TIDMNBDD TIDMNBDX TIDMNBDG
RNS Number : 9087C
NB Distressed Debt Invest. Fd. Ltd
21 April 2017
21 April 2017
NB Distressed Debt Investment Fund Limited
Portfolio Update - Global Shares
NB Distressed Debt Investment Fund Limited's ("NBDDIF") primary
objective is to provide investors with attractive risk-adjusted
returns through long-biased, opportunistic stressed, distressed and
special situation credit-related investments while seeking to limit
downside risk.
NBDDIF's holdings are diversified across distressed, stressed
and special situations investments, with a focus on senior debt
backed by hard assets. The portfolio is managed by the Distressed
Debt team at Neuberger Berman, which sits within what we believe is
one of the largest and most experienced non-investment grade credit
teams in the industry.
The New Global Share Class ("NBDG") was created in March 2014 in
order to capture the growing opportunity in distressed debt
globally. NBDG's investment period ended on 31 March 2017,
following which the harvest period commenced.
The New Global Share Class is one of three classes of shares in
NBDDIF. The others are the Ordinary Share Class and the Extended
Life Share Class. The Ordinary Share Class was subject to an
investment period which ended on 10 June 2013 and the Extended Life
Share Class was subject to an investment period which ended on 31
March 2015. Separate factsheets are produced for those share
classes.
Manager Commentary
NAV increased in the quarter due to continued progress with
restructurings and resolutions. However, liquidity in distressed
debt markets remains strained as investment banks continue to pull
back their proprietary investing activities due to regulatory
changes. As a result, we are seeing wider bid / ask spreads and a
greater mark-to-market impact on the portfolio. Ultimately, we
believe value in the investments within the portfolio will be
realised via liquidity events (i.e. sale to a strategic buyer,
refinancing or IPO). Access to capital markets significantly
improves once an asset or company's balance sheet has been
restructured and / or operations have been stabilised.
Portfolio Update
NBDG's investment period ended on 31 March 2017. NBDG's NAV
increased by 1.86% over the quarter. The share class ended the
first quarter with NAV per share of 95.78p compared with 94.03p at
the end of December, due primarily to improving market conditions
and specific events within the portfolio (discussed below). The
increase in NAV during the quarter was due in part to an 18%
increase in value of a Spanish hotel portfolio investment resulting
from operational improvements at the property level and an increase
in value of shipping investments following improvements in shipping
charter rates. During the quarter, NBDG agreed to purchase an
ownership interest in a Spanish hotel that is undergoing an
operational turnaround. NBDG had four exits during the quarter,
generating a total return (income and capital gains over the life
of the investments) of GBP3.2 million to the fund.
As at 31 March 2017, 95% of NBDG's NAV was invested in
distressed assets with 5% cash available for distributions and
expenses. NBDG has investments in 25 issuers across 11 sectors. The
largest sector concentrations were in lodging & casinos,
shipping, utilities, oil and gas, and building and development.
NBDG generated GBP5.0 million cash from exits and portfolio
activity (principal repayments and distributions) which was offset
by the new GBP5.3 million Spanish hotel investment. Net cash
deployed was (GBP0.3 million). Notable corporate events involving
NBDG's existing investments are highlighted below(1) :
-- Secured bank debt in a portfolio of Australian wind farms
rose during the quarter as local power prices and the company's
operating performance both improved. Post quarter-end, the company
announced plans to raise additional equity to fund new projects and
increase balance sheet flexibility, potentially to facilitate a
global refinancing of its debt facilities.
Significant Value Change (approximately 0.5% NBDG NAV or +/-
GBP500,000)(2)
Industry Instrument Q117 Total Comment
Return
----------- -------------- ----------------- ----------------------
Lodging Secured GBP0.7 million Improved operations
& casinos loan at hotels
----------- -------------- ----------------- ----------------------
Shipping Secured GBP0.6 million Increase in ship
loan values & operational
improvement
----------- -------------- ----------------- ----------------------
Shipping Public equity GBP0.5 million Improved shipping
rates
----------- -------------- ----------------- ----------------------
Oil & Public equity (GBP0.7 million) Decline in energy
gas prices
----------- -------------- ----------------- ----------------------
Exit 9
NBDG invested GBP2.1 million in the bank debt of one of the
world's leading suppliers of marine fuels and related bunkering
services, secured by accounts receivable and cash in collection
accounts. At the time of our purchase, the company was in
bankruptcy. Full collection of receivables was uncertain as certain
customers were not paying invoices due to the bankruptcy.
Resolution of various lawsuits in favour of the company / secured
lenders led to an increase in the value of the estate and future
distributions. We sold our position in the secondary market for
GBP2.8 million resulting in a total return of GBP0.7 million. IRR
was 31% and ROR was 34% over the 19-month holding period.
Exit 10
NBDG invested GBP2.0 million in the secured bank debt of a U.S.
independent power producer with assets across the U.S. Due to
historically low natural gas prices, the company experienced
depressed cash flows that forced it to file a pre-packaged plan of
reorganisation, which exchanged secured bank debt for private
equity. Eighteen months after the filing, the company announced a
sale of substantially all of its assets to a U.S. energy retailer.
The transaction ultimately closed in February 2017 when the final
disbursements from escrow were paid to equity holders. Continued
low natural gas prices and resulting low power prices impacted the
sale price for the company. Total cash received was GBP2.1 million
and the total return for this investment was GBP0.1 million with an
IRR of 1% and a ROR of 4%. NBDG held the investment for 36
months.
Exit 11
NBDG invested GBP3.2 million in the post-reorganised private
equity of an eastern U.S. combined cycle gas turbine power plant.
