Placing and Offer for Subscription of C Shares

RNS Number : 8404N

NB Global Floating Rate Income Fund

07 September 2011

 



7 September 2011

NB Global Floating Rate Income Fund

Placing and Offer for Subscription of C Shares and Related Party Transaction

Further to the announcement made by NB Global Floating Rate Income Fund Limited (the "Company") on 18 August 2011, the Board of Directors is pleased to announce a Placing and Offer for Subscription for a target issue in excess of US$100,000,000 worth of C Shares at an issue price of US$1.00 per U.S. Dollar C Share and £1.00 per Sterling C Share (the "Issue").  A prospectus relating to the Issue (the "Prospectus") has today been published and will be made available on the Company's website.

Background to and rationale for the Issue

Since the IPO of the Company in April this year, the Board has been pleased with the progress that the Investment Managers have made in deploying capital, and the IPO Net Proceeds have been fully invested, in accordance with the anticipated time for full investment set out in the IPO Prospectus. As at 31 August 2011, the Company had fully invested its net assets, with 195 investments across 151 issuers. The portfolio is diversified across 32 industries including: financials, retailers (except food and drug), radio and television, healthcare, business equipment and services, telecommunications, publishing, food products and lodging and casinos.

The Board, as advised by the Investment Managers, continues to be positive about the prospects in the bank loan market. Although bank loan prices declined in August, the Investment Managers believe that macroeconomic factors including a reduction in global growth expectations, an escalation of Eurozone sovereign debt crisis, the US debt ceiling debate and the S&P downgrade of US credit rating were the primary drivers of these price falls. The sell-off was accelerated by technical factors as retail fund redemptions increased due to risk aversion, interest rate views and negative price movements. Low cash balances arising from the traditional new issue slowdown in August and September combined with limited liquidity often observed during the summer holiday season combined to further exacerbate losses over the period.

As such, the Investment Managers remain confident that the fundamental attractions of the bank loan market have not changed and, as a result of the sell off, credit spreads are wider than a reasonable default rate would suggest, creating significant buying opportunities across a range of industries.

Following the IPO, there has been considerable interest in the Company both from existing Shareholders and other investors. The Directors consider there to be a number of potential benefits to Shareholders by issuing C Shares and increasing the Company's capital available to make further investments. The Company is therefore targeting an issue of in excess of US$100,000,000 of C Shares pursuant to the Issue.

It is expected that the Net Issue Proceeds will be invested in accordance with the Company's investment policy, within one to three months from Admission.

Benefits of the Issue

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

·    Provide additional capital which will enable the Company to benefit from the continued investment opportunities in the market.

·    Having a greater number of Shares in issue is likely to provide the Shares with additional liquidity.

·    Increasing the size of the Company will help make the Company more attractive to a wider shareholder base.

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

The Company

The Company is a non-cellular company limited by shares incorporated in Guernsey and has been declared by the Guernsey Financial Services Commission 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.

The Company's share capital consists of ordinary shares denominated in U.S. Dollars and Sterling.  Following the Issue, the Company's share capital will also consist of C shares denominated in U.S. Dollars and Sterling (subject to a minimum amount being raised for each class pursuant to the Issue at the discretion of the Directors and compliance with the requirements of the Listing Rules).

Investment in the Company is only suitable for institutional, professional and high net worth investors, private client fund managers and brokers and other investors who understand the risks involved in investing in the Company, and/or who have received advice from their fund manager or broker regarding investment in the Company.

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 Managers.

To pursue its investment objective, the Company invests 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. These loans are at the time of investment often non-investment grade. The Company considers debt instruments to be non-investment grade if, at the time of investment, they are rated below the four highest categories by at least two independent credit rating agencies or, if unrated, are deemed by the Investment Managers to be of comparable quality.

The Company generally seeks to focus on loans of issuers that the Investment Managers believe have the ability to generate cash flow through a full business cycle, maintain adequate liquidity, possess an enterprise value in excess of senior debt and have access to both debt and equity capital.

The Company also makes investments in senior bonds on an opportunistic basis if the Investment Managers believe that such investments are attractively valued, up to a maximum in aggregate of 20 per cent. of the Net Asset Value at the time of investment, provided that no more than 10 per cent. of Net Asset Value may be invested in unsecured senior bonds at the time of investment.

