TIDMNBDD TIDMNBDX TIDMNBDG
RNS Number : 4290U
NB Distressed Debt Invest. Fd. Ltd
25 November 2019
25 November 2019
NB Distressed Debt Investment Fund Limited
Portfolio Update - Ordinary 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 10 June 2013, the investment period of the NBDD Share Class
("NBDD") expired and the assets of NBDDIF attributable to the
Ordinary Shares were placed into the harvest period. $132.8 million
(equivalent to 107% 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
began.
The Ordinary Share Class is one of three classes of shares in
NBDDIF. The others are the Extended Life Share Class and the New
Global Share Class, which both offered exposure to new
opportunities in this asset class beyond 10 June 2013. The Extended
Life Share Class was subject to an investment period which ended on
31 March 2015 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
NBDD is in the harvest period and the investment manager is
working to restructure, reorganise, and realise exits for each
investment to maximise the value of the portfolio for the
shareholders. During the harvest period, the investment manager
seeks a catalyst for each of the remaining investments that will
allow for a realisation and return of capital and profits, if
applicable. For regulatory reasons, the final 10% of the total
return (NAV plus cumulative distributions) in respect of any class
of participating shares in NBDDIF will be returned to shareholders
with a final compulsory redemption of all of the outstanding shares
of that class. As such, there will be no further distribution for
NBDD until the final distribution to investors and the wind-down of
the share class, currently expected in 2020.
The investment manager uses economic, industry and issuer
specific data to estimate the gross realisable value in downside,
base case and upside scenarios for each investment in the
portfolio. It currently estimates the range of the aggregated
realisable value for the investments in the portfolio is between
89% and 154% of the 30 September 2019 market values of these
investments, with a base case of 124%. Shareholders should,
however, note that: (i) the realisable values of the investments
are calculated on a gross basis and, in particular, do not reflect
the investment manager's management fee and investment-related
expenses; and (ii) this range of aggregate realisable values is an
estimate only, and there is no guarantee that the value actually
realised will be within this range. Further details on the risks
relating to "forward looking information" are set out at the end of
this announcement.
There was one exit during the quarter detailed below in the
factsheet. The ratio of total value (capital distributions,
dividends and current NAV) to original capital remains at 118%.
Portfolio Update
NBDD ended the quarter with NAV per share of $0.9261 as compared
to $0.9364 at the end of June 2019. The NAV decreased by 1.10% in
the quarter, principally driven by unrealised losses in private
packaging and utility private equity investments partially offset
by a rebound in Vistra public equity shares. During the harvest
period, reorganised equities, including public equities, represent
a larger percentage of NBDD's investments. More detail can be found
below. At quarter-end, 92% of NBDD's NAV was invested in distressed
assets (including cash in subsidiary accounts, receivables and net
payables) with 8% held in cash net of payables.
The portfolio consists of 12 issuers across 8 sectors. The
largest sector concentrations were in surface transportation,
utilities, building & development and auto components.
Public Equity
In the harvest period the public equity portion of the portfolio
increased as the result of debt-for-equity conversions. The NBDD
portfolio currently includes the following public equity
holdings:
ISSUER MARKET VALUE AT % NAV
30 SEPTEMBER 2019
($ millions)
Vistra Energy Corp (f/k/a
TECH) 2.8 19.4%
================== =====
Five Point Holdings
LLC 2.3 16.3%
================== =====
Eagle Bulk Shipping
Inc 0.2 1.2%
================== =====
Star Bulk 0.1 0.5%
================== =====
Total 4.9 33.9%
================== =====
Notable events(1) below describe activity in the investments
during the quarter and post quarter-end.
-- Pfleiderer - Post quarter-end, NBDD sold its holding of
subordinated debt to the company sponsor at an attractive value in
excess of NBDD's carrying value. Sales proceeds of approximately
$0.4 million were at the base case estimate for this
investment.
-- Vistra - The investment manager decided to retain the NBDD
public equity position, but sell the NBDX position, because at this
point in NBDD's harvest period there will be one single 10%
distribution to wind down the asset class. The investment manager
believes that the timetable to final distribution in NBDD permits
more time to realize further upside which it believes Vistra may
have.
Significant Value Change (approximately 0.5% of NBDD NAV or +/-
$100,000)(2)
INDUSTRY INSTRUMENT 3Q19 TOTAL MARKET QUARTERLY COMMENT
RETURN VALUE PRICE CHANGE
($ in millions) ($ in millions)
Reported strong
above consensus
Vistra Public Equity $0.4 $2.8 +18% earnings
=============== ================ ================= ============= ======================
Reduced full
year earnings
guidance due
to lower power
Utilities Various $(0.2) $0.2 -57% prices
=============== ================ ================= ============= ======================
Increasing leverage
and continued
challenge to
improve profitability
due to higher
Packaging freight and
and Containers Private Equity $(0.4) $1.0 -25% energy costs.
