ST. PETER PORT, Guernsey,
Aug. 31, 2011 /PRNewswire/ --
European Capital Limited ("European Capital" or the "Company")
today issues an Interim Management Statement announcing net
operating income ("NOI") for the first half ended 30 June 2011 of euro 39
million. Net earnings for the half year were
euro 86 million. As at
30 June 2011, net asset value ("NAV")
was euro 715 million, a 14% or
euro 86 million increase from the
31 December 2010 NAV of euro 629 million.
H1 2011 FINANCIAL SUMMARY
- Euro 39 million NOI
- Includes euro 17 million of
non-recurring income relating to the removal of investments from
non-accrual status
- Euro 98 million net unrealised
appreciation on investments
- Euro 102 million increase over
the first half of 2010
- Euro 86 million net earnings
- Euro 26 million improvement over
the first half of 2010
- 25% annualised return on average equity ("ROE")
- Euro 114 million of cash proceeds
from realisations
- Euro 288 million new senior notes
issued
- Existing debt refinanced with no required amortisation until
2022
- Euro 715 million NAV
- Euro 86 million, or 14% increase
over Q4 2010
"Our book value grew by euro 86
million for the first half to euro
715 million, delivering a 25% annualised return on equity
for the half year," said Malon
Wilkus, Chairman and Chief Executive Officer. "We have
now experienced seven quarters out of the last eight of unrealised
appreciation on our investments. We believe the performance
of the portfolio will continue to improve if the European economy
continues to expand. We remain focused on improving our
balance sheet, growing portfolio companies and originating high
quality investment opportunities."
PORTFOLIO VALUATION
For the half year ended 30 June
2011, net unrealised appreciation of investments totalled
euro 98 million. The primary
components of the net unrealised appreciation were:
- Euro 69 million net appreciation
from European Capital's private finance portfolio primarily as a
result of improved portfolio company performance
- Euro 18 million of reversals of
prior unrealised depreciation associated with realisation on
portfolio investments.
"During the half year, we followed up on our success in 2010 and
continued to strengthen our balance sheet," said Ira Wagner, President. "We have improved
our asset coverage to 267%. We continued to see liquidity in
the portfolio during the half year and are focused on maximising
the value of our investments to generate shareholder value."
PORTFOLIO LIQUIDITY AND PERFORMANCE
In the first half of 2011, euro 114
million of cash proceeds were received from realisations of
portfolio investments. The Company made euro 16 million in new committed investments in
the first half of the year to support the current portfolio.
The weighted average effective interest rate on the Company's
debt investments was 8.9% for the half year.
As of 30 June 2011, loans with a
cost of euro 200 million were on
non-accrual compared to euro 301
million as of 31 December
2011. These loans as of 30 June
2011 had a fair value of euro 65
million and represent 7.8% of total loans at fair value.
"The credit quality of our portfolio continues to improve this
half year," noted Juan Carlos Morales
Cortes, Director. "In June
2011, we completed the issue of our latest securitisation
which is a testament to the credit worthiness of our assets and
provides us flexibility for originating new transactions.
This was a landmark transaction as it is the first European
securitisation that is compliant with new regulatory
requirements."
DEBT REFINANCING
In the second quarter of 2011, European Capital's consolidated
subsidiary ECAS 2011-1 Loan B.V. ("ECAS 2011-1") sold and issued
euro 288 million of AAA-rated secured
floating rate notes, backed by assets with a par value of
euro 865 million originated by other
European Capital consolidated subsidiaries. The notes were
rated by Standard & Poor's and comply with recent regulations
affecting securitisations. The notes have a coupon payment of
Euribor plus 320 basis points, payable semi-annually, and are due
in 2024. The proceeds of the sale were used to refinance two
existing debt obligations of European Capital consolidated
subsidiaries, including a secured senior multicurrency term loan
facility and an issuance of secured senior notes, as well as to
make new investments.
"This refinancing provides European Capital with certainty in
its borrowings," said Nathalie Faure
Beaulieu, Managing Director. "It also provides us with
liquidity to invest in new opportunities. European Capital
and its affiliates will consider mezzanine debt investment
opportunities from 5 million to 25 million in either euros or
sterling and up to 100 million for One Stop Buyouts®."
"With offices in Paris,
London, five offices in the US and
one in Hong Kong, we are able to
consider companies with financial needs spanning the globe," added
Tristan Parisot, Managing Director.
