Portfolio Update - Replacement

RNS Number : 8932X

NB Distressed Debt Invest. Fd. Ltd

22 February 2012

 



NB DISTRESSED DEBT INVESTMENT FUND LIMITED

PORTFOLIO UPDATE - AMENDMENT

The following amendment has been made to the Portfolio Update announcement released on 20 February 2012 at 07.00am under RNS No 6760X.

Investment Exits

In the previous quarterly factsheet we highlighted five investment exits from late stage restructurings and debt refinancings which resulted in a gain of $5m (including interest). In the fourth quarter there were no exits. However, we anticipate additional exits in 2012 as we harvest existing positions.

All other details remain unchanged.

The full amended text is shown below.

NB Distressed Debt Investment Fund Limited

Portfolio Update

NB Distressed Debt Investment Fund Ltd ("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 credit teams in the industry.

We remain pleased with the portfolio's performance to date. Given the volatility of markets in 2011, we were gratified to preserve our investors' capital, whilst at the same time deploying the portfolio in attractive debt backed by hard assets. We continue to see significant upside potential in the existing portfolio, which we expect to realise as we restructure and exit investments.

We were further gratified by the successful continuation vote held in January. All votes cast voted in favour of continuing the Investment Period until June 2013, as envisaged at the time of launch. We appreciate the positive demonstration of support from our investors. 

As at 31 December 2011, approximately 85% of NBDDIF's NAV was invested in distressed assets. NBDDIF had investments in 47 companies diversified across 13 industries. Sticking to our price discipline has resulted in an average price of approximately 58% of face value. We are actively bidding on additional distressed loans at prices which we believe will generate attractive risk-adjusted returns. 

2011 was challenging across many asset classes, and the leveraged loan market was no exception. The average bid price of CCC loans in the S&P/LSTA Leveraged Loan Index fell more than 17% in 2011. NBDDIF's NAV was affected by the market volatility, which started in early August and resulted in a decrease in NAV for the year of 0.8% from $0.9754 to $0.9672 per share. For purposes of comparison, the HFRI Distressed/Restructuring Index¹ 2011 return was negative 1.9%. We believe the decrease in NAV primarily reflects mark-downs of the bid prices of various investments by brokers who provide pricing information. However, we remain confident in the ultimate value of the assets securing our debt positions.

Market Environment

The Investment Manager believes that the fundamentals for distressed investing remain favourable. As has been widely reported, the European sovereign debt crisis and related issues have impacted risk appetites globally.  We have seen European and other global commercial banks actively offer individual loans and loan portfolios at discounts. The current amount of non-performing and non-core portfolios in the US is estimated to be between $300 - $350 billion². Issuers with CCC credit ratings are finding it increasingly difficult to access the capital markets as spreads widened more than 700 bps in 2011³. Federal Reserve and ECB data show a continuing tightening of credit availability globally - particularly in Europe, where 35% of banks report a tighter corporate lending environment⁴. We believe that the supply of distressed assets from banks and a relative lack of capital for lower-rated companies will continue to result in opportunities for investing in distressed loans.

Source: BNP Paribas and Bloomberg. Data as at 31 December 2011. Past performance is not indicative of future returns.
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. Source: KPMG, Global Debt Sales, Portfolio Solutions Group, September 2011.
3. Source: S&P/LSTA Leveraged Loan Index.

4. Source: BofA Merrill Lynch, Credit Strategy Situation Room Report, February 2012.

Investment Exits

In the previous quarterly factsheet we highlighted five investment exits from late stage restructurings and debt refinancings which resulted in a gain of $5m (including interest). In the fourth quarter there were no exits. However, we anticipate additional exits in 2012 as we harvest existing positions.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited                               [phone]

Damian Holland

Anji Stewart

Financial Dynamics                                                            [phone]

Neil Doyle            

Ed Berry

Laura Pope

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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