LONDON (ShareCast) - (Sharecast News) - Private equity and venture capital company 3i Group said on Thursday that, since publishing its performance update for the nine months ended 31 December on 30 January, the global impact of the Covid-19 coronavirus pandemic on public health, business, financial markets, and government responses had developed rapidly.
The FTSE 100 company said it had a "conservative" balance sheet strategy since its restructuring in 2012, with two long-dated bonds being ?200m, maturing in 2023, and ?375m, maturing in 2032, which had no financial covenants.

On 13 March, it completed the refinancing of its revolving credit facility, increasing its amount to ?400m from ?350m in a five-year facility, with an option to extend annually for a further two years.

The cost of the facility, which also had no financial covenants, was reduced as well.

"At 31 March, we expect our cash balance to be [around] ?800m before the payment of carry in respect of the Action liquidity event due in May," the board said, adding that there were currently no plans to draw on the revolving credit facility.

3i completed its semi-annual portfolio company review meetings of the substantial majority of its top 20 investments in the week of 9 March.

It said that, although the situation was "very fluid", the majority of the portfolio was expected to experience a modest short-term disruption to business, primarily as a result of the country-by-country lockdowns.

"A small number of other companies are more directly and significantly affected, at least in the short term.

"These include Action, BoConcept and Hans Anders in the retail sector, and Audley Travel and ICE in the travel sector.

"Basic-Fit, in which we have a 13% stake, has also seen a significant decline in its share price."

More generally, 3i said it was focused on working with its portfolio companies to support them through "unprecedented times".

The weighted average net debt of the portfolio at 31 December was 4.0x, excluding Action.

"We invested ?471m in the nine months to 31 December, including new investments in Magnitude Software, Evernex, and the new bioprocessing platform.

"We have recently seen a number of new investment processes being postponed in light of the current environment.

"We are focusing our efforts on supporting our portfolio companies to deal effectively with the Covid-19 situation."

On 5 December, 3i announced the signing of an implementation agreement to dispose of its investment in ACR, with the company saying it had received final approvals to complete that transaction.

"Proceeds are subject to a number escrow arrangements - we expect to receive the first tranche of $136m in the third quarter of 2020."

The firm had also signed an agreement to sell another portfolio company for proceeds of up to €96m, which it said would be announced "in due course", and was expected to complete later in the year.

"For some time, we have had a policy of taking a longer-term approach to the multiples used to value our portfolio.

"This has meant that, in recent years, we have typically used multiples lower than those prevailing for comparable quoted companies.

"As a result, we have been able to mitigate the impact of market volatility in the past."

3i said that although the valuation of its portfolio would depend on market multiples and outlook as at 31 March, the "significant and continuing" falls in equity markets would put more pressure on the multiples that it would use to value the portfolio as at that date.

"[This is] particularly for those portfolio companies currently most directly exposed to the impact of Covid-19."

At 0900 GMT, shares in 3i Group were up 2.07% at 610.2p.

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