TIDMNBDD TIDMNBDX TIDMNBDG
RNS Number : 4305U
NB Distressed Debt Invest. Fd. Ltd
25 November 2019
25 November 2019
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. Including the GBP2.5
million capital distribution by way of redemption which the Fund
distributed during the quarter, GBP36.2 million (equivalent to 33%
of original capital), has been, or will have been, distributed to
shareholders (income by way of dividend, capital by way of
redemption and share buy-backs), since the realisation phase for
this share class began.
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
NBDG 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.
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
96% and 181% of the 30 September 2019 market values of these
investments, with a base case of 145%. Generally, the range
increased slightly due to a decline in NAV with one adjustment
lower for base case estimate for a lodging & casino investment
expected exit value. 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.
During the quarter, NBDG paid by way of redemption a capital
distribution of GBP2.5 million (GBP0.0332/share). The ratio of
total value (capital distributions, dividends, share buy-backs and
current NAV) to original capital is 90%. There was one exit during
the quarter, detailed later in the factsheet.
Portfolio Update
NBDG ended the quarter with NAV per share of GBP0.8768 compared
to GBP0.9113 at the end of June 2019. NBDG's NAV decreased 3.8%
during the quarter due to unrealised mark to market losses on Eagle
Bulk Shipping and Twin River public equities partially offset by
unrealised gains on a lodging & casino investment and Vistra
public equity. During the harvest period, reorganised equities,
including public equities, represent a larger percentage of NBDG's
investments. More detail can be found below. At quarter-end, 97% of
NBDG's NAV was invested in distressed assets (including cash held
in subsidiary accounts, receivables and net payables) with 3% held
in cash.
The current portfolio consists of 19 issuers across 9 sectors.
The largest sector concentrations include lodging & casinos,
shipping, auto components, and commercial mortgage.
Notable events(1) below describe activity in the investments
during the quarter and post quarter-end.
-- Twin River - The company conducted a Dutch auction tender
which was completed in the quarter. NBDG tendered the maximum
shares and 6.2% of the position was tendered at a price of
$29.50/share. The company announced two acquisitions to continue to
diversify its operations with the opening of the Boston Wynn
casino. Shares continue to be under pressure and have traded down
from the tender price.
Public Equity
-- Vistra - The investment manager decided to retain the NBDG
public equity position, but sell the NBDX position, because NBDG
has been in its harvest period for less time than NBDX. The
investment manager believes that the remaining harvest period for
NBDG permits more time to realize the further upside which it
believes Vistra may have.
In the harvest period the public equity portion of the portfolio
increased as the result of debt-for-equity conversions. The NBDG
portfolio currently includes the following public equity
holdings:
ISSUER MARKET VALUE AT % NAV
30 SEPTEMBER 2019
(GBP millions)
Twin River Management 10.3 16.3%
================== =====
Eagle Bulk Shipping Inc 4.4 7.0%
================== =====
Torm A/S 4.2 6.6%
================== =====
Vistra Energy Corp (f/k/a
TECH) 4.2 6.6%
================== =====
Five Point Holdings LLC 3.0 4.8%
================== =====
Sandridge Energy Inc 0.6 1.0%
================== =====
Rivera Resources 0.4 0.6%
================== =====
Roan Resources 0.04 0.1%
================== =====
Grand Total 27.1 42.8%
================== =====
Significant Value Change (approximately 0.5% of NBDG NAV or +/-
GBP350,000)(2)
INDUSTRY INSTRUMENT 3Q19 MARKET QUARTERLY COMMENT
TOTAL VALUE PRICE CHANGE
RETURN (GBP
(GBP in millions)
in millions)
Vistra Public equity GBP0.8 GBP4.3 18% Company reported above
consensus earnings
=============== ============= ============= ============= ============================
Spanish Private equity GBP0.7 GBP6.5 11% Improved hotel profitability
Hotel Investment due to higher ADRs,
improved occupancy
and cost reductions
=============== ============= ============= ============= ============================
Eagle Bulk Public equity GBP(0.7) GBP4.4 -16% Global growth and
Shipping trade worries
Inc
=============== ============= ============= ============= ============================
Twin River Public equity GBP(2.6) GBP10.3 -23% Larger than expected
impact from new competition
of the recently opened
Boston Wynn
=============== ============= ============= ============= ============================
Exits
Exit 18 - Utilities
NBDG purchased second lien debt, 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 zero in early 2017. Litigation between the first and
second lien holders over the intercreditor agreement ended with the
second lien debt slowly dropping in price throughout 2017 and 2018
with the debt priced at zero once the bankruptcy court made a final
ruling in favour of the first lien holders. The first lien debt
holders took control of the asset, so there was no
recovery to the securities NBDG owned beyond the principal and
interest it had already received over the life of the
investment.
Cash invested was GBP6.0 million and cash received from coupon
and principal repayments was GBP0.5 million. The total return on
the investment was -GBP5.5 million over 66 months. The IRR was -73%
and ROR was -91%.
EXIT CASH INVESTED CASH RECEIVED TOTAL RETURN IRR ROR MONTHS HELD
GBP(5.5)
18 GBP6.0 million GBP0.5 million million -73% -91% 66
=============== =============== ============= ===== ===== ============
Inception to date, NBDG has experienced 18 exits with a total
return of GBP5.4 million, weighted average IRR of 6% and weighted
average ROR of 10%.
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
Lodging GBP4.5 GBP7.2 GBP2.9
1 & Casino 1Q18 million million GBP0.2 million million 18% 64% 68
========= ========= ========= ========= ============== ======== ======= ======= ======
Distributions
The investment manager's current expectation is to distribute
75-80% of 30 September 2019 NAV in 2020 and the remainder in 2021.
Significant changes to timing of realisations based on current
analysis are summarised below. For regulatory reasons, the final
10% of total return in respect of any class of participating shares
in NBDDIF will be returned to shareholders with the final
compulsory redemption of all of the outstanding shares of that
class. In the harvest period, we continue to focus on restructuring
and monetising our investments, balancing timely realisations with
maximising proceeds to our investors. Changes to timing are
expected based on market conditions and investment developments and
will continue to be updated in the quarterly factsheets.
Significant Investments Experiencing Exit Timing Changes
INDUSTRY INSTRUMENT MARKET COMMENT
/ ISSUER VALUE
Auto Components Private GBP6.2 As previously described last quarter,
Equity million the company completed an out of court
and Notes recapitalisation. The transaction
provided incremental liquidity to
fund its business plan. The company's
performance continues to improve
but earnings growth has been slower
than expected and the position is
anticipated to be an exit in 2021
from 2Q20.
=========== ========= =======================================
During the quarter, the board approved a GBP2.5 million
(GBP0.0332/share) capital distribution by way of redemption
bringing total distributions (including share buy-backs) to GBP36.2
million or 33% of original capital.
Share Buy-Backs
NBDDIF repurchased 230,000 shares in NBDG during the quarter at
a weighted average discount of 13.3% and a cost of GBP178,122.
Since inception to date, a total of 12,747,200, or 11.5% of the
original NBDG shares at a cost of GBP9.0 million, have been
repurchased and cancelled.
Factsheet
An accompanying factsheet on the information provided above can
be found here
http://www.rns-pdf.londonstockexchange.com/rns/4305U_1-2019-11-22.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.
-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
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. 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
NBDG'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.
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END
PFUFEUFMEFUSEDF
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