3i Says Shareholder Debt Concerns Are Misplaced

BERLIN (Reuters) – British private equity firm 3i Group Plc (III.L) believes anxiety over its debt burden is misplaced and that the market will ultimately recognize the strength of its assets, a senior executive said.

“Clearly the shareholders have a concern about it, or that’s what you would believe if you read the analysts reports on us,” Jonathan Russell, partner and head of European buy-outs at 3i told Reuters in an interview.

3i’s net debt at end-2008 totaled 2.11 billion pounds ($3.04 billion), while its available cash and credit lines amounted to 839 million pounds.

“When you have 5 billion pounds in assets as we do have and a pretty strong looking portfolio, it’s hard for me to understand that anxiety, but they have it and that’s the reality of it and it’s up to us to do what the shareholders want us to do,” Russell said.

He declined to comment on specific pressure from shareholders to dispose of assets to reduce its debt pile.

“Luckily 3i has lots of different options to pursue and I’m very confident we will be appreciated for our true strengths as a business,” he said.

While large LBO deals completely dried up toward the end of 2008, as banks have severely curtailed lending, Russell said he did not believe the buyout model was dead.

“I don’t think you should see the model as defunct because the top end, the deals that dominate the headlines, are not feasible for the foreseeable future,” he said.

Russell said pockets of debt were still available for the right assets and deals structured in the right way.

“It’s entirely volatile, unpredictable and very febrile,” he said. “Banks open for a short period of time and then they close again.”

By Simon Meads
(Editing by Andrew Macdonald)