Proposed Issue of New Global Shares

RNS Number : 6314Y

NB Distressed Debt Invest. Fd. Ltd

28 January 2014

 



28 January 2014

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS OR INTO OR IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN

NB Distressed Debt Investment Fund Limited

Proposed Issue of New Global Shares

Further to the announcement on 6 December 2013, the Board of NB Distressed Debt Investment Fund Limited (the "Company") today announces the proposal to create a New Global Share Class to capture growing opportunities in the global distressed debt market with a particular focus on Europe and North America by way of an issue of New Global Shares targeting in excess of £100m.

Since the IPO of the Company in 2010, Neuberger Berman Europe Limited (the "Investment Manager") has built an attractive portfolio of distressed debt investments focused on senior secured debt backed by hard assets. The existing share classes are now closed to further issuance and the Company has started returning capital from realisations to shareholders having announced its maiden capital distribution on 17 January 2014 of US$48.9 million across both share classes.

The Investment Manager has seen a strong pipeline of new investment opportunities emerging in Europe alongside the continuation of US opportunities coming to the market.  It is anticipated that these opportunities will continue for at least the next few years and the Issue provides both existing shareholders and new investors access to these opportunities and the Investment Manager.

Oriel Securities Limited and Winterflood Investment Trusts are acting as joint financial advisers and joint brokers to the Company in connection with the Issue.

Highlights

·     Proven track record - Proven track record of generating attractive IRRs at exit across the Ordinary Shares and Extended Life Shares. The Company has made 20 exits generating a weighted average IRR on investment exits of 21 per cent.

·     Risk management - The Investment Manager intends to invest in approximately 30 to 40 holdings diversified across distressed, stressed and special situations investments on behalf of the New Global Share Class, with a focus on senior debt backed by hard assets to attempt to limit downside risk.

·     Limited life - Investment/reinvestment period of approximately three years following which the New Global Share Class Portfolio will be placed into run-off and distributions of capital proceeds will commence.

·     Management fees - No management fees charged on cash until the proceeds of the Issue are 85% invested.

·     Highly experienced portfolio management team - The New Global Share Class Portfolio will be managed by the distressed debt team of NB Non-Investment Grade Credit - the same team that manages the existing share classes

·     Proprietary database - The team has access to comprehensive proprietary information and commentary on over 1,500 U.S. and Euro-denominated issuers, providing extensive private and public financial and capital structure information.

Market Opportunity

The Investment Manager believes that the investment opportunity for distressed debt will continue for at least the next few years. The Investment Manager's experience indicates that the supply of distressed debt is a key factor in the relative attractiveness of the asset class over time. It is the Investment Manager's view that a high and rising amount of non-performing loans ("NPLs") provides opportunities to purchase distressed debt at attractive valuations.

Despite the passage of over five years since the peak of the 2008 financial crisis, many banks have yet to clean up their balance sheets and shed legacy assets. NPLs have continued to increase in Europe, and in the U.S. remain over three times pre-crisis levels. At the same time, regulatory minimum capital requirements for banks are scheduled to increase in the near future. The disposal of NPLs and other non-core assets by banks has increased every year since 2010. This increasing supply provides a visible pipeline of opportunities in asset intensive sectors.

NPLs remain stubbornly high in the global banking system and European banks in particular have experienced an increase in NPLs. Germany and the U.K. are two of the top three largest sources of NPLs in Europe, at €179 billion and €164 billion, respectively.

NPLs are expensive for banks to hold from a capital perspective and European banks in particular face substantial capital needs in 2014 through the combined impact of increasing Basel III capital ratio requirements, leverage ratio requirements, the ECB Comprehensive Assessment and additional potential regulations at the national level. Total capital shortfalls are estimated to be approximately €280 billion. With banks reluctant to issue new equity unnecessarily, the near term focus is anticipated to be on asset disposals, with the disposal of NPLs a priority, providing an environment that the Investment Manager believes will be attractive for distressed debt investing.

