Portfolio Update

RNS Number : 3527R

NB Global Floating Rate Income Fund

25 October 2013

 



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 Global Floating Rate Income Fund

Portfolio Update

The NB Global Floating Rate Income Fund Limited's 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 three experienced Portfolio Managers backed by what we believe to be one of the largest and most experienced credit teams in the industry.

Success C Share Issue of £425 million

The board of directors of NB Global Floating Rate Income Fund Limited (the "Company") is pleased to announce that the Company has raised gross proceeds of £425 million by means of a Placing and Offer for Subscription of Sterling C Shares (the "Issue").

The Company has applied for admission of the Sterling C Shares to listing on the Official List of the UK Listing Authority and to trading on the main market of the London Stock Exchange ("Admission"), which is expected to take place on 29 October 2013.

Market Environment¹

As we progressed through the third quarter we experienced reduced volatility as credit markets moved further away from the May/June sell-off. For the quarter loans produced a positive return, increasing from a YTD return of 2.28% through June 30th to 3.53% through September 30th. As has been the case throughout much of the year, lower rated credits outperformed with CCC's leading the way with a 7.06% YTD return versus 3.87% for B's and 2.51% for BB's. In Europe since dipping into the red in June the S&P European Leveraged Loan Index (ELLI) posted gains in each of the last three months, resulting in the Index being 3.25% in the third quarter of 2013; its best performance since the first quarter of 2012. The YTD ELLI return is now 6.15%.  

Although down from the second quarter, at $101 billion versus $117 billion, institutional issuance continued to be strong in the third quarter and included some much welcomed M&A activity. M&A activity included 5 loans totalling over $2.0 billion (Dell, BMC, Fieldwood, Gardner Denver and HUB International) versus only two for all of 2012. The increase in M&A also had the added benefit of reducing some of the more opportunistic activity during the quarter, including repricings and dividend recapitalizations. While leverage levels remained reasonable, in our opinion, the share of deals that were covenant lite increased from earlier in the year. In the third quarter, covenant lite issuance increased to 64% and the resulting share of the S&P/LSTA Index that is now covenant lite is at 43% versus 30% at year-end 2012.

As has been the case throughout the year, supply was met with ample demand from both retail investors and CLO's, both exceeding $50 billion year-to-date. While CLO creation looks to be challenged in the near term by recent regulatory changes (specifically new FDIC rules that have narrowed the buying base for the most senior tranches), we continue to expect robust demand from both institutional and retail investors seeking attractive income in a short duration instrument.  The European CLO market has continued its revival and we have now seen 13 new CLOs price this year in the sum of c€4.5 bn.  It is rumoured that various managers are working on potential new deals meaning that the 2013 full year forecast of €8-10m seems likely to be met. 

Portfolio Management

The Portfolio, as at 30 September 2013:

·     was split 88.31% USD, 7.80% EUR, 3.89% GBP (excluding Cash)

·     had 9.16% allocated to bonds out of the maximum 20% allowable

·     was invested primarily in B (52.70%) and BBB (35.05%) rated investments²

We took advantage of the stabilization in the treasury market and resulting rally in high yield bond prices to reduce our bond exposure by approximately 3%, from 12.5% to 9.2%. Our exposure to Euro & Sterling assets increased to 11.7% from 8.3% in Q2 following a steady flow of issuance and selective investments including United Biscuits and Vue.  From a rating perspective, we maintained our overweight to single-B credits given the attractive risk-reward profile of this rating category.

Outlook

Our default outlook remains benign driven by continued earnings growth, free cash flow generation, deleveraging and modest upcoming maturities (as of Sept. 27, just $20.4 billion of S&P/LSTA Index loans are due by year-end 2015, down from $67.2 billion at year-end). While fundamentals and technicals remain supportive, we do think the upcoming quarter will be volatile due to the debt ceiling debate that will unfold over the next few months.

Source: BNP Paribas and Bloomberg. Data as at 30 September 2013. Past performance is not indicative of future returns.

1.   Source: S&P LCD.

2.   Source: Standard & Poor's.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited          [phone]

Anji Stewart

FTI Consulting                                              [phone]

Neil Doyle                   

Ed Berry

Laura Ewart

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.

Neuberger Berman is a private, independent, employee-controlled investment manager. It partners with institutions, advisors and individuals throughout the world to customize solutions that address their needs for income, growth and capital preservation. Neuberger Berman has more than 1,900 employees worldwide, with approximately 450 investment professionals, offering an investment culture of independent thinking.  Founded in 1939, the company provides solutions across equities, fixed income, hedge funds and private equity, and had $227 billion in assets under management as of September 30, 2013.

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. The target yield should not be taken as an indication of the Fund's expected future performance or results. The target yield is a target only and there is no guarantee that it can or will be achieved and it should not be seen as an indication of the Fund's actual or expected return. 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.

© 2013 Neuberger Berman.

 

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