NB Distressed Debt has announced results for the year ended 31 December 2015. NBDD’s NAV per share decreased 10.7% during the year, to $1.1184 from $1.2521 per share, compared to a drop of 8% in the HFRI Distressed/Restructuring Index and a drop of 43% in the defaulted loans segment of the S&P/LSTA Index.
Similarly the Extended Share Class had handed back 25% by the end of the year, while also suffering a decline in NAV of 16% in the year. During 2015 the Company also bought back 2,453,766 shares at an average discount of 5.8%, which added 0.05 cents to NAV. In mid-December the Board temporarily suspended share buybacks amid concerns that the direction of markets might make these disadvantageous to those shareholders who wished to continue their investment. This caused the discount to widen for a period but, since buybacks were recommenced, with a further 1,114,000 being bought in 2016, it has narrowed again to 4.5% as of the latest practicable date prior to publication of this report.
The New Global Share Class is still in its investment phase, which ends in March 2017 and, consistent with the other classes suffered a decline in NAV of 17.1% during the year. During 2015 the Company also bought back 4,065,000 shares at an average discount of 10.4%, which added 0.42 pence to NAV. Again the Board decided to suspend buybacks in mid-December for the same reason as for the Extended Share Class, but also to preserve cash in order to take advantage of opportunities that unduly low asset prices might offer. In order to strike a balance between the potential benefit of increasing NAV and preserving capital for investment, the buyback programme was recommenced on a more limited basis: this has enjoyed some success as the discount at the latest practicable date prior to publication of this report now stands at 9.6% of NAV, compared with 15.0% at the year-end.
The managers’ report says, during 2015, NBDD exited three positions that contributed $2.2 million (inception to date) to NBDD’s NAV. NBDD has had 31 exits since inception with net gains of $25.0 million and a weighted average IRR from inception to date of 20% on the 31 exits. To date, NBDD has returned 75% of original capital ($93.5 million) to investors with another 6% ($7 million) distributed in Q1 2016 and an additional 3% ($4.5 million) approved for distribution in Q2 2016, bringing total approved cash distributions to $105.0 million. NBDD recently received the first distribution from the proceeds of the previously announced sale of the eastern USA power plant, additional repayments of portfolio loans and distributions on private equity investments in 2016. NBDD has 26 remaining investments in various stages of restructuring. They continue to see upside potential in these investments, many of which have suffered mark-to-market write-downs.
During 2015, NBDX exited seven positions that contributed $6.6 million net gain (inception to date) to NBDX’s NAV. NBDX has had 35 exits to date and net gains of $66.7 million and a weighted average IRR from inception to date of 21% on the exits.
On 31 March 2015, the investment period of NBDX expired and the assets of NBDX were put into run-off following such expiration. To date NBDX has returned 25% ($90.4 million) of original capital to investors through distributions and share buybacks with another 6% ($20 million) distributed in Q1 2016 and an additional 3% ($11 million) approved for distribution in Q2 2016 bringing total approved cash distributions to $121.4 million. NBDX recently received the first distribution from the proceeds of the previously announced sale of the eastern USA power plant, partial repayment of bank debt secured by an Australian toll road concession, additional repayments of portfolio loans and distributions on private equity investments in 2016.
NBDX has 46 remaining investments in various stages of restructuring. We continue to see upside potential in these investments which have suffered mark-to-market write-downs. They believe the portfolio to be undervalued and continue to focus on returning capital to investors while also ensuring that they maximise the value of all assets in the portfolio. NBDX’s NAV was impacted during the year by mark-to-market gains/losses in post-reorganisation equities, energy, utility, financial and infrastructure investments. Specifically Exploration and Production (E&P) investments were negatively impacted by declines in underlying commodity prices some portion of this decline could be permanent.
During 2015 NBDG exited four positions in 2015 that contributed GBP1.0 million net gains to NBDG’s NAV. NBDG has had 6 exits since inception to date with net gains of GBP1.5 million and a weighted average IRR from inception to date of 42%. NBDG’s NAV per share decreased 17.1% during the year, to 73.41 pence from 88.60 pence. Volatility in global markets continues to impact valuations of almost all financial instruments. The increase in volatility has been caused by a number of factors including the lack of liquidity in the leveraged loan and high yield bond markets and severe price declines in oil and other commodities.
NBDD / NBDX / NBDG : Mark to market write downs weigh on NB Distressed Debt