(Alliance News) - 3i Group PLC on Thursday said it has agreed to sell a portfolio company for as much as EUR96 million and is working with its portfolio companies to support them through the Covid-19 pandemic.
Shares in 3i were up 4.3% at 623.19 pence in London in morning trading.
In the nine months ended December 31, the private equity and infrastructure-focused investment manager invested GBP471 million. However, "a number of new investment processes" are being postponed over the pandemic.
In December, 3i announced it has signed an implementation agreement for the disposal of its ACR investment and final approvals for the deal have been obtained. While proceeds from the disposal are subject to escrow arrangements, a first tranche totalling around USD136 million is due in the third quarter of 2020.
On top of this, 3i said is has signed an agreement which will see it sell another of its portfolio companies, as yet undisclosed, for up to EUR96 million. This transaction "will be announced in due course and is expected to complete later this year".
At present, 3i has two long-dated bonds of GBP200 million and GBP375 million, maturing 2023 and 2032 respectively and have no financial covenants. It also refinanced its revolving credit facility on Friday last week, increasing it to GBP400 million from GBP350 million. The new five-year facility can be extended annually for a further two years and its cost, again with no financial covenants, was also reduced.
At the end of March, "before the payment of carry in respect of the action liquidity event due in May 2020", 3i expects to have an approximately GBP800 million cash balance. It has no plans to draw on its revolving credit facility.
After a semi-annual portfolio review, 3i has concluded that most of its portfolio is likely "to experience a modest short-term disruption to its business, principally as a result of the country by country lockdowns".
Portfolio companies "more directly and significantly affected, at least in the short term" include retail firms "Action, BoConcept and Hans Anders" as well as travel firms Audley Travel and ICE. Basic Fit NV, in which 3i's stake is 13%, has also suffered significant share price decline.
3i will be holding a seminar to talk about discount retailer Action's performance, which will include "an update on Action's performance for 2019, and the current status of the impact of Covid-19 on the business". By March 31, 3i will have a 49% interest in Action.
"More generally, we are focused on working with our portfolio companies to support them through these unprecedented times," said 3i.
"For some time, we have had a policy of taking a longer-term approach to the multiples used to value our portfolio. This has meant that, in recent years, we have typically used multiples lower than those prevailing for comparable quoted companies. As a result, we have been able to mitigate the impact of market volatility in the past," 3i commented.
"Although the valuation of our portfolio will depend on market multiples and outlook as at 31 March 2020, the significant and continuing falls in equity markets will put more pressure on the multiples that we will use to value the portfolio as at that date, particularly for those portfolio companies currently most directly exposed to the impact of Covid-19."
By Anna Farley; annafarley@alliancenews.com
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3i Group (III)