"We understand the need for speed and so we have one of the
largest underwriting capabilities in the industry, and we can fund
senior debt, mezzanine debt and equity."
EUROPEAN
CAPITAL LIMITED
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
As of 30
June 2011, 31 December 2010 and 30 June 2010
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H1
|
|
H2
|
|
H1 2011
Versus H2 2010
|
|
H1
|
|
H1 2011
Versus H1 2010
|
|
|
2011
|
|
2010
|
|
euro
|
|
%
|
|
2010
|
|
euro
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value (Cost
basis of euro 1,638,416, euro 1,721,230 and euro 1,883,515,
respectively)
|
1,099,214
|
|
1,075,766
|
|
23,448
|
|
2%
|
|
1,179,726
|
|
(80,512)
|
|
-7%
|
|
Cash and cash
equivalents
|
2,257
|
|
3,006
|
|
(749)
|
|
-25%
|
|
1,766
|
|
491
|
|
28%
|
|
Restricted cash
|
69,653
|
|
21,380
|
|
48,273
|
|
226%
|
|
31,031
|
|
38,622
|
|
124%
|
|
Interest receivable
|
7,848
|
|
5,282
|
|
2,566
|
|
49%
|
|
4,928
|
|
2,920
|
|
59%
|
|
Derivatives agreements at fair
value
|
3,021
|
|
10,290
|
|
(7,269)
|
|
-71%
|
|
5,804
|
|
(2,783)
|
|
-48%
|
|
Other
|
6,522
|
|
8,316
|
|
(1,794)
|
|
-22%
|
|
9,730
|
|
(3,208)
|
|
-33%
|
|
Total assets
|
1,188,515
|
|
1,124,040
|
|
64,475
|
|
6%
|
|
1,232,985
|
|
(44,470)
|
|
-4%
|
|
Liabilities and Shareholder's
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt (maturing within one year
euro 1,704, euro 224,742 and euro 163,008, respectively)
|
429,685
|
|
484,872
|
|
(55,187)
|
|
-11%
|
|
631,986
|
|
(202,301)
|
|
-32%
|
|
Due to European Capital
Financial Services (Guernsey) Limited
|
1,818
|
|
1,351
|
|
467
|
|
35%
|
|
2,385
|
|
(567)
|
|
-24%
|
|
Derivatives agreements at fair
value
|
915
|
|
3,283
|
|
(2,368)
|
|
-72%
|
|
6,068
|
|
(5,153)
|
|
-85%
|
|
Other
|
41,266
|
|
5,458
|
|
35,808
|
|
656%
|
|
8,615
|
|
32,651
|
|
379%
|
|
Total
liabilities
|
473,684
|
|
494,964
|
|
(21,280)
|
|
-4%
|
|
649,054
|
|
(175,370)
|
|
-27%
|
|
Shareholder's equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital
|
224,475
|
|
224,475
|
|
-
|
|
0%
|
|
224,475
|
|
-
|
|
0%
|
|
Undistributed net realised
earnings
|
1,087,988
|
|
1,064,903
|
|
23,085
|
|
2%
|
|
1,085,026
|
|
2,962
|
|
0%
|
|
Net unrealised foreign
currency depreciation
|
(133,373)
|
|
(98,147)
|
|
(35,226)
|
|
-36%
|
|
(68,770)
|
|
(64,603)
|
|
-94%
|
|
Net unrealised
depreciation of investments
|
(464,259)
|
|
(562,155)
|
|
97,896
|
|
17%
|
|
(656,800)
|
|
192,541
|
|
29%
|
|
Total shareholder's
equity
|
714,831
|
|
629,076
|
|
85,755
|
|
14%
|
|
583,931
|
|
130,900
|
|
22%
|
|
Total liabilities and
shareholder's equity
|
1,188,515
|
|
1,124,040
|
|
64,475
|
|
6%
|
|
1,232,985
|
|
(44,470)
|
|
-4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM = Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUROPEAN
CAPITAL LIMITED
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Six Months
Ended 30 June 2011 and 2010
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
30
June
|
|
|
30
June
|
|
2011 Versus
2010
|
|
|
2011
|
|
2010
|
|
euro
|
|
%
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME:
|
|
|
|
|
|
|
|
|
Interest and dividend
income
|
66,240
|
|
56,242
|
|
9,998
|
|
18%
|
|
Fee and other
income
|
508
|
|
464
|
|
44
|
|
9%
|
|
Total operating
income
|
66,748
|
|
56,706
|
|
10,042
|
|
18%
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Interest
|
12,887
|
|
28,764
|
|
(15,877)
|
|
-55%
|
|
Management fee
|
10,980
|
|
9,212
|
|
1,768
|
|
19%
|
|