Benefits of the Proposals

The Directors believe that the Proposals will have the following benefits to Shareholders:

·     The issue of New Global Shares will provide additional capital which will enable the Company to take advantage of the continued investment opportunities in the European and North American markets.

·     Both existing and potential new investors will have the opportunity to gain continued access to the distressed debt market and the Investment Manager.

·     The Company's fixed running costs will be spread across a wider shareholder base, thereby reducing the total expense ratio.

New Global Shares Class

The New Global Share Class will be similar to the existing share classes save for a broader geographic focus.  Key features of the New Global Shares are set out below:

·     Investment Period: The New Global Shares will be subject to an investment period commencing on the date of Admission and ending on 31 March 2017 following which the New Global Share Portfolio will be placed into run-off.

·     Capital Return Policy: Following the end of the Investment Period all capital and profits from realisations will be returned to shareholders.

·     Geographic exposure:  The New Global Share Class will have a greater focus on Europe where the Investment Manager is seeing a number of attractive opportunities. The New Global Share Class will have a minimum exposure of 80 per cent. to Europe, North America and Australia.

·     Cash deployment: Cash fully deployed in 6 to 9 months with no fees charged on cash until the proceeds of the Issue are 85 per cent. invested.

·     Discount control policy: The New Global Share Class will be the subject of a share buyback programme in order to seek to restrict any discount to less than 5 per cent. in normal market conditions, subject to available cash resources.

·     Currency: The New Global Share Class will be denominated in Sterling.

It is intended that the New Global Shares be admitted to trading on the Specialist Fund Market of London Stock Exchange plc and to listing and trading on the Official List of the Channel Islands Securities Exchange Authority Limited.

The creation of a New Global Share Class is not expected to impact the structure or strategy of the existing Ordinary Share Class and Extended Life Share Class.

Prospectus and Circular

The Proposals require the approval of the Ordinary Shareholders and Extended Life Shareholders at respective Class Meetings. A Circular will be posted to Shareholders today to seek the approval of the Proposals. A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.Hemscott.com/nsm.do. The Circular will also shortly be available for viewing on the Company's website, www.nbddif.com.

A Prospectus in relation to the Issue is expected to be published in due course and will also be posted to Shareholders.

Terms used in this announcement shall, unless the context otherwise requires, bear the meanings given to them in the Circular and the Prospectus.

Expected Timetable

Event	Date
Prospectus and Circular publication	28 January 2014
Class Meetings	25 February 2014
Result of Issue announced	27 February 2014
Admission	4 March 2014

Voting rights

The New Global Shares will be issued with full voting rights and the Company will also introduce full voting rights for the Ordinary Shares and the Extended Life Shares. This will be effective following the conclusion of the Class Meetings at which time the Class A Shares will have no voting rights save where no other shares are in issue.

As a consequence of this change, Shareholders will be required to comply with regulatory obligations relating to voting rights, inter alia, under the Disclosure and Transparency Rules and Rule 9 of the Takeover Code.

For further information please contact:

Neuberger Berman Europe Limited                               Damian Holland Anji Stewart	[phone]
Oriel Securities Limited Neil Winward Mark Bloomfield Gaudi Le Roux	[phone]
Winterflood Investment Trusts Joe Winkley Neil Langford	[phone]

IMPORTANT NOTICES

This document and the information contained herein is not for release, publication or distribution (directly or indirectly) in or into the United States, Canada, Australia or Japan or to any "US person" or into any other jurisdiction where applicable laws prohibit its release, distribution or publication. "U.S. person" means (i) a "U.S. Person" as defined under Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"); (ii) a person who is not a "Non-United States person" as defined under U.S. Commodity Futures Trading Commission ("CFTC") Regulation 4.7; (iii) a "United States person" as defined under the U.S. Internal Revenue Code of 1986, as amended, or (iv) a "U.S. Person" as defined under the CFTC's "Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations," 78 Fed. Reg. 45291 (July 26, 2013). It does not constitute an offer of securities for sale anywhere in the world, including in or into the United States, Canada, Australia or Japan. No recipient may distribute, or make available, this document (directly or indirectly) to any other person. Recipients of this document in jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements in their jurisdictions. In particular, the distribution of this document may in certain jurisdictions be restricted by law. Accordingly, recipients represent that they are able to receive this document without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which they reside or conduct business.

