Listed private equity firm 3i Group has indicated further write-downs will be applied to its portfolio as it moves from holding portfolio companies at cost to valuing them on a mark-to-market basis.
“The board has decided that no assets will be held at cost at 31 March 2009. In addition, the non-core assets in the SMI [small minority investment] and venture portfolios will be valued on their expected disposal proceeds,” the firm said in a pre-close trading statement this morning.
In January, the firm said its top 50 investments, which accounted for 61 percent of the £5.9 billion portfolio value at 30 September 2008, lost an estimated 21 percent, or £682 million, in the fourth quarter.
We are cracking on with our two priorities of reducing net debt and managing the existing portfolio.
3i said it will reduce its net debt by around £1 billion over the next 12 months, a measure likely to assuage analysts concerns over the firm's debt and liqudity levels.
In addition to trying to sell roughly £400 million-worth of assets on the secondary market, 3i's recent capital-raising initiaves have included the sale of a 10 percent stake in its infrastructure fund for £60 million. It will also net £110 million from liquidating its quoted private equity fund.
“We are cracking on with our two priorities of reducing net debt and managing the existing portfolio,” chief executive Michael Queen said during a conference call this morning.
The firm made realisations of £181 million during January and February, taking its total realisations for the past 11 months to £1.1 billion.
Queen said he was “pretty confident” the £1 billion reduction in group debt could be achieved within the next 12 to 18 months.
3i has accelerated the disposal of both its venture capital and small minority investment (SMI) portfolios, which Queen said would most likely be fully divested within the next 12 months.
Like most listed private equity firms, 3i has had to deal with a significant slump in its share price over the last year, falling from a 52-week high of £9.66 per share to £2.56 per share at press time, giving it a market cap of roughly £985 million.
The falling share price has fuelled speculation that 3i could be a takeover target, but so far there have been no approaches. “If there has been any interest, no one has discussed it with us,” said Queen.