3i rights issue buoys sector

The listed private equity firm has raised more than £730m, which it will use to continue its de-levering process. Other listed private equity stocks reacted well to the news Friday.

3i Group said Friday it has received valid acceptances for around 97 percent of shares offered in a £732 million (€862 million; $1.2 billion) rights issue. The proceeds of the rights issue will be used to continue the reduction of 3i's net debt without the need to sell off assets too quickly, the firm said. The firm will also use the cash to take advantage of new investment opportunities.

Details of how the proceeds would be split between paying down debt and making new investments have not been revealed, but previous press reports, citing people familiar with the plan, said around £400 million would be used to de-lever, with the remainder earmarked for new investments.

The successful rights issue follows 3i's return last week to the FTSE 100, the ranking of the UK's 100 largest listed companies. 3i dropped out of the list in March this year, when its shares dropped to a low of £1.74. Shares have since bounced back following the group's continued effort to reduce its net debt levels. They have almost doubled from their low in March to £2.68 at press time.

Gains in 3i's share price have been mirrored among some other listed private equity stocks. Shares in Candover Investments, a firm which has been dogged by liquidity issues since the financial crisis intensified last year, rose almost 37 percent to £2.91 last week on news that it may be close to a successful exit of portfolio company Wood Mackenzie.

Elsewhere listed private equity funds such as New Star Private Equity Investment Trust and Standard Life European Private Equity recorded more modest gains over the last seven days of 7.4 percent and 6.3 percent, respectively.

As of 29th March 2009, 3i's net debt stood at more than £1.9 billion: 103 percent of the firm's total equity. Michael Queen, who replaced Philip Yea as 3i's chief executive in January, hopes to have reduced this figure to around £1 billion in the next 12 to 15 months.