SVG eyes secondaries sales

The listed firm, which has reported strong portfolio company growth in its interim results, looks likely to sell some ‘early secondary’ fund interests to boost liquidity.

Listed private equity investor SVG Capital reported strong interim results Friday morning, with its net asset value increasing 4.6 percent since 31 December, but chief executive officer Lynn Fordham said balance sheet strength and liquidity remain the immediate priority.

As well as awaiting realisations from underlying funds, the firm will seek to access the secondaries market to improve liquidity in the medium- to short-term.

SVG is looking to sell selective fund interests from a warehoused portfolio of mostly uncalled commitments, Fordham said in an interview. The warehoused portfolio comprises around £32 million (€39 million; $49 million) of invested capital and £59 million of uncalled commitments. The fund interests – nine in total – were originally intended to seed products for SVG Advisers, but are now surplus to requirements.

The warehoused interests include a €25 million commitment to CVC European Equity Partners V, €19.7 million of which is uncalled, and a €20 million commitment to Barclays Private Equity III, which has only €4.4 million remaining to be called. Funds managed by Actis, American Capital, AXA Private Equity, Bridgepoint, IK Investment Partners and PAI Partners account for the other interests.

The portfolio will not be sold as a bundle but rather as individual assets on a “selective” basis, added Fordham.

In April last year SVG completed a strategic review, which among other things resulted in the firm pausing from commitments to new funds. New commitments are still “a little way away”, said Fordham.

SVG is listed on the London Stock Exchange. The vast majority of its business comprises commitments to funds managed by Permira, which account for 74 percent of its investment portfolio. In recent years, however, the firm has sought to expand the third party fund of funds management side of the business.

The firm reported strong interim results based on improved performance from Permira’s underlying portfolio companies. Earnings across Permira’s portfolio grew at 23 percent year on year, said SVG, with revenues growing at 11 percent over the same period. Permira’s €3.1 billion sale of chemicals group Cognis – expected to close later this year – also gave the firm a boost, crystallising a gain of £18.5 million over the asset’s December book value.

“A number of investments were written up and the portfolio benefited from higher earnings and the leveraged structures at underlying investments,” said Iain Scouller, an analyst at Oriel Securities in a note this morning. He added that, given SVG is relatively highly leveraged at 49 percent – and there is also leverage within the underlying investments – the firm’s shares would continue to trade at a “relatively wide” discount to net asset value.

SVG’s shares rose 3.6 percent on Friday’s results to £1.54 from £1.50.