scroll

NB Global Corporate Income Trust (NBI) $1.49 & Perpetual Credit Income Trust (PCI) $1.105

UPDATED 10/04/2024 09:29

trade now

Back in 2021, we sold our position in the NB Global Corporate Income Trust (NBI) from the Income Portfolio at $1.88, writing at the time: This listed investment trust trades at a discount to NTA, which is not ideal, however, it is very much exposed to a large cross-section of US Junk Bonds. As spreads hit record lows, the backdrop for NBI is as good as it gets in MM’s view

Since then, NBI has continued to trade at a persistent discount to the value of their assets, which sat at $1.63 on the 8^th of April. The persistent discount experienced by NBI and many other listed investment companies or trusts has prompted the decision by NBI to delist from the ASX – a good call by NBI for the benefit of unit holders. A reminder to subscribers who may still be holding this security, NBI is scheduled to be suspended from trading on May 10 and delisted on May 15. Holdings will get units in an unlisted structure, however, investors will not receive any distributions or other proceeds from the fund post 15^th May 2024 until a valid TIF has been completed, with details on this available here: http://www.nb.com/nbi

While holding an unlisted structure has more complications, redeeming units will be done at the prevailing NTA (last at $1.63) while selling on the market will be done ~$ at $1.49. Thus, it is more hassle but makes more sense to redeem units at the NTA post-delisting.

An alternative to NBI that we are looking at is the Perpetual Credit Income Trust (PCI). PCI offers a similar return profile to the private credit/high yield players, with the added benefit of a more diversified portfolio across multiple sectors. One thing we like about PCI is that it sticks with the largest credit issuers while following the Standard and Poor rating scale; many of the others tend to lend to smaller issuers and use their own internal rating scales.

The share price at $1.10 is trading in line with the value of the portfolio (NTA), and it has a running yield of 8.1%. The only aspect we’re less positive on is its floating rate nature; we are more positive on fixed rates at this stage of the cycle. However, it is a very solid security.