Interim Management Statement

RNS Number : 1608R

NB Global Floating Rate Income Fund

15 November 2012

 



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

15 November 2012

NB GLOBAL FLOATING RATE INCOME FUND LIMITED

INTERIM MANAGEMENT STATEMENT

NB Global Floating Rate Income Fund Limited (the "Company"), is publishing this Interim Management Statement in accordance with DTR 4.3 of the FSA Handbook.

This interim management statement has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the Financial Service Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party or for any other purpose.

This interim management statement contains information that covers the period between 1 July 2012 and the date of publication of this interim management statement, unless otherwise specified.

Fund Objective

NB Global Floating Rate Income Fund Limited is a FTSE 250-listed, closed-ended investment company. The Company's objective is to produce an annualised net yield per share in the region of 5% on the issue price, which it has done since inception, plus some capital appreciation, whilst preserving investors capital and giving protection from rising interest rates.

The Company's managers generate this yield by investing in a global portfolio of senior secured corporate loans with selective use of senior bonds, diversified by both borrower and industry. The Company is managed by three accomplished portfolio managers backed by a credit team of over 30 investment professionals.

Market Environment

The loan markets in both the US and Europe continued to perform well in the third quarter. This was driven by global Central Bank stimuli, which resulted in the "risk on" trade coming to the fore once again.

As investors continued their search for yield, the US loan market saw strong demand. This was particularly evident from new Collateralised Loan Obligation (CLO) vehicles, which have generated over $30bn of flows into the loan market this year. We also began to see a pick up in retail demand throughout Q3 which we expect to continue into Q4. Additionally, the high yield asset class attracted $11bn of flows in Q3 and has seen over three times that amount year to date, driving bond yields to all-time lows, leaving them now within 50bp of loan yields. This narrowing of spreads has driven many high yield managers to the loan market where they are able to move up in the capital structure without sacrificing much yield. To meet this demand issuance levels are also high. For the year to date we have seen $210bn of institutional deals in the US, which is in line with last year and, with market indicators far more positive this time around, US issuance appears strong for the rest of the year. Europe continues to lag, with just €10bn (against €19bn year to date in 2011) of institutional issuance seen year to date and a paltry €2bn in Q3. Whilst we have seen all the deals that have been launched in Europe most are still not of sufficient quality to pass our investment criteria and we have declined the majority shown to us.

The resulting performance of the market is as follows: year-to-date, the US S&P/LSTA Loan Index returned 8.12% (3.43% in Q3) with the single B rating segment (where the portfolio continues to have its largest exposure and over-weight) performing strongly once again, with a return of 9.35% (3.40% in Q3). European performance was similarly strong, with the S&P European Leveraged Loan Index (ELLI) up to 7.33% year to date with 2.28% generated in Q3. Given both the increased market demand and more positive macro news, new issue yields did tighten slightly during the quarter, with BB now pricing between 4.0% - 4.5% and single Bs around the 5.5% - 6.5% level. Our view on default rates for 2012 is sustained, with the US below 2.0% and Europe at 7.0%, with current trailing 12m default rates of 1.00% and 6.2% respectively. The Company's portfolio has not had any defaults since its IPO.

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

Portfolio Management

The most significant changes made to the portfolio since the last quarterly factsheet relate to its more volatile components. Specifically, we have reduced the Company's bond positions from 11.6% at the end of Q2 to 6.7% at the end of September, due to the previously mentioned spread narrowing between loans and bonds. We have also reduced the Company's non-US exposure, with the Company's European assets down from 7.4% to 5.1% over the same period. This is due do the lack of new supply and the fact that many of our holdings had experienced significant price appreciation and we sold some that were trading at levels above where we had purchased them.

Outlook

It will come as no surprise that our investment focus over the final quarter will remain in the US primary market. The current pipeline of deals is very healthy at just over $35bn. Most importantly, we believe US companies remain fundamentally strong and continue to report decent earnings. The fact that the European new issue market is effectively closed for the remainder of the year compounds our view. Whilst secondary opportunities remain, these are more limited at present given the market rally we have seen, but we continue to monitor the situation and will still continue reducing the more volatile segments of our portfolio and taking profits on some lower yielding assets that we bought at a discount. Although our focus is on the primary market we are well aware that market conditions can change quickly, and cognisant of the fact that if we do see a period of volatility in the run up to year end, that this is likely to present significant secondary buying opportunities.