=============== ================ ================= ============= ======================
Exits
There was one exit during the quarter. Inception to date, NBDD
has experienced 44 exits with a total return of $42.8 million,
weighted average IRR of 14% and weighted average ROR of 27%.
Exit 44 - Utilities
NBDD purchased second lien debt (which was repaid in full
through another financing), mezzanine debt, and units of
reorganised equity in a 1000MW combined-cycle gas turbine power
plant in central California. At the time of the purchases we
believed the plant benefitted from significant collateral coverage:
the second lien and equity both traded at deep discounts to
replacement value and the original construction cost of the
plant.
Unfortunately, following our purchases, increased investment in
renewable energy sources (specifically, solar, wind, and hydro) had
a negative effect on California power prices and significantly
impacted cash flow and liquidity. The company ultimately filed for
Chapter 11 bankruptcy protection in December 2016. As the
bankruptcy progressed it became clear that there was no value to
distribute to the equity and mezzanine debt, and the prices
declined to nearly zero in early 2017. The first lien debt holders
took control of the asset, so there was no recovery to the
securities we owned beyond the principal and interest already
received over the life of the investment.
Cash invested was $3.7 million and cash received from coupon and
principal repayments was $3.4 million. The total return on the
investment was ($0.3) million over 107 months. The IRR was -3% and
ROR was -8%.
EXIT CASH INVESTED CASH RECEIVED TOTAL RETURN IRR ROR MONTHS HELD
44 GBP3.7 million GBP3.5 million GBP(0.3) million -3% -8% 107
=============== =============== ================= ==== ==== ============
Partial Realisations
There was no activity during the quarter. The table below has
been updated with current values.
PARTIAL SECTOR QUARTER CASH CASH CURRENT TOTAL CURRENT CURRENT MONTHS
REALISATION REPORTED INVESTED RECEIVED VALUE RETURN IRR ROR HELD
TO DATE OF
INVESTMENT
Containers
&
3 Packaging 2Q17 $2.0 million $2.8 million $0.1 million $0.9 million 25% 48% 82
========== ========= ============ ============ ============ ============ ======= ======= ======
Containers
&
4 Packaging 2Q17 $2.6 million $6.5 million $1.0 million $4.9 million 53% 191% 85
========== ========= ============ ============ ============ ============ ======= ======= ======
Distributions
As explained above, for regulatory reasons, the final 10% of the
total return (NAV plus cumulative distributions) in respect of any
class of participating shares in NBDDIF will be returned to
shareholders with a final compulsory redemption of all of the
outstanding shares of that class. The next distribution for NBDD
will be the final distribution to investors and will wind down the
share class. We believe there is material upside potential in four
of our largest holdings and the timing of our last and final
distribution is being pushed into the first half of 2020 in the
hope of realising that upside. We will continue to update investors
as we gain clarity on the realisations.
Factsheet
An accompanying factsheet on the information provided above can
be found here
http://www.rns-pdf.londonstockexchange.com/rns/4290U_1-2019-11-22.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.
-S -
For further information please contact:
KL Communications Tel: +44 (0) 20 3995 6673
Charles Gorman nbdd@kl-communications.com
-----
Data as at 30 September 2019. Past performance is not indicative
of future returns. All comments unless otherwise stated relate to
NBDD.
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 NBDD investment or a change in
NBDD'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. 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.
References in this factsheet to the market value of specific fund
investments refers to the value determined in accordance with
NBDD's valuation policy, which may include fair valued investments
where third party prices are not available or are not considered
accurate.
This document has been issued by NB Distressed Debt Investment
Fund Limited (the "Company"), and should not be taken as an offer,
invitation or inducement to engage in any investment activity and
is solely for the purpose of providing information about the
Company. This document does not constitute or form part of, and
should not be construed as, any offer for sale or subscription of,
or solicitation of any offer to buy or subscribe for, any share in
the Company or securities in any other entity, in any
jurisdiction.
The Company is a closed-ended investment company incorporated
and registered in Guernsey and is governed under the provisions of
the Companies (Guernsey) Law, 2008 (as amended), and the Registered
Collective Investment Scheme Rules 2008 issued by the Guernsey
Financial Services Commission ("GFSC"). It is a non-cellular
company limited by shares and has been declared by the GFSC to be a
registered closed-ended collective investment scheme. The Company's
shares are admitted to trading on the Specialist Fund Segment of
the London Stock Exchange's Main Market for listed securities.