This document has been prepared by Neuberger Berman Europe Limited ("NBEL") and is the sole responsibility of NBEL. No liability whatsoever (whether in negligence or otherwise) arising directly or indirectly from the use of this document is accepted and no representation, warranty or undertaking, express or implied, is or will be made by NB Distressed Debt Investment Fund Limited ("the Company"), NBEL, ,Oriel Securities Limited ("Oriel Securities") or Winterflood Investment Trusts ("Winterflood") or any of their respective directors, officers, employees, advisers, representatives or other agents ("Agents") for any information or any of the opinions contained herein or for any errors, omissions or misstatements. None of Neuberger Berman LLC, Neuberger Berman Fixed Income LLC ("NBFI"), Oriel Securities, Winterflood nor any of their respective Agents makes or has been authorised to make any representation or warranties (express or implied) in relation to the Company or as to the truth, accuracy or completeness of this document, or any other written or oral statement provided. In particular, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in this document and nothing in this document is or should be relied on as a promise or representation as to the future. The name "Neuberger Berman" is used interchangeably throughout these materials for a number of entities associated with the Neuberger Berman Group and the Company and when used in this notice includes all such entities.

This document is an advertisement and does not constitute a prospectus or offering memorandum or an offer in respect of any securities and is not intended to provide the basis for any decision in respect of the Company or other evaluation of any securities of the Company or any other entity and should not be considered as a recommendation that any investor should subscribe for or purchase any such securities. Neither the issue of this document nor any part of its contents constitutes an offer to sell or invitation to purchase any securities of the Company or any other entity or any persons holding securities of the Company and no information set out in this document or referred to in other written or oral information is intended to form the basis of any contract of sale, investment decision or any decision to purchase any securities in it. An investment decision must be made solely on the basis of the prospectus to be issued by the Company. Copies of the prospectus, once issued, may be obtained at no cost, subject to applicable law, from the registered office of the Company and will be made available for viewing at the document viewing facility of the Financial Conduct Authority.

This document, any presentation made in conjunction with this document and any accompanying materials (the "Information Materials") are preliminary and made available for information purposes only. The Information Materials, which are not a prospectus or listing particulars or an admission document, do not contain any representations, do not constitute or form part of any offer or invitation to sell or transfer, or to underwrite, subscribe for or acquire, any shares or other securities, and do not constitute or form any part of any solicitation of any such offer or invitation, nor shall they, or any part of them, or the fact of their distribution form the basis of, or be relied upon in connection with, any contract therefor, and they do not constitute a recommendation regarding the securities of the Company.

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No information contained in this announcement should be taken as constituting an offer to the public in the Bailiwick of Guernsey (the "Bailiwick") for the purposes of the Prospectus Rules 2008 issued by the Guernsey Financial Services Commission. This announcement is addressed to a restricted number of persons in the Bailiwick who are either (i) persons appropriately licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended; or (ii) persons licensed under the Insurance Business (Bailiwick of Guernsey) Law, 2002, the Banking Supervision (Bailiwick of Guernsey) Law, 1994, or the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc, (Bailiwick of Guernsey) Law, 2000.

The Company will not be registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act") and investors will not be entitled to the benefits of that Act. The securities described in this document have not been and will not be registered under the Securities Act, or the laws of any state of the United States. Consequently, such securities may not be offered, sold or otherwise transferred within the United States or to or for the account or benefit of U.S. persons (as defined above) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, applicable state laws and under circumstances which will not require the Company to register under the Investment Company Act and which would not require Neuberger Berman to register under the U.S. Commodity Exchange Act, as amended. No public offering of the securities is being made in the United States.

