Investcorp has written down its private equity and real estate co-investments by $350 million, contributing signficantly to an annual net loss of $780.6 million.
The write-downs, in line with fair value accounting practices, “reflect a conservative view in light of continued economic uncertainty that could prolong a period of weaker earnings growth and lower multiples”, the firm said in a statement. However, Investcorp said that there is no near-term pressure to sell any of the co-investments at the currently depressed values as year-on-year EBITDA growth has either been positive or remained flat for a majority of its portfolio companies.
The annual loss was a first for the Bahrain- and London-listed alternative investment firm, which called fiscal 2009 “the most challenging year since the formation of the firm in 1982″.
In the year ended 30 June 2009, the firm made a total of five investments worth $553 million, excluding add-on acquisitions made through its portfolio companies. No exits were made in the fiscal year.
It also deployed $111.4 million of capital into real estate debt investments from its two real estate debt funds.
The firm’s bottom line was also significantly impacted by a reduction in income through fees. Fee income for the 2008-09 fiscal year stood at $129.4 million, down from $382.9 million a year ago – a decline the firm attributed to “an unprecedented low level of investment acquisition and deal-by-deal placement”.
Although Investcorp recorded its first ever annual loss, the second half of the fiscal year 2009 actually saw an improvement on its performance. From January to June 2009, the firm saw a net loss of $269.5 million, 47 percent less than the $511.1 million in losses recorded from July to December last year.
The firm’s total assets at the end of June 2009 stood at $3.6 billion, a decline of 24 percent compared to the previous fiscal year.
In January, Investcorp suffered a ratings downgrade by Standard and Poor's due to falling valuations of its investment portfolio and high leverage levels.
The firm has been in cost-cutting mode for much of the past fiscal year. In June this year, it streamlined its management structure and eliminated the role of chief operating officer, resulting in the exit of Gary Long. In December 2008, Investcorp slashed 20 percent of its work force across offices in Bahrain, London and New York.
The cost-cutting measures were reflected in the firm's annual results. In the fiscal year gone by, Investcorp's total operating expenses stood at $206.3 million, 22 percent lower than in the preceding fiscal year.