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LONDON (Alliance News) - NB Distressed Debt Investment Fund Ltd on Tuesday said regulatory pressures resulted in a "constant stream" of investment opportunities in the distressed debt arena in 2015, but at the same time those pressures weighed on asset values.
"I believe that our portfolio managers have performed satisfactorily in these difficult times and that the company is well-positioned to take advantage of future developments," Chairman John Hallam said.
The ordinary share class had returned 75% of investors' original capital by the end of 2015. The net asset value per share declined by 11% during the year, 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.
The extended share class had returned 25% by the end of the year, while also suffering a decline in NAV of 16% in the year. During 2015 the company bought back 2.5 million shares at an average discount of 5.8%, which added 0.05 cents to NAV. In mid-December the company temporarily suspended share buybacks amid "concerns that the direction of markets might make these disadvantageous to those shareholders who wished to continue their investment."
Buybacks were then recommenced, with a further 1.1 million shares bought in 2016, helping to narrow the discount at which the shares traded to NAV to 4.5% prior to publication of the company's annual report Tuesday.
The company's new global share class is still in its investment phase, which ends in March 2017. Cconsistent with the other classes it suffered a decline in NAV of 17.1% during the year, Hallam said.
During 2015 the company bought back 4.1 million shares at an average discount of 10.4%, which added 0.42 pence to NAV.
"Again your 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," Hallam said.
"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," Hallam said.
Hallam said the new global share class is "well positioned" to benefit from an "attractive opportunity set" in 2016.
"The recent decline in many key commodities and investor concern over global growth has resulted in US corporate loan and high yield distressed ratios climbing to their highest levels since 2009," Hallam said.
"Increased regulation has significantly decreased banks' proprietary balance sheets, reducing liquidity and exacerbating the volatility in the credit markets. In Europe, portfolio loan and asset disposals at banks, including non-performing loans, remain robust. All of these factors have created a significant amount of opportunities for NBDG through the remainder of its investment period," Hallam said.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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