Material Events and Transactions

Share Issues and Conversions

During the period, the following Ordinary Share issues and conversions took place.

Event	Effective date	Sterling share	USD Share
Share class conversion as at 29 June 2012	9 July 2012	1,492,833	(2,329,824)
Share class conversion as at 31 July 2012	9 August 2012	34,971	(54,536)
Issue of shares as a Scrip Dividend	24 August 2012	792,651	97,572
Share class conversion as at 28 September 2012	9 October 2012	24,888,278 (2,157,800)	(40,000,000) 3,467,977

Accordingly, the Company's issued share capital as at 9 November 2012 (being the latest practicable date prior to the release of this announcement) consists of 396,918,780 Sterling Shares and 82,904,258 U.S. Dollar Shares.

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

Dividends

The following dividends were declared to the shareholders during the reporting period:

Period	Date declared	Payment date	USD Share	Sterling Share
Quarter ended 30 June 2012	5 July 2012	24 August 2012	$0.0131	£0.0131
Quarter ended 30 September 2012	3 October 2012	23 November 2012	$0.0121	£0.0121

Report and Accounts

On 16 August 2012, the Company announced its interim results for the period ended 30 June 2012. On 31 August 2012, the Company posted its Interim Report and Financial Statements for the period ended 30 June 2012 to shareholders.

Financial Highlights

	9 November 2012	29 June 2012	30 March 2012	31 December 2011	30 September 2011
NAV per Ordinary Share
- Sterling (£)	0.9875	0.9760	0.9809	0.9479	0.9278
- US Dollars ($)	0.9931	0.9804	0.9861	0.9497	0.9297
NAV per C Share
- Sterling (£)	n/a	n/a	n/a	0.9912	n/a
- US Dollars ($)	n/a	n/a	n/a	0.9913	n/a

Background Information

The Company is a non-cellular company limited by shares incorporated in Guernsey and has been declared by the Guernsey Financial Services to be a registered closed-ended collective investment scheme. The Company is managed by Neuberger Berman Europe Limited, which has delegated certain of its responsibilities and functions to the sub-investment manager, Neuberger Berman Fixed Income LLC, both of which are indirect wholly owned subsidiaries of Neuberger Berman Group LLC.

The Company's share capital consists of Ordinary Shares denominated in U.S. Dollar and Sterling.

Investment objective, policy and strategy

The Company's investment objective is to provide its shareholders with regular dividends, at levels that are sustainable, whilst growing the capital value of its investment portfolio over the long term, utilising the investment skills of the Investment Manager and the Sub-Investment Manager.

To pursue its investment objective, the Company invests mainly in floating rate senior secured loans issued in US Dollars, Sterling and Euros by North American and European Union corporations, partnerships and other business issuers.

The financial information covered herein for the period between 1 July 2012 and the date of publication of this interim management statement has not been audited.

By order of the Board

BNP Paribas Fund Services (Guernsey) Limited, for and on behalf of

NB Global Floating Rate Income Fund Limited

as Company Secretary

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

This document is intended only for the person to whom it has been delivered. No recipient may distribute, or make available, this document (directly or indirectly) to any other person and no part of this document may be reproduced in any manner without the written permission of NB Global Floating Rate Income Fund Limited ("NBGFRIF").  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" as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act") or into any other jurisdiction where applicable laws prohibit its release, distribution or publication. 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.  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 NBGFRIF and is the sole responsibility of NBGFRIF. 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 NBGFRIF or Neuberger Berman Europe Limited ("NBEL") or Neuberger Berman Fixed Income LLC ("NBFI") or Oriel Securities Limited ("Oriel Securities") or Dexion Capital plc ("Dexion") 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, NBEL, NBFI, Oriel Securities, Dexion nor any of their respective Agents makes or has been authorised to make any representation or warranties (express or implied) in relation to NBGFRIF 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.

NBGFRIF 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 such term is defined in Regulation S under the Securities Act) 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 NBGFRIF to register under the Investment Company Act. No public offering of the securities is being made in the United States.

Neuberger Berman Europe Limited is authorised and regulated by the United Kingdom Financial Services Authority and whose 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. All rights reserved. © 2012 Neuberger Berman.

 

END

 

 

IMSGGGMGGUPPGMC