SVG awaits ‘wall of cash’ to kick-start commitments

SVG Capital, the London-listed investor in Permira’s funds, reported a strong set of results this morning, having strengthened its balance sheet with a series of measures throughout 2009.

The most recent of these was the renewal of a revolving credit facility, which, said chief executive Lynn Fordham in a telephone interview Thursday morning, was “the last piece in the jigsaw”. “I am quite comfortable with the [cash] coverage we have,” she said.

Measures taken by the company to improve its liquidity position during 2009 included reducing its €2.8 billion commitment to Permira’s fourth fund by 40 percent and raising around £170 million via a rights issue.

SVG’s cash balance was £144 million at the end of December. Uncalled commitments currently stand at £371.1 million, which is around 90 percent covered by the cash position combined with a revolving credit facility of £191 million.

During 2009, SVG made no new commitments to third party funds, instead only using minimal funds to seed its own funds of funds, managed by subsidiary company SVG Advisers, and meet capital calls for follow-on investments.

When asked how long it would be before SVG was once again in a position to make new commitments to primary funds, Fordham said: “To put it bluntly, we need to get some money in the door.”

In October, Kurt Björklund, co-managing partner of Permira, said his firm was preparing to deliver a “wall of cash” back to investors.

“Every time I meet him, I ask him if he has any bricks with him,” an upbeat Fordham joked.

SVG was able to write up its net asset value by 30 percent since June 2009. “The majority of the portfolio is well positioned to capitalise on a recovery and improving market conditions may also provide opportunities for Permira to realise some of the more mature investments within the portfolio,” said Fordham. Action taken by Permira during 2009 reduced the debt levels across its portfolio companies by €4.5 billion, or 18 percent of the debt associated with its 20 largest investments.

Among the portfolio investments to be written up, were TDC, which was up 40 percent in value, Galaxy, which was up 171 percent and Provimi, which was up 58 percent. AA Saga and Birds Eye igloo also saw improved valuations.

JPMorgan Cazenove analyst, Chris Brown, described the results as being at the “top end” of what had been hoped for: “The bad news was mostly taken in H1 – which also coincided with unhelpful currency movements,” he said in a note to investors Thursday morning, “while the almost universally good news in H2 was accompanied by positive forex movements.”

Brown also noted that while the portfolio is quite concentrated, “it has been deleveraged at the underlying level and appears to be through the worst.”

SVG shares were up 7.7 percent to £1.44 at press time.