General and
administrative
|
3,703
|
|
3,364
|
|
339
|
|
10%
|
|
Corporate restructuring
costs
|
-
|
|
2,020
|
|
(2,020)
|
|
-100%
|
|
Total operating expenses
|
27,570
|
|
43,360
|
|
(15,790)
|
|
-36%
|
|
OPERATING INCOME BEFORE
INCOME TAXES
|
39,178
|
|
13,346
|
|
25,832
|
|
194%
|
|
Provision for income
taxes
|
(44)
|
|
(79)
|
|
35
|
|
44%
|
|
NET OPERATING
INCOME
|
39,134
|
|
13,267
|
|
25,867
|
|
195%
|
|
|
|
|
|
|
|
|
|
|
Net realised (loss) gain on
investments
|
|
|
|
|
|
|
|
|
Portfolio company
investments
|
(23,858)
|
|
7,846
|
|
(31,704)
|
|
-404%
|
|
Foreign currency
translations
|
4,028
|
|
17,030
|
|
(13,002)
|
|
-76%
|
|
Derivative
agreements
|
3,781
|
|
(255)
|
|
4,036
|
|
1583%
|
|
Total net realised (loss)
gain on investments
|
(16,049)
|
|
24,621
|
|
(40,670)
|
|
-165%
|
|
|
|
|
|
|
|
|
|
|
NET REALISED EARNINGS
|
23,085
|
|
37,888
|
|
(14,803)
|
|
-39%
|
|
|
|
|
|
|
|
|
|
|
Net unrealised appreciation
(depreciation) on investments
|
|
|
|
|
|
|
|
|
Portfolio company
investments
|
98,331
|
|
(4,039)
|
|
102,370
|
|
2535%
|
|
Foreign currency
translations
|
(35,226)
|
|
24,412
|
|
(59,638)
|
|
-244%
|
|
Derivative
agreements
|
(435)
|
|
1,148
|
|
(1,583)
|
|
-138%
|
|
Total net unrealised
appreciation of investments
|
62,670
|
|
21,521
|
|
41,149
|
|
191%
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ("NET EARNINGS")
|
85,755
|
|
59,409
|
|
26,346
|
|
44%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM = Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUROPEAN
CAPITAL LIMITED
|
|
OTHER
FINANCIAL INFORMATION
|
|
Six Months
Ended 30 June 2011, 31 December 2010 and 30 June
2010
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H1 2011
Versus
|
|
|
|
H1 2011
Versus
|
|
|
H1
2011
|
|
H2
2010
|
|
H2
2010
|
|
H1
2010
|
|
H1
2010
|
|
|
euro
|
|
euro
|
|
euro
|
|
%
|
|
euro
|
|
euro
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
debt
|
-
|
|
-
|
|
-
|
|
100%
|
|
867
|
|
(867)
|
|
-100%
|
|
Convertible
Bond
|
6,300
|
|
-
|
|
6,300
|
|
100%
|
|
-
|
|
6,300
|
|
100%
|
|
Preferred
Equity
|
10,053
|
|
555
|
|
9,498
|
|
NM
|
|
-
|
|
10,053
|
|
100%
|
|
Common Equity
|
-
|
|
1,000
|
|
(1,000)
|
|
-100%
|
|
2
|
|
(2)
|
|
-100%
|
|
Total
|
16,353
|
|
1,555
|
|
14,798
|
|
NM
|
|
869
|
|
15,484
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add-on Financing for
Recapitalisations
|
16,353
|
|
1,555
|
|
14,798
|
|
NM
|
|
869
|
|
15,484
|
|
NM
|
|
Total
|
16,353
|
|
1,555
|
|
14,798
|
|
NM
|
|
869
|
|
15,484
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realisations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Prepayments
|
75,824
|
|
90,888
|
|
(15,064)
|
|
-17%
|
|
101,234
|
|
(25,410)
|
|
-25%
|
|
Payment of Accrued
Payment-in-kind Interest and Dividends and Original Issue
Discount
|
17,614
|
|
23,814
|
|
(6,200)
|
|
-26%
|
|
24,117
|
|
(6,503)
|
|
-27%
|
|
Sale of Equity
Investments
|
-
|
|
17,138
|
|
(17,138)
|
|
-100%
|
|
20,585
|
|
(20,585)
|
|
-100%
|
|
Sale of Loans
|
21,046
|
|
1,558
|
|
19,488
|
|
NM
|
|
3,660
|
|
17,386
|
|
475%
|
|
Total
|
114,484
|
|
133,398
|
|
(18,914)
|
|
-14%
|
|
149,596
|
|
(35,112)
|
|
-23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appreciation, Depreciation,
Gains and Losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Realised
Gains
|
-
|
|
7,677
|
|
-
|
|
0%
|
|
11,575
|
|
(11,575)
|
|
-100%
|
|
Gross Realised
Losses
|
(23,858)
|
|
(67,749)
|
|
43,891
|
|
65%
|
|
(3,729)
|
|
(20,129)
|
|
-540%
