NB GLOBAL FLOATING RATE INCOME FUND LIMITED (GB...

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NB Global Floating Rate Income Fund

Portfolio Update

The NB Global Floating Rate Income Fund Limited's (the "Fund") investment objective is to provide its shareholders with regular dividends, at levels that are sustainable, whilst preserving the capital value of its investment portfolio, utilising the investment skills of the Investment Managers.

The Fund's managers seek to generate this yield by investing in a global portfolio of below investment grade senior secured corporate loans with selective use of senior secured bonds, diversified by both borrower and industry. The Fund is managed by four experienced Portfolio Managers backed by what we believe to be one of the largest and most experienced credit teams in the industry.

Market Environment¹

The US loan market, as measured by the S&P/LSTA Leveraged Loan Index (the "Index"), got off to a very good start this year, posting a 2.1% return for the first quarter, already beating the full year 2014 return of 1.6%. The market recaptured some of the fourth quarter energy led sell-off as the weighted average price of the lndex increased from 95.9 to 96.9 (for context, the price was 99.0 at the end of June 2014). There was not much dispersion of returns for performing loans by rating category as double B, single B and CCC returns were 2.4%, 2.3% and 2.7%, respectively, while defaulted asset returns were -4.7%.

There were two primary drivers for the strong first quarter returns, one on the demand side and one on the supply side. On the demand side, CLOs had record first quarter issuance of $29 billion. This was significantly stronger than most market players had projected as the majority had thought that recently announced Dodd-Frank Risk Retention Rules would slow down issuance. While it did not occur in the first quarter, we do expect a slowdown as the year goes on and think full year issuance will be in the $70-90 billion range versus $126 billion last year. On the supply side, institutional loan issuance was down more than 50% year-over-year, at $56 billion versus $129 billion. The two primary drivers of the decreased issuance were i) the US Interagency Leveraged Lending Guidelines which aim to reduce aggressive underwritings by arranging banks and ii) the disappearance of more opportunistic deal flow (refinancings and recapitalizations). What did come to market included some very attractive corporate deals (Dollar Tree and Valeant) and LBOs (Pet Smart, Riverbed and SIG Combibloc). While the Leveraged Lending Guidelines were responsible for the decreased issuance, they were also responsible for more conservative structures as we saw a decrease in the leverage multiples on these transactions. Looking out over the next 3-6 months, the forward calendar stands at approximately $34 billion while the expected repayments to the market stand at $40 billion (including the recently announced Heinz/Kraft transaction which will result in a $6.3 billion paydown of the Heinz term loans).

After the widely anticipated Caesars Entertainment default in January, which added $5.4 billion and 70bp to the default statistics, February and March were both default free and as such the default rate ended the quarter at 3.8% by amount and a 3 year low of 0.6% by number. The distress ratio, that is the part of the market trading at a yield of L+1000bp or higher, now stands at 4.5%. Not surprisingly, Energy names accounted for 40% of this. This sector represented 4.8% of performing Index loans as of March 31 and Oil and Gas loans in the Index have come under pressure with 61% bid below 90 as of March 31 versus just 0.94% at the end of October. Ultra-deepwater firms - of which there are five issuers in the Index but none in the portfolio (Ocean Rig, KCA Deutag, Pacific Drilling, SeaDrill, and Vantage Drilling Company) and together represent 19.8% of Oil and Gas Index loans and 0.92% of total performing loans - are likely to be the most vulnerable to a sustained decrease in oil prices.

Turning to Europe, the most significant macroeconomic news during the first quarter 2015 was the announcement of QE by the ECB. The impact has not been as dramatic in the loan market as in high yield bonds, where we have seen spreads tighten on new issue, the European "premium" disappear and deals printing in Europe where 12 months ago they may have tapped the US market (albeit these dynamics are based on a limited sample over a short time period). However, given the expected low base rates for the next few years, we believe the impact on loans will be two fold: i) Issuers will look to the European market to finance transactions given the potentially cheaper rates available which should generate more deal flow and ii) Investors will continue their hunt for yield and are likely to remain focused on, or enter into for the first time, the loan asset class.

