LONDON (Reuters) – London-listed Electra Private Equity Plc ELTA.L is eyeing opportunities to buy secondary private equity assets and debt, in businesses owned by its industry rivals, it said on Thursday.
“The opportunities are going to be in the rather unusual parts of the spectrum, not the classic buyouts,” Chairman Sir Brian Williamson told Reuters, after the firm on Thursday reported results for the year to end-September.
Large private equity buyouts have all but disappeared in the wake of the credit crunch as the availability of cheap debt has dried up.
“At the moment there is good value in the debt markets. Some of these senior debts in the (private equity-owned) business are selling very cheaply. They are not distressed, they are stressed, and there’s some good value there, and there’s going to be some good value in buying secondary positions because people have to sell,” Williamson said.
Wellcome Trust, a charitable trust which funds medical research, recently highlighted this trend as it invited bids for most of its 3.8 billion pound private equity portfolio.
Williamson added that a number of banks are also looking to sell their secondary positions. He said Electra is actively pursuing opportunities in both secondaries and debt.
TOUGH TIME FOR EXITS
Electra said net asset value (NAV), a key measure for listed private equity firms, fell 10 percent over the year to 1,801 pence per share as the valuations of companies in its portfolio decreased, beating broker UBS’s expectations of 1,750 to 1,775 pence.
Together with a special dividend of 25 pence paid in March this year, returns fell 8.3 percent for the year to end-September, below the company’s long-term objective of providing a 10 to 15 percent return on equity.
Electra said NAV has fallen a further 2.1 percent since year end to 1,763 pence per share.
At 1216 GMT on Thursday shares in the company were down 2.4 percent at 937 pence.
Maintaining its ‘buy’ rating, UBS drew attention to Electra’s comments on the underlying trading performance of its companies.
Electra, which has 66 direct investments and 32 private equity fund investments, said its retained portfolio continued to be sound with many individual companies performing ahead of last year and in line or above budget for the current year.
Over the course of the year Electra’s new investments totalled 114 million pounds compared with 322 million the previous year, while exits totalled 192 million, down from 303 million in 2007.
In the light of falling company valuations, however, Williamson said it was “not a great time to be selling”.
While traditionally the majority of deals have taken place between private equity firms, Williamson said he believes trade sales will become increasingly important.
By Simon Meads
(Editing by Greg Mahlich)