Prospective investors should take note that any securities may not be acquired by investors using assets of any retirement plan or pension plan that is subject to Part 4 of Subtitle B of Title I of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA") or section 4975 of the United States Internal Revenue Code of 1986, as amended (the "Code"), entities whose underlying assets are considered to include "plan assets" of any such retirement plan or pension plan, or any governmental plan, church plan, non-U.S. plan or other investor subject to any state, local, non-U.S. or other laws or regulations similar to Title I or ERISA or Section 4975 of the Code or that would have the effect of the regulations issued by the United States Department of Labor set forth at 29 CFR Section 2510.3-101, as modified by section 3(42) of ERISA.

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This document may contain certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, forward-looking statements can be identified by terms such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "potential", "should", "will", and "would", or the negative of those terms or other comparable terminology. The forward- looking statements are based on Neuberger Berman's beliefs, assumptions, and expectations of future performance and market developments, taking into account all information currently available. These beliefs, assumptions, and expectations can change as a result of many possible events or factors, not all of which are known or are within Neuberger Berman's control. If a change occurs, the Company's business, financial condition, liquidity, and results of operations may vary materially from those expressed in forward-looking statements. Some of the factors that could cause actual results to vary from those expressed in forward-looking statements include, but are not limited to: the factors described in this document; the rate at which the Company deploys its capital in investments and achieves expected  rates  of  return;  the Company,  NBEL  and  NBFI's  ability  to  execute  the Company's  investment  strategy,  including  through  the identification of a sufficient number of appropriate investments; the continuation of NBEL and NBFI as investment manager and sub-investment manager, respectively, of the Company's investments, the continued affiliation with Neuberger Berman of its key investment professionals; the Company's financial condition and liquidity; changes in the values of or returns on investments that the Company makes; changes in financial markets, interest rates or industry, general economic or political conditions; and the general volatility of the capital markets and the market price of the Company's shares.

By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events, and depend on circumstances that may or may not occur in the future. Forward- looking statements are not guarantees of future performance. Any forward-looking statements are only made as at the date of this document, and Neuberger Berman neither intends nor assumes any obligation to update forward-looking statements set forth in this document whether as a result of new information, future events, or otherwise, except as required by law or other applicable regulation. In light of these risks, uncertainties, and assumptions, the events described by any such forward-looking statements might not occur. Neuberger Berman qualifies any and all of their forward-looking statements by these cautionary factors. Please keep this cautionary note in mind while reading this document.

Oriel Securities and Winterflood, each of which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, are acting for the Company and no-one else in connection with the potential offering of securities by the Company and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Oriel Securities and Winterflood or for providing advice in relation to the offer of securities by the Company.

By reading this document you will be deemed to have represented, warranted and undertaken for the benefit of Neuberger Berman, Oriel Securities and Winterflood and others that (a) you are outside of the United States and are a Relevant Person (as defined above), (b) you have read and agree to comply with the contents of this notice, you will keep the information in this document and delivered during any accompanying document and all information about Neuberger Berman confidential, and will not reproduce or distribute, in whole or in part, (directly or indirectly) any such information, until such information has been made publicly available and take all reasonable steps to preserve such confidentiality, and (c) you are permitted, in accordance with applicable laws, to receive such information.

Neuberger Berman Europe Limited is authorised and regulated by the United Kingdom Financial Conduct Authority and its registered address is at Lansdowne House, 57 Berkeley Square, London, W1J 6ER. Neuberger Berman LLC is a registered Investment Adviser and Broker Dealer and member of the New York Stock Exchange, the Financial Industry Regulation Authority and the Securities Investor Protection Corporation. Neuberger Berman Fixed Income LLC is a US registered Investment Adviser. Neuberger Berman is a registered trademark.

 

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