The S&P European Leveraged Loan Index ("ELLI") recorded a quarter one return of 2.1% excluding currency effects (3.2% with) placing it in line with the US. The weighted average bid of the ELLI ended the quarter at 97.3, the highest reading since August 2007. The themes we saw during 2014, including a strong CLO bid supporting prices, have continued. Following on from last year's record post-crisis CLO issuance of €14.5 billion, the first quarter started equally well with €3.5 billion printing, the best opening quarter since 2007. European institutional loan issuance was €13 billion through to March versus €11 billion for the comparable period last year. The type of deal mix was interesting with M&A dominating early on in the quarter to be followed by some more opportunistic deals during March albeit M&A accounted for 64% of total loan volume for the period. The solid issuance helped offset the €8.6 billion of repayments seen in the Index, including some larger issuers in TDF and Alliance Boots, and the ELLI closed the quarter at just under €96 billion versus €98.3 billion at the 2014 year end. The European default rate reduced to 3.6% by volume at the end of March 2015, 2.9% by Issuer. This is down from 4.9% at the year-end and is primarily due to the retailer Vivarte, which commenced a restructuring process in January 2014, falling out of the calculation. The default rate is now at its lowest level since the end of 2013. The ELLI distress ratio - the percentage of performing loans trading below 80 - was 6.8% at the end of March, down from 7.8% at the end of February.

Portfolio Management

The Portfolio, as at 31 March 2015 (excluding cash):

• was split 95.81% USD, 2.07% EUR, 2.12% GBP
• had 2.39% allocated to bonds out of the maximum 20% allowable
• was invested primarily in B (51.80%) and BB (37.20%) rated investments²

Whilst issuance levels in the US have clearly slowed, we were still able to find what we feel are good investment opportunities and have been able to add attractively priced transactions to the portfolio in both the primary and secondary markets. Many of the deals that were underwritten in 2014 came to market during the first quarter with very attractive economics (Dollar Tree, Pet Smart, Valeant to name a few).

In terms of segment allocations, we have retained our low bond weighting and as at 31st March we had allocated 2.4% of NAV, marginally down from the 2.6% at year end. Our non USD exposure has continued to contract and stood at 4.2% as at the end of the quarter down from 5.6% at the 2014 close. This remains a relative value choice rather than a reflection of the credit quality of European names. Finally from a rating perspective we remain overweight to single B Issuers.

Outlook

We maintain our full year asset class return forecast of 4-6%, which is comprised mostly of income with the potential for some capital appreciation, as the currently reduced supply should continue to allow prices to move higher. While we might see some defaults in the Energy space, the overall default outlook remains very benign as the companies in our investable universe maintain strong credit profiles and have very few near term maturities.

1. Source: S&P LCD.
2. Source: Standard & Poor's

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited           [phone]
Joanna Pope

Background Information

The Company is a registered closed-ended investment company incorporated in Guernsey. 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 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. To pursue its investment objective, the Company will invest mainly in floating rate senior secured loans issued in U.S. Dollars, Sterling, and Euros by North American and European Union corporations, partnerships and other business issuers.

Established in 1939, Neuberger Berman is one of the world's leading private, independent employee-controlled asset management firms, managing approximately $251 billion in assets as of March 31, 2015. Neuberger Berman provides a broad range of global investment solutions to institutions and individuals through customized separately managed accounts, funds and alternative investment products.  

Non-Mainstream Pooled Investments
The Company confirms that it conducts its affairs, and intends to continue to conduct its affairs, so that the Company's shares will be excluded securities under these the new rules and will therefore be excluded from the FCA's restrictions which apply to non-mainstream investment products.
This document is intended only for the person to whom it has been delivered. No part of this document may be reproduced in any manner without the written permission of NB Global Floating Rate Income Fund Limited ("NBGFRIF"). The securities described in this document may not be eligible for sale in some states or countries and it may not be suitable for all types of investors. Securities in the fund may not be offered or sold directly or indirectly into the United States or to U.S. Persons. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The price of investments may fall as well as rise and investors may not get back the full amount invested. Statements contained herein, including without limitation, statements regarding the credit markets, are based on current expectations, estimates, projections, opinions and/or beliefs of the managers. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Such statements are necessarily speculative in nature, as they are based on certain assumptions. It can be expected that some or all of the assumptions underlying such statements will not reflect actual conditions. Accordingly, there can be no assurance that any projections, forecast or estimates will be realized. This document is not intended to be an investment advertisement or sales instrument; it constitutes neither an offer nor an attempt to solicit offers for the securities described herein. This document was prepared using the financial information available to NBGFRIF as at the date of this document. This information is believed to be accurate but has not been audited by a third party. This document describes past performance, which may not be indicative of future results. NBGFRIF does not accept any liability for actions taken on the basis of the information provided in this document. Neuberger Berman is a registered trademark. © 2015 Neuberger Berman.

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Source: NB GLOBAL FLOATING RATE INCOME FUND LIMITED (GBP) via Globenewswire

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