Intermediate Capital Group, a mezzanine and leveraged loan investor and third party fund manager, has reported that while the primary leveraged buyout market remains shut due to a liqui
Intermediate Capital Group, a mezzanine and leveraged loan investor and third party fund manager, has reported that while the primary leveraged buyout market remains shut due to a liquidity drought, very attractive investment opportunities exist in the secondary market for senior leveraged loans.
ICG says its loan and investment portfolio, while not immune to the recessionary environment, continues to perform satisfactorily.
At its recent quarterly portfolio review, over two thirds of its portfolio companies were performing at, or above, the prior year level and close to half were on, or above, budget. This is broadly in line with what it observed in the two previous quarterly reviews.
However, since the end of September the firm has seen a marked deterioration in the operating performance of a limited number of weaker assets as economic conditions have worsened.
Its watch list consists of 13 per cent of its portfolio by value reflecting the impact of deteriorating economic conditions and the heightened level of vigilance necessary in the current climate.
A team of senior investment executives has been assembled to support its local investment teams in managing assets on its watch list.
During the third quarter IGC arranged or provided GBP205m in four new investments (GBP55m of which was retained on its balance sheet), compared with GBP559m in 11 new investments in the first half of this year and GBP566m in ten new investments in the third quarter of last year.
Two of these four new investments were primary LBO transactions which had been committed to prior to the end of September 2008 but completed in the early part of the third quarter.
Early redemptions remained at very low levels with only GBP14m of its loan and investment portfolio repaid this quarter. This translates into net new lending of GBP41m.
IGC says its loan and investment portfolio grew by GBP514m or 19 per cent to GBP3,103m. The increase was principally due to currency movements which added GBP484m due to the strength of the Euro and US Dollar against Sterling.
IGC says it expects net new investments to be limited to the secondary market for senior loans. Core income in the second half is expected to be slightly lower than the level achieved in the first half, as it does not accrue rolled-up interest on impaired assets.
It currently anticipates that provisions will be noticeably higher than in the first half due to the impact of the worsening economic environment on its weaker assets and the strength of the Euro against Sterling.
Capital gains are expected to remain at the low level experienced in the first half.
