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3i extends credit facilities amid deal slowdown

Against a ‘fragile’ economic backdrop, the listed firm continues to sell assets and invest only in existing portfolio companies.

A steady series of asset sales and the arrangement of two new credit facilities have further strengthened 3i Group’s balance sheet, the firm said in a statement this morning.

The exits of Asian restaurant chain Little Sheep and oil and gas business Venture Production contributed to an inflow of £448 million (€491 million; $725 million) from asset sales in the five months to the end of August.

Our priorities are to preserve and optimise the value of our existing portfolio…

Michael Queen

During the same period the listed private equity firm continued to invest only at a slow pace, putting £155 million to work in existing portfolio companies and making no new investments.

The latest realisation figures do not include the cash generated by the recent sale – understood to be worth around £130 million – of a significant portfolio of venture capital assets to secondaries players Coller Capital and HarbourVest Partners.

The firm has also negotiated credit lines worth £350 million via two new facilities, both of which do not mature until October 2012.

Michael Queen

3i is currently in the process of reducing its debt burden. The group’s net debt had been as high as £1.9 billion in March this year, but a series of measures, such as the completion of a £732 million rights issue, the liquidation of its London-listed fund 3i Quoted Private Equity and the sale of a large portion of its venture capital portfolio, have reduced the total to £858 million at the end of August.

Chief executive Michael Queen sounded a note of caution in this morning’s statement, saying that in spite of recent strong performance in the equity markets, the economic outlook is “still fragile” and that the private equity and M&A markets “remain subdued”.

“Our priorities are to preserve and optimise the value of our existing portfolio as well as to continue to position the business for the upturn,” he added.

As of press time, 3i's share price had dropped 3 percent to £2.79.