Eurazeo is betting on its “solid cash position in 2019” to ride out volatility in the face of the coronavirus pandemic.
“With a solid cash position, no structural debt on the Eurazeo balance sheet and a recently renewed five-year undrawn credit facility of €1.5 billion, the group is well equipped to deal with the economic uncertainties linked to the covid-19 outbreak and seize potential opportunities that may arise,” chief executive Virginie Morgon noted in the firm’s full-year 2019 earnings statement last week.
The Paris-headquartered investment firm ended last year with €533 million in cash and dry powder of €3.8 billion, according to a statement. Eurazeo had also last year secured a €1.5 billion credit line, which is indexed against environmental, social and governance performance criteria, the first “green” credit facility in Europe for a private equity player, as reported by sister title Private Debt Investor.
Eurazeo said it has set up procedures to constantly monitor the impact that coronavirus could have on its portfolio companies, particularly those exposed to tourism and transport and those exposed in China primarily for their supplies. The firm noted “the revenue, profitability and cash position of these companies may be impacted, even though, at the moment, the impacts on the portfolio as a whole are limited”.
The firm is active in markets such as China and South Korea – two countries that have been badly hit by the outbreak – and last year set up an outpost in Seoul. It also teamed up with sovereign wealth fund China Investment Corporation and BNP Paribas last year to create an up to €1.5 billion fund to back continental European companies that want to expand in China.
Global consumer brands including backpack producer Herschel Supply Maker, makeup brand Pat McGrath Labs and luxury fragrance maker NEST are among its portfolio companies.
On investment activities and fundraising, Eurazeo noted in its earnings statement that “a temporary slowdown cannot be ruled out, while the impact on management fees is expected to be limited”. On the continuity of business activity, the firm said it has “taken the necessary measures to ensure the protection of its collaborators”.
Morgon also noted in the statement that the firm’s long-term strategy of international expansion and diversification of resources has worked well and strengthened its financial position, delivering AUM growth of more than 16 percent to €18.8 billion in the last year.
In line with this, the firm is increasing its dividend per share by 20 percent to €1.50, as a sign of this “confidence in the future”, Morgan noted.
Private equity made up 54 percent of the firm’s total AUM or €10.2 billion as of end-2019.