3i wipes off £1bn in debt

The listed private equity firm has brought new investment to a standstill and made significant inroads into its debt pile.

Efforts by listed private equity company 3i to boost its cash position have resulted in a reduction of net debt by around £1 billion (€1.2 billion; $1.6 billion) in the last quarter.
Following the completion of a £732 million right issue, the liquidation of its London-listed fund 3i Quoted Private Equity and other cash generative measures, the group’s net debt now stands at £961 million, having been  as high as £1.9 billion at the end of March.
The level of 3i's net debt has been a bugbear for analysts following the firm. Credit ratings agency Standard and Poor’s and investment bank Morgan Stanley have both downgraded 3i in the past six months based on group leverage worries.

Michael Queen

“A substantial increase in liquidity and the reduction in net debt provide further resilience in what remains a fragile environment,” said chief executive Michael Queen, in the firm’s interim results statement this morning.

Having sold 10 venture capital stakes to secondaries firm Cipio earlier this year, 3i is currently in the process of selling the remainder of its European venture capital portfolio. According to market sources, negotiations are ongoing with European venture firms and other secondaries players.

Queen described 3i’s approach to new investments as “cautious” and in line with this, the firm did not add any new investments to its portfolio. Investments in existing portfolio companies amounted to £76 million, while realisations from exits generated £163 million.
Shares in 3i fell slightly in this morning’s trading from 228 pence to 221 pence at press time.
In related news, 3i has reshuffled its boardroom. Oliver Stocken, deputy chairman of the group, has stood down as senior independent director after nine years on the board. He is replaced by Robert Swanell.
Two new non-executive directors have also been appointed. John Allan, chairman of electronics retailer DSG International, and Alistair Cox, chief executive of international recruitment business Hays, will join the board later this year.