Investment Managers

The Company is managed by Neuberger Berman Europe Limited, an indirect wholly-owned subsidiary of Neuberger Berman Group. The Investment Manager has delegated certain of its responsibilities and functions to the sub-investment manager, Neuberger Berman Fixed Income LLC, also an indirect wholly-owned subsidiary of Neuberger Berman Group (together, the "Investment Managers").

Established in 1939, Neuberger Berman is one of the world's largest private, independent employee-controlled asset management companies, managing approximately $198 billion of assets as of 30 June 2011, including approximately US$80 billion in fixed income investments. Neuberger Berman is a leader in providing a broad range of global investment solutions to institutions and individuals through customised separately managed accounts, mutual funds and alternative investment products. For more information please visit our website at www.nb.com.

Related Party Transaction, adoption of revised articles of incorporation and disapplication of pre-emption rights

The Company has received expressions of interest both from new investors and existing shareholders (and/or their associates) to participate in the Issue.  Existing shareholder BlackRock, Inc. (the "Related Party") holds Ordinary Shares representing more than 10 per cent. of the voting rights of the Company.  As the size of the proposed issue of C Shares to the Related Party may breach certain thresholds, the Listing Rules require the approval of independent Shareholders for the Issue.  Should the Related Party choose to participate in the Issue, its participation will be on the same terms as other placees in the Issue.  It is proposed that the maximum number of C Shares for which the Related Party will subscribe for in the Issue will comprise no more than 15 per cent. of the Issue size.

The Company's existing Articles of Incorporation (the "Articles") provide that if the number of Ordinary Shares of any class held in public hands (as such phrase is used in current Listing Rule 6.1.19(4)R) falls below 25 per cent. of the total number of issued Ordinary Shares of that class, the Directors, in accordance with the Articles, have the right, at their discretion, to convert compulsorily the Ordinary Shares of such class into Ordinary Shares of the class then in issue with the greatest aggregate Net Asset Value in U.S. Dollar terms as at the corresponding NAV calculation date. It is proposed that the Articles are amended to allow the Directors to compulsorily convert C Shares from one class to another to reflect any compulsory conversion of any class of underlying Ordinary Shares.

The Articles contain pre-emption rights in respect of all new share issues for cash, which can be disapplied by way of a special resolution. It is proposed that the pre-emption rights are disapplied in accordance with the Articles in respect of up to an aggregate of 500,000,000 C Shares to be issued pursuant to the Issue.

A circular (the "Circular") is being sent today to shareholders giving notice of an extraordinary general meeting of the Company at which approval will be sought from shareholders for (i) the approval of the Related Party Transaction that may arise with respect to a certain substantial shareholder in the Company that may wish to participate in the Issue; (ii) the adoption of new Articles of Incorporation to amend certain provisions relating the C Shares; and (iii) the disapplication of pre-emption rights in respect of C Shares for the purposes of the Issue.

Notice of EGM

An extraordinary general meeting at which approval will be sought for the proposals set out in the Circular has been convened for 11:00 hours on 27 September 2011.

Document viewing

The Prospectus has been approved by the UK Listing Authority.  To view the full document, please place the following URL into the address bar of your browser:

http://www.rns-pdf.londonstockexchange.com/rns/8404N_1-2011-9-7.pdf

Copies of the Prospectus and Circular have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do. The Prospectus and Circular will also shortly be available for viewing on the Company's website, www.nbgfrif.com.

Draft new Articles of Incorporation showing all changes proposed to be adopted at the EGM will be available for inspection at (i) the registered office of the Company at BNP Paribas House, St. Julian's Avenue, St. Peter Port, Guernsey GY1 1WA; and (ii) the offices of Herbert Smith LLP at Exchange House, Primrose Street, London EC2A 2HS, during normal business hours on any Business Day (excluding Saturdays, Sundays and public holidays), from the date of the Circular until the conclusion of the EGM, and at the place of the EGM for at least 15 minutes prior to, and during, the EGM.

Oriel Securities Limited and Dexion Capital plc have been appointed as joint financial advisers, global co-ordinators and joint bookrunners for the Issue. Oriel Securities Limited has also been appointed as sole sponsor to the Company.

For further information, please contact:

Neuberger Berman Europe                         [phone]

Nick Hoar

Damian Holland

Anji Stewart

Oriel Securities                                            [phone]

Joe Winkley

Neil Langford

James Brodie

Dexion Capital                                              [phone]                         

Ravi Anand

Justin Zawoda-Martin

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