Neuberger Berman Europe Limited ("NBEL"), the Company's Manager,
is authorised and regulated by the 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 presented solely for information purposes and
nothing herein constitutes investment, legal, accounting or tax
advice, or a recommendation to buy, sell or hold a security. We do
not represent that this information, including any third party
information, is accurate or complete and it should not be relied
upon as such. Any views or opinions expressed may not reflect those
of the Company or NBEL as a whole. All information is current as of
the date of this material and is subject to change without notice.
No part of this document may be reproduced in any manner without
prior written permission of the Company and NBEL.
There is no guarantee that any of the goals, targets or
objectives described in this factsheet will be achieved. This
factsheet may contain "forward-looking information" which can be
identified by the use of forward looking terminology such as "may",
"will", "should", "expect", "anticipate", "target", "project",
"estimate", "intend", "continue" or "believe" or the negatives
thereof or other variations thereon or comparable terminology. Such
statements are not purely historical in nature, and may include,
among other things, projections, forecasts or estimates of cash
flows, yields or returns, scenario analyses and proposed or
expected portfolio composition. The forward-looking information
contained herein is based upon certain assumptions about future
events or conditions and is intended only to illustrate
hypothetical results under those assumptions (not all of which will
be specified herein). Not all relevant events or conditions may
have been considered in developing such assumptions. The success or
achievement of various results and objectives is dependent on a
multitude of factors, many of which are beyond the control of the
Company and Neuberger Berman. Actual volatility and returns will
depend on a variety of factors including overall market conditions
and the ability of the Company and Neuberger Berman to implement
its process, investment strategy and risk management policies. No
representations are made as to the accuracy of such estimates or
projections or that such projections will be realised. Actual
events or conditions are unlikely to be consistent with, and may
differ materially from, those assumed.
An investment in the Company involves risks, with the potential
for above average risk, and is only suitable for people who are in
a position to take such risks. No recommendation or advice is being
given as to whether any investment or strategy is suitable for a
particular investor. Each recipient of this document should make
such investigations as it deems necessary to arrive at an
independent evaluation of any investment, and should consult its
own legal counsel and financial, actuarial, accounting, regulatory
and tax advisers to evaluate any such investment. It should not be
assumed that any investments in securities, companies, sectors or
markets identified and described were or will be profitable.
Investment in the Company should not constitute a substantial
proportion of an investor's portfolio and may not be appropriate
for all investors. Diversification and asset class allocation do
not guarantee profit or protect against loss.
Past performance is not a reliable indicator of current or
future results. The value of investments may go down as well as up
and investors may not get back any of the amount invested. The
performance data does not take account of the commissions and costs
incurred on the issue and redemption of units.
The value of investments designated in another currency may rise
and fall due to exchange rate fluctuations in respect of the
relevant currencies. Adverse movements in currency exchange rates
can result in a decrease in return and a loss of capital.
Tax treatment depends on the individual circumstances of each
investor and may be subject to change, investors are therefore
recommended to seek independent tax advice.
This document, and the information contained therein, is not for
viewing, release, distribution or publication in or into the United
States, Canada, Japan, South Africa or any other jurisdiction where
applicable laws prohibit its release, distribution or publication,
and will not be made available to any national, resident or citizen
of the United States, Canada, Japan or South Africa. The
distribution of this document in other jurisdictions may be
restricted by law and persons into whose possession this document
comes must inform themselves about, and observe, any such
restrictions. Any failure to comply with the restrictions may
constitute a violation of the federal securities law of the United
States and the laws of other jurisdictions.
The Company's shares have not been and will not be registered
under the US Securities Act of 1933, as amended (the "Securities
Act"), or with any securities regulatory authority of any state or
other jurisdiction of the United States. The shares may not be
offered, sold, resold, pledged, delivered, distributed or otherwise
transferred, directly or indirectly, into or within the United
States, or to, or for the account or benefit of, US persons (as
defined in Regulation S under the Securities Act). No public
offering of the shares is being made in the United States.
The Company has not been and will not be registered under the US
Investment Company Act of 1940, as amended (the "Investment Company
Act") and, as such, holders of the shares will not be entitled to
the benefits of the Investment Company Act. No offer, sale, resale,
pledge, delivery, distribution or transfer of the shares may be
made except under circumstances that will not result in the Company
being required to register as an investment company under the
Investment Company Act. In addition, the shares are subject to
restrictions on transferability and resale in certain jurisdictions
and may not be transferred or resold except as permitted under
applicable securities laws and regulations. Any failure to comply
with these restrictions may constitute a violation of the
securities laws of any such jurisdictions.
The "Neuberger Berman" name and logo are registered service
marks of Neuberger Berman Group LLC.
(c) 2019 Neuberger Berman Group LLC. All rights reserved.
This information is provided by RNS, the news service of the
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Kingdom. Terms and conditions relating to the use and distribution
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contact rns@lseg.com or visit www.rns.com.
END
PFULLFVRLLLFFIA
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