TIDMNBDD TIDMNBDX TIDMNBDG
RNS Number : 9078C
NB Distressed Debt Invest. Fd. Ltd
21 April 2017
21 April 2017
NB Distressed Debt Investment Fund Limited
Portfolio Update - Extended Life 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.
On 31 March 2015, the investment period of the Extended Life
Share Class ("NBDX") expired and the assets of NBDDIF attributable
to the Extended Life Shares were placed into the harvest period.
Prior to the expiry of the investment period, distributions were
made to reflect capital profits arising from the exit of any assets
attributable to Extended Life Shares. Including the $10.5 million
capital distribution described below, $158.6 million (equivalent to
44% of original capital) has been distributed (income by way of
dividend and capital by way of redemption) to shareholders since
the realisation phase for this share class.
The Extended Life Share Class is one of three classes of shares
in NBDDIF. The others are the Ordinary Share Class and the New
Global Share Class. The Ordinary Share Class was subject to an
investment period which ended on 10 June 2013 and the New Global
Share Class was subject to an investment period which ended on 31
March 2017. 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.
NBDX had four exits during the quarter, which had a total return
(income and capital gains over the life of the investments) of $8.9
million. Three of the exits were final returns of capital on
long-term private equity positions. NBDX generated net cash during
the quarter of $9.9 million, made up of $5.7 million from exits and
$4.2 million from portfolio activity (principal repayments and
distributions). During the quarter, the Board approved and paid a
distribution to shareholders via a share redemption of $10.5
million. Cash distributed to investors over the life of the fund
totals $158.6 million (equivalent to 44% of original capital). At
quarter-end, the ratio of total value (distributions, dividends,
share buy-backs and current NAV) to original capital was 105%.
Portfolio Update
NBDX's NAV increased by 2.80% during the quarter, ending March
with NAV per share of $1.0253 compared with $0.9974 at the end of
December, due primarily to improving market conditions and specific
events described below. An increase in value of a shipping
investment from improvements in shipping charter rates was offset
by declines in energy-related investments. The portfolio consists
of 35 issuers across 14 sectors. The largest sectors were lodging
& casinos, shipping, commercial mortgage, utilities and oil
& gas. Certain notable corporate events involving NBDX's
existing investments are highlighted below(1:)
-- Private equity of a lodging and casino investment distributed
cash of $0.45 / share from cash generated from operations. This
represents the first distribution for this investment. We are
continuing to work towards a sale of this property.
-- 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% NBDX NAV or +/-
$1,000,000)(2)
Industry Instrument Q117 Total Comment
Return
--------- ----------- ------------- ------------------------
Shipping Bank debt $1.9 million Increase in ship
values and operational
improvement
--------- ----------- ------------- ------------------------
Exit 42
NBDX invested $3.8 million to purchase a senior construction
loan secured by 99 condominium units located just south of Downtown
Chicago, Illinois. The lender group executed a deed-in-lieu with
the borrower and took possession of the underlying collateral. The
group engaged a nationally recognised real estate firm to act as
asset manager and broker for the remaining units, invested
additional capital to complete the units and common areas, and
rebranded the property. The remaining units were sold with proceeds
being used to return capital and profits to the lenders. Cash
received on this investment was $5.1 million with total return on
the investment for NBDX of $1.3 million over 67months. IRR was 10%
and ROR was 34%.
Exit 43
NBDX invested $15.3 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 into 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 $16.7 million
and the total return for this investment was $1.4 million with an
IRR of 3% and a ROR of 9%. NBDX held the investment for 69
months.
Exit 44
NBDX invested $12.0 million in the post-reorganised private
equity of an eastern U.S. combined cycle gas turbine power plant.
At the time of the purchase, NBDX 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 $17.3 million and total return
on this investment was $5.3 million over a 74-month holding period,
resulting in an IRR of 8% and ROR of 44%.
Exit 45
NB distressed funds collectively purchased a 50% interest of an
existing joint venture in an aircraft financing company. Invested
capital for all funds was $11.875 million (NBDX invested $3.8
million). We purchased the interest 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. Total return on this investment for
NBDX was $0.9 million, with initial cash invested of $3.8 million
and total cash received over the life of the investments $4.7
million. IRR on the investment was 31% over 24 months and ROR was
25%.
Exit Entry Exit Price Total Holding IRR ROR
Price Return Period
----- ------------- ------------- ------------- ---------- ---- ----
42 $3.8 million $5.1 million $1.3 million 67 months 10% 34%
----- ------------- ------------- ------------- ---------- ---- ----
$15.3 $16.7
43 million million $1.4 million 69 months 3% 9%
----- ------------- ------------- ------------- ---------- ---- ----
$12.0 $17.3
44 million million $5.3 million 74 months 8% 44%
----- ------------- ------------- ------------- ---------- ---- ----
45 $3.8 million $4.7 million $0.9 million 24 months 31% 25%
----- ------------- ------------- ------------- ---------- ---- ----
Distributions
During the first quarter, the Board announced a capital
distribution of $10.5 million. This brings total distributions
(capital and income by way of dividend) to $158.6 million,
equivalent to 44% of original capital.
Share Buy-Backs
NBDX purchased 392,868 shares during the quarter under the
discount control policy at a cost of $368,490 and average discount
of 6.9%(3) . The shares have been cancelled.
Factsheet
An accompanying factsheet on the information provided above can
be found here
http://www.rns-pdf.londonstockexchange.com/rns/9078C_-2017-4-20.pdf
or 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
NBDX.
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 NBDX investment or a change in
NBDX'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: 97460
This information is provided by RNS
The company news service from the London Stock Exchange
END
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