At the time of the purchase, NBDG believed that power prices in the
market would improve and the plant would be sold at an attractive
valuation above our purchase price. In August 2016, it was
announced that the plant was being sold to a large, public, U.S.
independent power producer. The bulk of the transaction proceeds
were paid in early 2016 while the final escrow release was received
in Q1 2017. Total cash received was $5.1 million and total return
on this investment was GBP1.9 million over a 36-month holding
period, resulting in an IRR of 22% and ROR of 59%.
Exit 12
NB distressed funds collectively purchased a 50% interest in an
existing joint venture in an aircraft financing company. Invested
capital from all funds was $11.875 million (NBDG invested GBP2.2
million). We purchased from a fund that sought to provide liquidity
to its investors who needed to exit the investment. Our JV partner
was one of the largest independent providers of aviation services
globally and they acted as the servicer of the entity. At the time
of our investment the joint venture owned eight 737-400s (vintage
1992-97). Six of the aircraft were sold on installment sale to an
independent Mid-Eastern airline and two were leased to airlines in
South Eastern Asia. The planes on installment sale were exited at
various points in time in accordance with the terms of the sale
agreements. One of the leased aircraft was sold to the lessee. The
remaining aircraft was sold following a lease termination due to
payment default and repossession by the servicer. The total return
on this investment for NBDG was GBP0.6 million, with initial cash
invested of GBP2.2 million and total cash received over the life of
the investments GBP2.8 million. IRR on the investment was 34% over
24 months and ROR was 29%.
Exit Cash Invested Cash Received Total Holding IRR ROR
Return Period
----- -------------- -------------- ------------- ---------- ---- ----
9 $2.1 million $2.8 million $0.7 million 19 months 31% 33%
----- -------------- -------------- ------------- ---------- ---- ----
10 $2.0 million $2.1 million $0.1 million 36 months 1% 4%
----- -------------- -------------- ------------- ---------- ---- ----
11 $3.2 million $5.0 million $1.8 million 36 months 22% 59%
----- -------------- -------------- ------------- ---------- ---- ----
12 $2.2 million $2.8 million $0.6 million 24 months 34% 29%
----- -------------- -------------- ------------- ---------- ---- ----
Distributions
There were no distributions during the first quarter. Total
distributions to date are GBP1.0 million.
Share Buy-Backs
NBDG purchased 422,000 shares during the first quarter under the
discount control policy at a total cost of GBP336,075 and an
average discount to NAV of 15.6%(3) . The shares were held in
treasury with 10,632,000 shares at held at quarter-end.
Factsheet
An accompanying factsheet on the information provided above can
be found here:
http://www.rns-pdf.londonstockexchange.com/rns/9087C_-2017-4-20.pdf
on the Company's website www.nbddif.com. Neither the contents of
the Company's website nor the contents of any website accessible
from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
-ENDS-
For further information please contact:
Neustria Partners +44 (0)20 3021 2580
Nick Henderson
Charles Gorman
Rob Bailhache
__________________________________________________
Data as at 31 March 2017. Past performance is not indicative of
future returns. All comments unless otherwise stated relate to
NBDG.
Source: Bloomberg, except where otherwise stated.
1. Notable corporate events may or may not result in an increase
or decrease in the value of an NBDG investment or a change in
NBDG's NAV per share. Please note that an investment may experience
a change in value (positive or negative) during the quarter whether
or not it was subject to a notable corporate event. Not all events
involving existing investments are disclosed above. In addition,
certain corporate events may not have been disclosed due to
confidentiality obligations.
2. Industry categorisations determined by Neuberger Berman.
Total Return determined by the Administrator, and includes realised
and unrealised gains and losses, expenses, FX gains and losses, and
all income on investments according to US GAAP accounting.
3. Source: Stifel Nicolaus Europe Limited.
This document is issued by Neuberger Berman Europe Limited
("NBEL") which is authorised and regulated by the UK Financial
Conduct Authority ("FCA") and is registered in England and Wales,
at Lansdowne House, 57 Berkeley Square, London, W1J 6ER and is also
a Registered Investment Adviser with the Securities and Exchange
Commission ("SEC") in the U.S. and regulated by the Dubai Financial
Services Authority.
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 Distressed Debt
Investment Fund Limited ("NBDDIF"). 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.
Prospective investors are advised to seek expert legal, financial,
tax and other professional advice before making any investment
decision. Securities in the fund may not be offered or sold
directly or indirectly into the United States or to U.S. Persons.
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 NBDDIF 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. NBDDIF does not accept any liability for actions taken on
the basis of the information provided in this document. This report
includes candid statements and observations regarding investment
strategies. Individual securities, and economic and market
conditions; however, there is no guarantee that these statements,
opinions or forecasts will prove to be correct. These comments may
also include the expression of opinions that are speculative in
nature and should not be relied on as statements of fact. The views
and opinions expressed herein include forward-looking statements
which may or may not be accurate over the long term.
Forward-looking statements can be identified by words like
"believe", "expect", "anticipate", or similar expressions. You
should not place undue reliance on forward-looking statements,
which are current as of the date of this report. We disclaim any
obligation to update or alter any forward-looking statements,
whether as a result of new information, future events or otherwise.
While we believe we have a reasonable basis for our appraisals and
we have confidence in our opinions, actual results may differ
materially from those we anticipate. The information provided in
this material should not be considered a recommendation to buy,
sell or hold any particular security. Neuberger Berman is a
registered trademark.
(c) 2017 Neuberger Berman Ref: 97459
This information is provided by RNS
The company news service from the London Stock Exchange
END
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