NB Distressed Debt’s run-off continues- NB Distressed Debt Investment fund (NBDD), which is currently undergoing a run off program, has published its annual report and audited financial statement for the year ended 31 December 2017.
The company overall has an indefinite life span. It is made up of a number of different share classes, which are currently in “harvest periods”. This means that assets of the company are being realised to gradually return them to share holders, mostly in the form of dividends. Due to the nature of distressed debt and similar asset classes in which the company invests, it is not clear when these payments are made. However, the program is likely to continue into 2020.
Strategy
The investment period of each share class has expired. During the investment period, the Investment Manager sought, in accordance with the Investment Policy, to identify mis-priced or otherwise overlooked securities or assets that had the potential to produce attractive absolute returns while seeking to limit downside risk through collateral and structured protection where possible.
The Ordinary Shares, Extended Life Shares and New Global Shares (collectively the “Portfolios”) are biased toward stressed and distressed debt securities secured by hard asset collateral in accordance with the Investment Policy.
At 31 December 2017 the Company’s share capital comprised the following:
Ordinary Share Class (NBDD)
26,714,397 Ordinary Shares, none of which were held in treasury.
Extended Life Share Class (NBDX)
173,302,953 Extended Life Shares, none of which were held in treasury.
New Global Share Class (NBDG)
98,733,585 New Global Shares, none of which were held in treasury.
Chairman’s statement
In his statement, the chairman makes it clear that the investment manager is now focused on maximising the value of the portfolios and returning capital to shareholders. Shareholders should note that towards the end of the Portfolios’ respective harvest periods, a residual amount will be retained in accordance with regulatory requirements until such time that all assets in that Portfolio can be liquidated and returned to shareholders.
He goes on to say that the board continually reviews both the most appropriate means for returning of capital to shareholders and the very structure of the Company to maximise the benefit to shareholders. In addition, he highlighted that the company’s corporate umbrella has an indefinite life and as such it does have the flexibility to add new share classes in the future subject to identifiable demand, market opportunities and shareholder approval although there are no plans to do so at the current time.
Performance and progress
NBDD had returned $121.1m or 97% of investors’ original capital of $124.5m by the end of the year.
- This, when added to the NAV of $29.6m, brings the ratio of total value to 121% of original capital invested.
- The adjusted NAV per share increased by 6.2% during the year.
- The discount to NAV varied from a low of 2.1% to a high of 9.5% with an average discount over the year of 5.3%.
- Available cash which is net of cash held in subsidiaries and available cash totalled $0.3m as at 31 December 2017.
Although the actual time and realisation values are uncertain, based on the company’s current analysis it is expecting to make distributions to investors throughout 2018 and 2019 and any remainder in 2020.
NBDX had returned $194m or 54% of investors’ original capital of $359.4m by the end of the year.
- This, when added to the NAV of $180m and buybacks of $1.7m brings the ratio of total value to 106% of original capital invested.
- The NAV per share increased by 5.9% during the year.
- The gradual growth in NAV per share as a result of the buybacks in the year amounted to 0.110%.
- Available cash totaled $3.7m as at 31 December 2017.
As with the NBDD share class, whilst the actual timings and values of realisation are uncertain, based on the current analysis we anticipate making distributions through to 2020.
NBDG – Although NBDG is yet to return capital to investors through capital distributions, the NBDG Share Class had returned £8.5m through buybacks by the end of the year and £2.1m through an income distribution by way of dividend.
- The NAV per share had decreased by 1.0% during the year.
- On 18 May 2017 the Board cancelled the 12,052,000 NBDG shares held in Treasury, of which 10,210,000 were purchased in prior years, as the share class entered its harvest period.
- The gradual growth in NAV per share as a result of the buybacks in the period amounted to 0.297%.
- Available cash for NBDG totaled $1.7m as at 31 December 2017.