NB Distressed Debt has published interim results covering the six months to the end of June 2016. By that point, the NBDD Share Class had returned, through capital distributions, $108.4m or 87% of investors’ original capital of $125.0m by the end of the period. This, when added to the NAV of $40.3m, brings the ratio of total value to 119% of original capital invested. The net asset value per share increased by 2.2% during the period, compared to an increase of 3.5% in the HFRI Distressed/Restructuring Index and a return of 9.8% in the defaulted loans segment of the S&P/LSTA Index. The NBDD share price decreased by 4.1% during the same period reflecting a widening of the discount from 2.5% to 8.6%.
The NBDX Share Class had returned, through capital distributions, $129.5m or 36% of investors’ original capital of $359.4m by the end of the period. This, when added to the NAV of $228.8m and buybacks of $3.7m brings the ratio of total value to 101% of original capital invested. The NAV per share modestly increased by nearly 0.1% during the period with declines in shipping and power investments being offset by the general recovery. The NBDX share price increased by 7.6% during the period reflecting a narrowing of the discount from 14.8% to 8.3%. Since the start of the period and up to the latest practicable date prior to writing the Company has continued to support a buyback programme and repurchased 1.3m NBDX shares at a total cost of $1.2m and at a weighted average discount of 6.6%.
At 30 June 2016 the NBDG Share Class was 79% invested and its investment period ends in March 2017. Although NBDG is yet to return capital to investors through capital distributions, the NBDG Share Class has returned GBP5.8m in buybacks, which when added to the NAV of GBP82.1m, brings the ratio of total value to 79% of GBP110.8m of original capital invested. During the period NBDG’s NAV (which is expressed in Pound Sterling) increased by 9.3% primarily as a result of foreign exchange gains which were amplified post the Brexit result. During the same period the NBDG share price decreased by 2.2%, the combination of which resulted in a widening of the discount from 13.7% to 22.8%.
The Board say that a number of shareholders have provided feedback over recent months seeking greater transparency on the Company’s investments and returns. Whilst the Board does not deem it appropriate to make available a full listing of the portfolios to shareholders, as the information is considered commercially sensitive and often subject to non-disclosure agreements, they have made a number of improvements to our disclosures.
In NBDD’s portfolio, the sale of a power plant located in the northeast U.S. was finalised and NBDD received $6.9m in sales proceeds. Final distributions from escrow holdbacks will be distributed when received. NBDD sold its position in a U.S. REIT that generated proceeds of $2.7m in the first half of 2016 and a total return of $0.5m. NBDD’s investment in debt secured by a portfolio of aircraft increased by 22% after the aircraft trust announced a sale of the portfolio to a strategic buyer. Proceeds from the sale will be used to repay principal through the third quarter of 2016. A German forest products company repaid one tranche of debt from a debt recapitalisation transaction, generating $0.7m cash. They continue to hold other outstanding debt investments in this company.
The primary drivers of NBDX’s NAV movements were declines in shipping and power investments being offset by a recovery in credit markets from the significant volatility at the end of 2015 and beginning of 2016 as well as certain credit specific improvements. NBDX exited an investment in a financial intermediary through the sale of the company which concluded at the end of the second quarter. The exit price reflected a significant increase over the year end value, generating proceeds of $5.5m and a total return during the first half of the year of $3.6m. NBDX’s investment in debt secured by a portfolio of aircraft increased by 22% after the aircraft trust announced a sale of the portfolio to a strategic buyer. Proceeds from the sale will be used to repay principal through 3Q16. The portfolio sold its position in a U.S. REIT that generated proceeds of $6.9m in the first half of 2016 and a total return of $1.2m. The sale of a power plant located in the northeast U.S. was finalised and NBDX received $17.9m sales proceeds. Final distributions from escrow holdbacks will be distributed when received. A lodging and casino investment tendered for contingent equity rights cleaning up the capital structure to better enable a liquidity event. Cash of $0.3m was received on the tender and the remaining equity appreciated 40% during the first half. A German forest products company repaid one tranche of debt from a debt recapitalisation transaction, generating $1.9m cash. This is the same investment as in NBDD (see above). The sale of the underlying property in an infrastructure investment generated a partial repayment of bank debt (cash proceeds of $0.9m). They are awaiting final payment on the debt from escrow releases. A shipping investment sought to raise debt financing and additional equity from existing equity holders and NBDX participated to protect against dilution of its equity position.
At 30 June 2016, 79% of NBDG’s NAV was invested in distressed assets. NBDG has 27 investments across 11 industries. The largest concentrations were in lodging and casinos, utilities, oil & gas and shipping. In the first quarter we added exposure to an Australian wind farm and added incremental exposure to existing names including a liquidation investment of a marine services company, a western U.S. land bank and a dry bulk shipping company. We reduced exposure to a lodging and casino investment through a tender offer. They exited an investment in a Midwest U.S. infrastructure asset through sale of the underlying property. This transaction closed during the first half of 2016 and generated cash of GBP4.1m in the first half and a total return of GBP1.3m over the life of the investment. A lodging and casino investment tendered for contingent equity rights cleaning up the capital structure to better enable a liquidity event. Cash of GBP1.0m received on the tender and remaining equity appreciated 40% during the first half. The sale of a power plant located in the northeast U.S. was executed and NBDG received GBP5.0m sales proceeds. Final distributions from escrow holdbacks will be distributed when received. The sale of the underlying property in an infrastructure investment generated a partial repayment of bank debt (cash proceeds of GBP1.43m). They are awaiting final payment on the debt from escrow releases. A shipping investment sought to raise debt financing and additional equity from existing equity holders and NBDG participated to protect against dilution of its equity position.
NBDD / NBDX / NBDG : Welcome increase in disclosure by NB Distressed Debt