By Edward Evans
Nov. 8 (Bloomberg) -- 3i Group Plc, Europe's biggest publicly traded private equity firm, said the net value of its assets rose 27 percent in its fiscal first half even as rising borrowing costs crimped the pace of leveraged buyouts.
Net asset value rose to 1,007 pence a share in the six months to Sept. 30 from 792 pence in the year-earlier period, Chief Executive Officer Philip Yea said on a conference call with reporters today. That beat the 981 pence average forecast of three analysts surveyed by Bloomberg News.
Yea is boosting infrastructure and growth-capital investments to increase returns while allocating less to buyouts as banks struggle to clear, or syndicate, a backlog of leveraged loans. After a record $579 billion of takeovers in the first half, the pace of buyouts has slumped by almost 50 percent, according to data compiled by Bloomberg.
``In terms of summer's dislocation in the leveraged finance markets, the effect on mid-market hasn't been as pronounced as at the large end,'' Yea, 52, said today. ``We weren't as reliant on big underwritten syndications as the top of the market.''
3i reaped 1.04 billion pounds ($2.2 billion) from selling investments including Aibel Ltd., a Norwegian offshore oil and gas service provider, and Care Principals, a chain of British nursing homes it sold to a Qatari fund for 270 million pounds in July. That rate of realizations may now slow, the company said.
Less Debt
The firm spent 1.23 million pounds on new investments in the first half including stakes in Deutz Power Systems, Eltel and Bestinvest, a British investment adviser. That's more than double the 598 million pounds 3i spent in the same period last year. The firm spent more on so-called growth capital investments than buyouts.
The effect of rising U.S. subprime-mortgage defaults on consumer and business confidence is ``yet to be fully played out,'' Yea added. The firm is also using less debt to fund its buyouts.
``Some of the wonderful terms we saw in the first half of last year, like covenant-lite loans, toggles, they're gone,'' 3i's buyout chief Jonathan Russell told analysts on conference call. ``They were lovely at the time. We've returned to a state of reality.''
3i shares were unchanged at 1,016 pence in London, valuing the company at 3.9 billion pounds. The stock has dropped 17 percent since touching a high of 1,236 pence in May as buyouts slowed.
Analyst Ratings
Of the six analysts who rated 3i shares this year, five recommend investors ``buy'' the stock and one advises them to ``hold'' it, according to data compiled by Bloomberg.
3i raised 700 million pounds in a March initial public offering of a fund that targets infrastructure investments. By August, the fund had invested half that money in projects such as oil and chemical storage facilities. 3i is preparing to raise $1 billion for a fund for infrastructure in India.
Growth-capital investments are typically minority investments in companies worth up to 1 billion euros ($1.5 billion). 3i typically invests cash to fund takeovers or boost growth by expanding overseas.
Started after World War II by Prime Minister Clement Attlee to invest in small businesses, 3i looks for undervalued or out- of-favor companies or start-ups that promise rapid growth. The company raised a 5 billion-euro buyout fund last year.
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