|
|
Portfolio Net (Losses)
Gains
|
(23,858)
|
|
(60,072)
|
|
36,214
|
|
60%
|
|
7,846
|
|
(31,704)
|
|
-404%
|
|
Foreign
Currency
|
4,028
|
|
5,756
|
|
(1,728)
|
|
-30%
|
|
17,030
|
|
(17,030)
|
|
-100%
|
|
Derivative
Agreements
|
3,781
|
|
(179)
|
|
3,960
|
|
NM
|
|
(255)
|
|
4,036
|
|
NM
|
|
Net Realised
Losses
|
(16,049)
|
|
(54,495)
|
|
38,446
|
|
71%
|
|
24,621
|
|
(40,670)
|
|
-165%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealised
Appreciation of Portfolio Investments
|
133,965
|
|
95,928
|
|
38,037
|
|
40%
|
|
52,273
|
|
81,692
|
|
156%
|
|
Gross Unrealised
Depreciation of Portfolio Investments
|
(53,870)
|
|
(63,491)
|
|
9,621
|
|
15%
|
|
(48,847)
|
|
(5,023)
|
|
-10%
|
|
Reversal of Prior Period
Unrealised (Depreciation) Appreciation Upon Realisation
|
18,236
|
|
60,957
|
|
(42,721)
|
|
-70%
|
|
(7,465)
|
|
25,701
|
|
344%
|
|
Net Unrealised
Depreciation of Portfolio Investments
|
98,331
|
|
93,394
|
|
4,937
|
|
5%
|
|
(4,039)
|
|
102,370
|
|
NM
|
|
Foreign
Currency
|
(35,226)
|
|
(29,377)
|
|
(5,849)
|
|
-20%
|
|
24,412
|
|
(59,638)
|
|
-244%
|
|
Derivative
Agreements
|
(435)
|
|
1,252
|
|
(1,687)
|
|
-135%
|
|
1,148
|
|
(1,583)
|
|
-138%
|
|
Net Unrealised
Depreciation of Investments
|
62,670
|
|
65,269
|
|
(2,599)
|
|
-4%
|
|
21,521
|
|
41,149
|
|
191%
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
Net Gains, Losses,
Appreciation and Depreciation
|
46,621
|
|
10,774
|
|
35,847
|
|
333%
|
|
46,142
|
|
479
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value
|
714,831
|
|
629,076
|
|
85,755
|
|
14%
|
|
583,931
|
|
130,900
|
|
22%
|
|
Financial
Liabilities
|
429,685
|
|
484,872
|
|
(55,187)
|
|
-11%
|
|
631,986
|
|
(202,301)
|
|
-32%
|
|
Asset Coverage
Ratio
|
267%
|
|
230%
|
|
|
|
|
|
193%
|
|
|
|
|
|
Debt to Equity
Ratio
|
0.6 x
|
|
0.8 x
|
|
|
|
|
|
1.1 x
|
|
|
|
|
|
Credit Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Effective
Interest Rate on Debt Investments
|
8.9%
|
|
8.8%
|
|
0.2%
|
|
2%
|
|
6.6%
|
|
2.3%
|
|
36%
|
|
Loans on Non-Accrual at
Cost
|
199,985
|
|
300,669
|
|
(100,684)
|
|
-33%
|
|
301,923
|
|
(101,938)
|
|
-34%
|
|
Loans on Non-Accrual at
Fair Value
|
65,190
|
|
77,180
|
|
(11,990)
|
|
-16%
|
|
48,599
|
|
16,591
|
|
34%
|
|
Non-Accrual Loans at Cost
as a Percentage of Total Loans
|
17.3%
|
|
23.8%
|
|
|
|
|
|
21.2%
|
|
|
|
|
|
Non-Accrual Loans at Fair
Value as a Percentage of Total Loans
|
7.8%
|
|
8.9%
|
|
|
|
|
|
4.9%
|
|
|
|
|
|
Return on Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM Net Operating Income
Return on Average Equity at Cost
|
5.8%
|
|
3.7%
|
|
|
|
|
|
2.7%
|
|
|
|
|
|
LTM Realised Earnings
Return on Average Equity at Cost
|
0.2%
|
|
1.4%
|
|
|
|
|
|
-2.5%
|
|
|
|
|
|
LTM Earnings Return on
Average Equity
|
20.4%
|
|
18.0%
|
|
|
|
|
|
10.2%
|
|
|
|
|
|
Current Half Year Net
Operating Income Return on Average Equity at Cost
Annualised
|
6.2%
|
|
5.4%
|
|
|
|
|
|
2.0%
|
|
|
|
|
|
Current Half Year Realised
Earnings Return on Average Equity at Cost Annualised
|
3.6%
|
|
-3.2%
|
|
|
|
|
|
5.8%
|
|
|
|
|
|
Current Half Year Earnings
Return on Average Equity Annualised
|
25.2%
|
|
15.1%
|
|
|
|
|
|
21.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM = Not Meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NA = Not Applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPORTANT DISCLOSURES
NAV
Any valuation information relating to the portfolio companies of
European Capital stated or referred to in this release has been
