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Investing.com -- NBPE has announced a new capital allocation policy that includes a $120 million buyback reserve, set to be available for the next three years. This comes in addition to the firm’s existing dividend policy of 3% or more of net asset value (NAV) per annum.
The reserve will be deployed based on several factors, including NBPE’s share price discount to NAV, market conditions, and performance.
The board of NBPE will re-evaluate the criteria for buyback on a quarterly basis. Despite the new reserve, the board maintains that new investment remains the principal use of the company’s capital in the long term.
This newly outlined framework provides a degree of visibility to the market, although the exact parameters for buyback deployment remain unclear. The total amount of the buyback reserve alone is equivalent to around 10% of NAV, a figure significantly higher than the ’seed’ amounts under the distribution pool arrangements of peers.
In terms of quantum, if the 2025 dividend plus a pro-rata use of the $120 million reserve were used for the remainder of the year, it would equate to 6.5% of NAV. This move suggests that NBPE has considerable balance sheet flexibility, allowing it the potential to increase the buyback commitment in a strong exit environment.
Previously, NBPE’s capital allocation policy was conspicuous by its absence, despite the firm’s narrower discount than peers. This new policy offers a more transparent approach, providing a buyback reserve in excess of the existing dividend policy.
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