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NB Private Equity Partners Ltd. — Net Asset Value 2016
Oct 14, 2016
6280_iss_2016-10-14_c718f51e-5d14-4aee-9569-f88c097c75b2.pdf
Net Asset Value
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FUND OBJECTIVE
NB Private Equity Partners Limited ("NBPE" or the "Company") is a closed-end investment company registered under the laws of Guernsey managed by NB Alternatives Advisers LLC (the "Investment Manager"), an indirect wholly owned subsidiary of Neuberger Berman Group LLC.
Our investment objective is to produce attractive returns on capital by investing directly into Private Equity backed companies with a focus on capital efficient strategies while managing risk through portfolio diversification. NBPE pursues diversification across capital structure, asset class, vintage year, geography, industry and sponsor.
FUND MANAGER: NB ALTERNATIVES
- 29 years private equity investing experience
- Over \$35 billion of commitments managed
- Stable team with over 110 investment professionals with global presence
- Investments with over 200 private equity firms
MANAGER COMMENTARY
During September, NBPE received \$26.3 million of distributions from income investments, of which \$22.0 million was the result of full exits from two second lien debt positions. The remaining distributions from the income portfolio consisted of interest and principal payments. In the direct equity portfolio, NBPE received \$1.2 million of proceeds from the continuing realisation of its public holding of Commscope. NBPE also received \$3.6 million of distributions from its fund portfolio during September. In terms of new investments, NBPE funded \$6.0 million into new income investments and \$5.5 million to new and follow-on equity investments.
In a notable post reporting period event, on 11 October 2016, Extraction Oil & Gas (previously referred to in NBPE reporting as "Oil & Gas Company") completed an initial public offering. The IPO price has been used in this monthly report to reflect fair value as of September 30th 2016. Following this uplift in valuation, Extraction represents the largest investment in NBPE, comprising 4.4% of September 30th 2016 net asset value and increasing total public equity exposure to 12.3% of net asset value.
A notable capital structure initiative was completed during September, with the issuance of £50 million of 2022 ZDP Shares at a Gross Redemption Yield of 4%. This new issue was substantially completed through a roll over of the existing 2017 ZDP shares. This issuance, together with the new credit facility put in place in June 2016, extends NBPE's financing maturities and positions it with a strong balance sheet and significant capacity for new investments.
PORTFOLIO ACTIVITY 5 BALANCE SHEET DEVELOPMENT
Funds Direct Equity Investments Income Investments
| NET ASSET VALUE DEVELOPMENT | |||
|---|---|---|---|
| ----------------------------- | -- | -- | -- |
(\$ in millions, except per share data) Summary o f N A V o f Ordinary Shares 30 September 2016 (Unaudited) 31 A ugust 2016 (Unaudited) Direct Investments Direct Equity Investments \$385.8 \$366.6 Income Investments \$209.1 \$227.5 Total Direct Investments \$595.0 \$594.1 Fund Investments \$154.3 \$158.3 T o tal P rivate Equity Investments \$ 749.3 \$ 752.4 Cash and Cash Equivalents \$55.2 \$79.6 Credit Facility Outstanding - (\$50.0) 2017 ZDP Share Liability (\$15.0) (\$69.8) 2022 ZDP Share Liability, incl. Forward Currency Contract (\$65.0) - Net Other Assets (Liabilities), incl. M inority Interest (\$4.9) (\$3.7) N et A sset Value \$ 719.6 \$ 708.5 N et A sset Value per Share * \$ 14.75 \$ 14.52 N et A sset Value per Share Including 2016 D ividends * \$ 15.25 \$ 15.02 C lo sing Share P rice (Euro next A msterdam) \$ 11.20 \$ 10.60 P remium (D isco unt) (24.0%) (27.0%) Summary o f P rivate Equity Expo sure Estimated Fair Value of Private Equity Investments \$749.3 \$752.4 Adjusted Unfunded Private Equity Commitments** \$45.0 \$47.2 A djusted T o tal P rivate Equity Expo sure \$ 794.2 \$ 799.6 Private Equity Investment Level 104% 106% Cash + Undrawn Committed Credit Facility \$205.2 \$179.6 Adjusted Commitment Cover Ratio** 456% 380% (In £) Summary o f the Z D P Shares 2017 Z D P N et A sset Value per Share *** 161.95p 161.01p C lo sing Share P rice (LSE) fo r 2017 Z D P shares 169.75p 169.75p P remium (Discount) 4.8% 5.4% 2022 Z D P N et A sset Value per Share *** 100.17p N/A C lo sing Share P rice (LSE) fo r 2022 Z D P shares 106.63p N/A
