due to confidentiality obligations.

2. Industry categorisations determined by Neuberger Berman. Total Return determined by the Administrator, and includes realised and unrealised gains and losses, expenses, FX gains and losses, and all income on investments according to US GAAP accounting.

 

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