determined by the Board of European Capital in good faith, on a
basis consistent with past practice and for the purposes of
complying with its reporting obligations under applicable laws.
Forward-looking statements
This document may contain "forward-looking statements." By
their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Many of these risks and uncertainties relate to factors
beyond European Capital's control or which cannot be estimated
precisely. These factors include, but are not limited to,
uncertainties associated with the timing of transaction closings,
changes in interest rates, availability of transactions, changes in
regional, national or international economic conditions, and
changes in the conditions of the industries in which European
Capital has made investments. Actual outcomes and results may
therefore differ materially from any outcomes or results expressed
or implied by any such forward-looking statements.
Performance data quoted above represents past performance of
European Capital. Past performance does not guarantee future
results and the investment return and principal value of an
investment in European Capital will likely fluctuate.
Additionally, European Capital's current performance may be
lower or higher than the performance data quoted above.
Basis of preparation
This interim management statement has been prepared to provide
further transparent information about European Capital and should
not be relied on by any person for any other purpose. Certain
financial information in this interim management statement is based
on unaudited management accounts. Nothing in this document is
intended to be, or should be construed as, a profit forecast.
ABOUT EUROPEAN CAPITAL
European Capital is an investment company for pan-European
equity, mezzanine and senior debt investments with euro 1.1 billion in assets under management.
European Capital is a wholly-owned affiliate of American
Capital, Ltd. ("American Capital"). It is managed by European
Capital Financial Services (Guernsey) Limited ("ECFSG" or the
"Investment Manager"), a wholly-owned affiliate of American
Capital. The Investment Manager has offices in London and Paris. As of 30
June 2011 the Investment Manager had 5 investment teams with
18 investment professionals and employed 27 support staff.
European Capital and its affiliates will consider senior and
mezzanine debt investment opportunities from 5 million to 25
million in either euros or sterling and up to 100 million for One
Stop Buyouts®. For further information, please refer to
www.EuropeanCapital.com.
ABOUT AMERICAN CAPITAL
American Capital is a publicly traded private equity firm and
global asset manager. American Capital, both directly and
through its asset management business, originates, underwrites and
manages investments in middle market private equity, leveraged
finance, real estate and structured products. Founded in
1986, American Capital has $52
billion in assets under management and eight offices in the
U.S., Europe and Asia. American Capital and its
affiliates will consider investment opportunities from $10 million to $300 million. For further
information, please refer to www.AmericanCapital.com.
Contact: European Capital
Financial Services Limited
|
+ 44 207 539 7000
|
|
Ira Wagner, President
|
|
|
Juan Carlos Morales Cortes,
Director
|
|
|
Richard Smith, Finance
Director
|
|
|
|
|
SOURCE European Capital Limited