ICG puts 13% of portfolio on danger ‘watchlist’

The UK-quoted investment firm has suffered a ‘marked deterioration’ in a number of ‘weaker assets’ since September.

Intermediate Capital Group has seen “a marked deterioration in the operating performance of a limited number of weaker assets”, according to an interim management statement for third quarter to 31 December 2008.

The economic downturn has caused marked reductions in the value of 13 percent of the firm’s portfolio, ICG said. It has created a “watchlist” of at-risk firms, which a team of senior investment executives are keeping a close eye on.

The firm said, however, that its loan and investment portfolio continues to perform satisfactorily. In the review of the last quarter more than two-thirds of its portfolio companies were performing at or above the prior year level, it said.

During the period 31 September to December 2008 ICG was still investing, despite having said in its half-year report in November 2008 that the leveraged buyout market was closed, due to the “drought of liquidity”. Of the four investments made during this period, two were LBOs: The A$150 million mezzanine facility to refinance the senior debt of Australian company Veda by ICG Asia Pacific Fund, which closed on $1 billion in October; and the investment in an Italian company that manufactures vending machines, N7W Global Vending, with a €150 million mezzanine debt facility. The firm said these had been committed to prior to the end of September 2008.

Overall, £205 million in funding was arranged or provided for the four investments, which were made in the third quarter. Its loan and investment portfolio grew overall by £514 million or 19 percent to £3,103 million. However, this was largely due to currency movements, which added £484 million due to the strength of the Euro and the US Dollar against Sterling.

ICG was founded in 1989 and quoted on the London Stock Exchange in 2002. It has invested more than £10 billion in mezzanine and equity transactions since it was established, and currently manages £8 billion in mezzanine and other third party funds.