P remium (Discount) 6.4% N/A
ORDINARY SHARE INFORMATION
| Trading Symbol: | NBPE |
|---|---|
| Exchanges: | Euronext & LSE |
| Euronext Admission Date: | 25 July 2007 |
| LSE Admission Date: | 30 June 2009 |
| Base Currency: | USD |
| Bloomberg Ticker: | NBPE NA, NBPE LN |
| Reuters Ticker: | NBPE.AS, NBPE.L |
| ISIN: | GG00B1ZBD492 |
| Common: | 030991001 |
| Semi-annual Dividends:3 | \$0.25 per share |
| Annualised Dividend Yield:3 | 4.5% on share price, 3.4% on NAV |
ZDP SHARE INFORMATION
| Trading Symbol: | NBPZ (2017) / NBPP (2022) | |
|---|---|---|
| Exchanges: | LSE & CISE / LSE | |
| Admission Date: | 1 December 2009 / 16 September 2016 | |
| Base Currency: | GBP | |
| Bloomberg Ticker: | NBPEGBP LN / NBPP:LN | |
| Reuters: | NBPEO.L | |
| ISIN: | GG00B4ZXGJ22 / GG00BD0FRW63 |
|
| SEDOL: | B4ZXGJ2 / BD0FRW6 | |
| GRY at Issuance: | 7.3% / 4.0% | |
| Share Life: | 31 May 2017 / 30 September 2022 | |
| Capital Entitlement: | 169.73p / 126.74p |
*As of 30 September and 31 August 2016, there were 48,790,564 class A ordinary shares and 10,000 class B ordinary shares outstanding, with 3,150,408 class A ordinary shares held in treasury. ** Unfunded commitments are adjusted for amounts the Manager believes are unlikely to be called. As of 30 September (31 August) 2016 , unadjusted unfunded commitments are \$270.2 million (\$276.5 million), total private equity exposure is \$1.0 billion (\$1.0 billion) and the unadjusted commitment coverage ratio is 75.9% (65.0%).
*** As of 30 September 2016 , there were 7,019,599 2017 ZDP shares and 50,000,000 2022 ZDP shares outstanding. As of 31 August 2016, there were 32,999,999 2017 ZDP shares outstanding. Note: Numbers may not sum due to rounding.
ASSET CLASS AND INVESTMENT TYPE BY FAIR VALUE
YEAR OF INVESTMENT BY FAIR VALUE
INDUSTRY BY FAIR VALUE
GEOGRAPHY BY FAIR VALUE
LTM ORDINARY SHARE PRICE AND NAV PERFORMANCE (TOTAL RETURN) AND TRADING VOLUME
12%
VALUATION METHODOLOGY
The Company carries its private direct equity investments on its books at fair value using the best information it has reasonably available to determine or estimate fair value. Publicly traded securities are valued based on quoted prices as of the last day of the relevant period less discounts to reflect legal restrictions, if any, that affect marketability. The Company determines such values for publicly traded securities held directly as well as known public positions held in the underlying private direct equity investments on a look-through basis. The Company estimates fair value for private interests based on a methodology that begins with the most recent information available from the general partner of the underlying fund or the lead investor of a direct equity investment, and considers subsequent transactions, such as drawdowns or distributions, as well as other information judged to be reliable that reports or indicates valuation changes, including realizations and other portfolio company events. The Company proactively re-values its investments before it has received updated information from the fund manager or lead investor if it becomes aware of material events that justify a change in valuation. If the Company concludes that it is probable an investment will be sold, the Company will adjust the fair value to the amount the Company expects to realize from the sale, net of transaction costs.
For debt investments, the Company estimates the enterprise value of each portfolio company and compares such amount to the total amount of such portfolio company's debt, as well as the level of debt senior to our interest in such portfolio company. Estimates of enterprise value are based on a specific measure (such as EBITDA, free cash flow, net income, book value or NAV) believed to be most relevant for the given portfolio company and compares this metric in relation to comparable company valuations (market trading and transactions) based on the same metric. In determining the enterprise value, the Company will further consider the portfolio companies' acquisition price, credit metrics, historical and projected operational and financial performance, liquidity as well as industry trends, general economic conditions, scale and competitive advantages along with other factors deemed relevant. Valuation adjustments are made if estimated enterprise value does not support the value of the debt security in which the Company is invested and securities senior to NBPE's position.
