Last checked at 
26 Mar 2020 13:12
(LSE: APAX)
Apax Global Alpha Limited
Statement regarding COVID-19
The Board and the Investment Manager of Apax Global Alpha are monitoring the evolving COVID-19 crisis closely and would like to provide an update to shareholders as to relevant developments and what may be the potential impacts for Apax Global Alpha ("AGA").
Background
The COVID-19 crisis is unprecedented and has substantial humanitarian, social, and economic consequences. At this stage, it is still rapidly and dynamically evolving with uncertainty impacting global markets. Whilst governments and central banks have started to take wide-reaching actions to counter the near-term effects of the crisis, there remains a significant level of uncertainty as to how the crisis will continue to evolve. This heightened level of uncertainty, together with the short-term impact of extreme measures taken by governments across the world aimed at slowing down the spread of the coronavirus, has led to a high level of volatility in public equity and corporate credit markets. In the period from 19 February 2020 to 25 March 2020, the S&P 5001 price index has declined by 26.9% and average loan pricing in the S&P/LSTA US Leveraged Loan Index2 has dropped from 96.7 to 77.9 over the same period.
Update from the Investment Manager
Against this backdrop, the Investment Manager has been actively engaging with its Investment Adviser, Apax Partners, and can provide the following update:
The extent and nature of the economic impact of COVID-19 is unprecedented and unlike a typical cyclical downturn. The population lockdowns and pausing of many types of economic activity is causing unusual effects in the economy in general, and AGA's Private Equity portfolio is not exempt.
The Investment Adviser's current priority is on the Apax Funds' private equity portfolio. Portfolio companies are enacting their own measures to ensure the safety of employees and continuation of business operations. In addition to this, the Investment Adviser's deal teams are engaging proactively with management along with the advice and assistance of the Operational Excellence Practice to monitor developments and to come up with immediate actions and contingency plans.
The Investment Adviser is carefully monitoring liquidity in each portfolio company. In this context, it is worthwhile to note that average debt levels in AGA's Private Equity portfolio were relatively low heading into the crisis (Net Debt/EBITDA multiple: 3.7x at 31 December 2019).
We believe that much of Apax Funds' private equity portfolio is in sectors that are less severely impacted by the crisis. The private equity portfolio has limited exposure to energy and little exposure to travel. Least impacted portfolio companies include those that operate in the Tech & Telco sector or are services businesses that are not in-person. A subset of the portfolio is, however, currently seeing more severe impacts. This includes but is not limited to in-person retail and education-focused businesses. Whilst the Investment Adviser has not seen large reductions of run-rate revenue in most of the Apax Funds' private equity portfolio, if shutdowns were to persist for extended periods of time, we would expect more of the portfolio to be impacted more meaningfully.
Given significant volatility in capital markets, it is also likely there will be a decline in AGA's Net Asset Value in the short term. Where public market multiples are used to value portfolio companies, we expect lower multiples to have an impact on the valuation of portfolio companies at 31 March 2020 compared to the prior quarter. Private equity is an asset class where value is generated in the long term. In addition, history has shown the most attractive investment vintages have directly followed periods of economic dislocation. Given Apax Partners' strong long-term track record, there will likely be attractive private equity investment opportunities in the period ahead.
We are also closely monitoring the Derived Investments portfolio and AGA's liquidity position. As outlined in the Annual Results at 31 December 2019, there has been an increasing focus on Derived Debt and reduced exposure to Derived Equity. In addition, a larger proportion of Derived Debt investments (39% of Derived Debt at 31 December 2019) have been in first lien instruments which has improved risk exposures.
As at 25 March 2020, AGA's available liquidity is EUR 179.1m, consisting of EUR 39.1m cash and cash equivalents, and a committed facility of EUR 140.0m which remains undrawn.
In terms of their own operations, the Investment Manager and Investment Adviser remain fully operational with business continuity practices working as anticipated.
Tim Breedon CBE, Chairman of Apax Global Alpha, said:
"The Board is confident that Apax Partners' nearly five decades of investment experience across many economic cycles will be highly beneficial to AGA in this current crisis. The Board also remains positive in AGA's ability to withstand the current market developments and we will continue to monitor developments closely and will provide a detailed update to investors on 15 May 2020 in our Q1 reporting."
Contact details
Investor enquiries | Media enquiries |
Sarah Page IR Manager - AGA | Andrew Kenny Head of Communications |
Telephone: +44 (0)20 7666 6573 | Telephone: +44 (0) 20 7872 6371 |
Email: sarah.page@apax.com | Email: andrew.kenny@apax.com |
Notes
1. | Note that references in this announcement to Apax Global Alpha Limited have been abbreviated to "AGA" or "the Company". References to Apax Partners LLP have been abbreviated to "Apax Partners" or "the Investment Adviser" |
2. | This announcement is not for release, publication or distribution, directly or indirectly, in whole or in part, into or within the United States or to "US persons" (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")) or into or within Australia, Canada, South Africa or Japan. Recipients of this announcement in jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements in their jurisdictions. In particular, the distribution of the announcement may be restricted by law in certain jurisdictions. |
Footnotes
1. Bloomberg as at 25 March 2020
2. Bloomberg as at 19 February 2020 and 25 March 2020 respectively
About Apax Global Alpha Limited
AGA is a Guernsey registered closed-ended collective investment scheme incorporated as a non-cellular company that listed on the London Stock Exchange on 15 June 2015. It is regulated by the Guernsey Financial Services Commission.
AGA's objective is to provide shareholders with capital appreciation from its investment portfolio and regular dividends. The Company is targeting an annualised Total Return, across economic cycles, of 12-15% (net of fees and expenses) including a dividend yield of 5% of Net Asset Value.
The investment policy of the Company is to make Private Equity investments in Apax Funds, and Derived Investments which are investments in debt and equities derived from the insights gained via Apax Partners' Private Equity activities. Further information regarding the Company and its publications are available on the Company's website at www.apaxglobalalpha.com.
About Apax Partners LLP
Apax Partners is a leading global private equity advisory firm and over its more than 40-year history, Apax Partners has raised and advised funds with aggregate commitments of c.€40 billion. Funds advised by Apax Partners invest in companies across four global sectors of Tech & Telco, Services, Healthcare and Consumer. These funds provide long‐term equity financing to build and strengthen world‐class companies. For further information about Apax Partners, please visit www.apax.com. Apax Partners is authorised and regulated by the Financial Conduct Authority in the UK.