18 February 2019
NB DISTRESSED DEBT INVESTMENT FUND LIMITED
("NBDDIF" or the "Company")
Portfolio Update: Sale of Largest Investment and Potential Distribution
NB Distressed Debt Investment Fund Limited announces the sale of the Company's combined largest holding, a lodging and casino sector investment, for proceeds totalling approximately $34 million. This is substantially equal to the carrying value in the most recent Net Asset Value announcements and represents a gain of approximately $9 million over the acquisition value. The sale has been in progress over the last three quarters.
The asset management team at Neuberger Berman Investment Advisers LLC (the AIFM) provided the following summary of the investment management process surrounding this asset:
"NBDDIF purchased a non-performing loan secured by approximately 60 acres of land adjacent to the gaming corridor in Las Vegas at a significant discount to par value. The initial purchase of the loan was at an implied basis of $1.5 million per acre - the original loans equated to approximately $9.0 million per acre. The borrower (a complex Tenants-In-Common structure of entities) failed to pay the loan when it matured.
The Company, working with other lenders, ultimately foreclosed on the loan collateral, which in addition to undeveloped land included an apartment complex of 998 residential units that had become dilapidated in the absence of capital improvements. NBDDIF and the owners made significant improvements, including the deferred maintenance, repairs, and upgrades needed to bring the units back up to building code standards - increasing overall occupancy, rental rates and cash flow.
The land and apartments had a wide range of potential realisable values, which depended on the various possible future uses and related cash flow profiles. The loan collateral had zoning approval for mixed-use casino and lodging development. Other potential uses included a sports, entertainment and convention facility or a combination of retail, residential or commercial developments.
A buyer developing a new casino or hotel would have likely paid the highest value for the land, whereas a land bank or speculator would have likely been at the low end of price range. NBDDIF and the new ownership worked with advisors to conduct a broad and deep marketing of the property to potential buyers. Engaging with multiple interested parties, the Company prioritised buyers who had the ability to execute with limited contingencies.
Discussions with potential buyers determined that there was ultimately limited appetite to develop the mixed-use casino and commercial facility that would maximize the value of the zoning and likely proceeds in a sale. Following in-depth discussions with a shortlist of buyers, NBDDIF and the owners ultimately executed a purchase & sale agreement with an interested party in 3Q18 and completed the transaction in February 2019.
Impact on NAV and Potential Distributions
The Company will receive approximately $34 million in sale proceeds. Of this, approximately $6.9 million is due to NBDD and $17.9 million to NBDX. The return on investment to these two funds represents a 1.4x multiple on invested capital and an estimated IRR of 4.4%. It represented NBDD's largest investment and NBDX's second largest investment.
NBDG purchased shares in the new entity in the secondary market in 2016 from a forced seller at a different point in the investment's life. NBDG will receive approximately $9.1 million in proceeds. The return on investment to NBDG represents a 1.2x multiple on invested capital and an estimated IRR of 8.3% on a constant USD basis (in GBP terms, an estimated IRR of 6.5%).
The exit values are in line with the investment's contributions to NAV and the most recent base case assumptions for gross realisable values referenced in the fact sheets. The Board of Directors will review the cash positions at the February board meeting to determine the amount and timing of distributions to shareholders. Portfolio fact sheets for NBDD, NBDX and NBDG are being finalised following the successful sale and will be available shortly."
Senior Portfolio Manager Michael Holmberg commented:
"We are pleased to report this successful sale of one of our largest investments, with aggregate proceeds of over $34 million for shareholders. We continue to be focused on restructuring and monetising our investments, balancing timely realisations with maximising proceeds to our investors."
- ENDS -
For further information please contact:
KL Communications |
+44 (0)20 3603 2803 |
Charles Gorman |
[email protected] |
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Stifel Nicolaus Europe Limited |
+44 (0)20 7710 7600 |
Neil Winward |
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Mark Bloomfield |
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Gaudi Le Roux |
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LEI: YRFO7WKOU3V511VFX790
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.
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