£100m pain not gain

In a move that reveals the dilemma private equity houses have when valuing portfolio companies that are undergoing difficulties, Legal & General Ventures (LGV) is reported to have written off its £100m investment in UniPoly despite recent initiatives to revive the company's fortunes.

LGV was one of the investors that backed the £620m ($851.4m) management buy-out of UniPoly from conglomerate BTR (now called Invensys) in 1997. BTR received £515m for the company, which also raised a further £105m of expansion capital. LGV led the investors who put in £175m of equity and £50m of mezzanine finance, while Fuji Bank led the £395m debt financing.

UniPoly makes industrial belting, fluid handling equipment and owns Schlegel, the US-based shielding equipment maker.

The original strategy was to list the business or to break it up and sell on the parts within a three to five year period. Although one division was sold, the remainder have struggled and earlier this month the investors and banks bought in a new management team in an effort to re-invigorate operations.

This team is being led by Chief Executive Michael Teacher, formerly chief executive of Hillsdown, the food group. Chris Parratt, former finance director of pub chain Mill House has been drafted in as finance and commercial director.

Despite having a turnover approaching £400m and profits of £40m before interest payments, UniPoly is said to be struggling to service its interest payments.

The 28 banks and eight mezzanine lenders in the syndicate have promised to support the business after 'a recent period of uncertainty', said Mr Teacher quoted by the Financial Times. Close Brothers Corporate Finance advised on the agreement with the banks. UniPoly said in a statement that the changes would 'provide a stable foundation from which the new management can develop the business'.