3i’s realisations drop, investment rises

3i’s realisations fell 28.7 percent to £2.44 billion (€3.06 billion; $4.75 billion) last year to £1.74 billion, according to its preliminary results. But the firm invested £2.16 billion in the year up from £1.58 billion previously, with a rise in average investment size from £26 million to £37 million.

Philip Yea: repositioning provides position of strength

3i’s net asset value grew by 16 percent to £10.77 per share in the financial year to 31 March 2008. The group’s discount to NAV is 18.2 percent after the share price rose 1.44 percent to £8.82 per share at 1112BST. 

The group’s assets under management grew by 37 percent to £9.8 billion, while it made a return on opening shareholders' funds of £792 million compared to 26.8 percent, or £1.08 billion in the previous financial year.

“The markets are uncertain,” Philip Yea, 3i chief executive, said. “Having taken advantage of favourable conditions to reshape the group over the last few years we believe we face these market conditions from a position of strength.” 3i has increased investment in growth capital, infrastructure and mid-market buyouts, while it has abandoned early stage venture.

3i is launching an offering of £425 million of convertible bonds due 2011. These are to refinance its existing €550 million ($852 million) convertible bonds which mature on 1 August 2008. Dresdner Kleinwort and Lehman Brothers are acting as joint bookrunners. The conversion price will be set at a premium of between 25 percent and 30 percent.

The group established an €800 million debt warehouse in October in which 3i committed €160 million on a first loss basis. Lloyds TSB provided a €640 million debt facility, according to a source close to the company. As at 31 March 2008, the warehouse had invested €275 million. The short tem mark to market loss on this investment was €15 million due to market volatility, it said. The fund is investing opportunistically in the debt markets. The debt fund is run by Andrew Golding.

The group made returns of £731 million or 57 percent on its buyout portfolio compared to £788 million or 54 percent last year. It had returns of £302 million or 21 percent from growth capital compared to £21 million or 48 percent last year. Infrastructure had returns of £67 million, which Yea said was largely related to changes in the share price of 3i Infrastructure, its listed infrastructure affiliate. The quoted private equity portfolio made a loss of £42 million and venture capital a loss of £17 million.
 
The firm’s growth capital investment more than doubled on last year to £990 million; buyout investment rose 58.2 percent to £788 million; infrastructure investment was £38 million down from £380 million, reflecting the listing of 3i Infrastructure; quoted private equity investment was £182 million; and venture capital investment was £156 million.

The group realised £471 million from its buyout business, £320 million from growth capital and £70 million from venture capital.