If the principal repayment of debt and any accrued interest is supported by the enterprise value analysis described above, the Company will next consider current market conditions including pricing quotations for the same security and yields for similar investments. To the extent market quotations for the security are available, the Company will take into account current pricing and liquidity. Liquidity may be estimated by the spread between bid and offer prices and other available measures of market liquidity, including number and size of recent trades and liquidity scores. If the Company believes market yields for similar investments have changed substantially since the pricing of our security, the Company will perform a discounted cash flow analysis, based on the expected future cash flows of the debt securities and current market rates. The Company will also consider the maturity of the investment, compliance with covenants and ability to pay cash interest when estimating the fair value of our debt investment.
NBPE expects to issue its quarterly report for the nine month period ended 30 September 2016 in November. The quarterly report will include unaudited financial information prepared in accordance with accounting principles generally accepted in the United States. NBPE is required to consider, and will consider, all known material information in preparing such quarterly report, including information that may become known subsequent to the issuance of this monthly report. Accordingly, amounts included in the quarterly report may differ from this monthly report.
TRADING VOLUME AND SHARE REPURCHASE ACTIVITY
During the month of September, NBPE's aggregate trading volume on Euronext Amsterdam, the London Stock Exchange, and over-the-counter trading platforms was 1,737,110 Class A ordinary shares, which represents an average daily trading volume of approximately 78,960 Class A ordinary shares.
The Share Buy-Back Programme expired on 31 May 2016; however, the programme remains an option to the Company in future periods, if deemed suitable by the Directors at a later time. As of 30 September 2016, there were 48,790,564 class A ordinary shares and 10,000 class B ordinary shares outstanding, with 3,150,408 class A ordinary shares held in treasury.
INVESTMENT MANAGER REGISTERED OFFICE
| NB Alternatives Advisers LLC | Email: [email protected] | NB Private Equity Partners Limited St. Peter Port, Guernsey GY1 4HY |
|
|---|---|---|---|
| 325 N. Saint Paul Street | Tel: +1.214.647.9593 | P.O. Box 225 | Channel Islands |
| Suite 4900 | Fax:+1.214.647.9501 | Heritage Hall, Le Marchant Street | Tel.+44-(0)1481.716.000 |
| Dallas, TX 75201 | www.nbprivateequitypartners.com | Fax.+44-(0)1481.728.452 |
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- Figures provided are unaudited and subject to change. Certain numbers may not total due to rounding.
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- Other includes realised gains, investment income not classified as yield income, expenses, the ZDP liability and value changes to other assets and liabilities.
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- NBPE declared a \$0.25 per Share dividend on 12 July 2016, paid on 31 August 2016. On an annualised basis, this dividend payment represents a dividend yield of 3.4% based on the estimated September 2016 NAV and 4.5% based on the Euronext closing price of \$11.20 on 30 September 2016.
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- The diversification analysis by asset class and investment type is based on the fair value of underlying fund investments and direct/co-investments. The diversification analysis by year of investment, geography and industry is based on the diversification of underlying portfolio company investments at fair value as estimated by the Investment Manager. The year of investment is calculated at the portfolio company level and is defined as the date of capital deployment into a particular underlying investment. The diversification by year of investment also includes an allocation of net cash flows and valuation adjustments made since financial statements were last received from the investment sponsor. Accordingly, the actual diversification of the Company's investment portfolio and the diversification of the Company's investment portfolio on an ongoing basis may vary from the foregoing information.
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- Direct equity investment diversification includes all equity, including associated equity from income investments.
This document is not intended to be an investment advertisement or sales instrument; it constitutes neither an offer nor an attempt to solicit offers for the securities described herein. This report was prepared using financial information contained in NBPE's books and records as of the reporting date. This information is believed to be accurate but has not been audited by a third party. This report describes past performance, which may not be indicative of future results. None of NBPE or the Investment Manager accepts any liability for actions taken on the basis of the information provided.
NBPE is registered with the Dutch Authority for the Financial Markets as a collective investment scheme which may offer participations in The Netherlands pursuant to article 2:66 of the Financial Markets Supervision Act (Wet op het financieel toezicht). All investments are subject to risk. Past performance is no guarantee of future returns. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results.