3i Group suffers credit downgrade despite move to raise cash

3i group made further moves to cut its debts yesterday with a deal to buy out and liquidate an underperforming fund, but the private equity group was hit by a credit rating downgrade just hours later.

The blue-chip company agreed a cash and shares deal for the 55.1 per cent of 3i Quoted Private Equity (QPE) it does not already own yesterday. This is the latest attempt to lower debts that stood at £2.1bn at the end of the year.

The deal will be carried out through a voluntary solvent liquidation of QPE, with its assets transferring to 3i, and should result in freeing up £110m.

Yet the announcement failed to allay the share slump, which has seen 76 per cent wiped off the group’s value in the past 12 months. It was the worst-performing stock on the FTSE 100 yesterday, falling 7.12 per cent to 202.25p.

The shares suffered after the credit rating agency Standard & Poor’s cut 3i’s debt rating from A- to BBB+ before warning that it could make further cuts if the debt burden is not reduced. S&P said the rising leverage at the group and falling liquidity of its assets this year meant the company was “no longer consistent with an ‘A’ category rating.”

The agency added that the operating environment was tough for all private equity companies “and we believe that this may linger”.

Yesterday’s QPE deal values the fund’s shares at 88p each, equal to the net asset value at the end of last month, and capitalises the fund at £355.2m, a 33.5 per cent premium to Friday’s close.

3i decided to buy as it felt the fund was hugely undervalued. “Since the onset of the dislocation to the credit markets in autumn 2007, 3i QPE’s share price has traded at a significant discount to its net asset value,” the company said.

The independent advisers Tricorn Partners recommended the deal and, including its own stake, 3i already has 65 per cent approval for the deal.

3i said it was a good offer for the fund’s investors as it gave them an opportunity to realise their investment on the current net asset value per share, as well as receive a stake in the parent company.

The deal is attractive for 3i, as it can eliminate the “double discount” it suffers on QPE’s underlying assets under mark-to-market rules.

This came just days after the group raised £60m from selling a 9.5 per cent stake in its infrastructure fund. The move was overseen by the new chief executive, Michael Queen, who headed up 3i Infrastructure before replacing Philip Yea at the end of January.

It has since emerged that Baroness Hogg, the chairman of the group, is to step down at the end of next year, and is likely to be replaced by an existing non-executive director.

VIDEO
News
Matthew Mcnulty and Jessica Brown Findlay in 'Jamaica Inn'
mediaHundreds complain over dialogue levels in period drama
News
peopleJay Z and Beyoncé to buy £5.5m London townhouse
Voices
voicesMoyes' tragedy is one the Deputy PM understands all too well, says Matthew Norman
Arts & Entertainment
Rocker of ages: Chuck Berry
musicWhy do musicians play into old age?
Arts & Entertainment
tv
Arts & Entertainment
With Jo Joyner in 'Trying Again'
tvHe talks to Alice Jones on swapping politics for pillow talk
News
Jilly's jewels: gardener Alan Titchmarsh
peopleCountry Life magazine's list of 'gallant' public figures throws light on what it means to be a gentleman in the modern world
Sport
John Terry goes down injured in the 70th minute
sportAtletico Madrid 0 Chelsea 0: Blues can finish the job at Stamford Bridge, but injuries to Terry and Cech are a concern for Mourinho
Student
student
News
<b>Rebecca Adlington</b>
<br />This, the first British swimmer to win two
Olympic gold medals in 100 years, is the eversmiling
face of the athletes who will, we're
confident, make us all proud at London 2012
peopleRebecca Adlington on 'nose surgery'
Arts & Entertainment
tvJudge for yourself
Life & Style
tech
News
Tough call: is the psychological distress Trott is suffering an illness? (Getty)
healthJonathan Trott and the problems of describing mental illness
Life & Style
23 April 2014: Google marks St George's Day with a drawing depicting England's patron saint slaying a fire-breathing dragon
tech
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Director of Consulting - Energy Trading Gas, Power - London

£90000 - £110000 per annum + full Package: Harrington Starr: Director of Cons...

Automation Test Manager (C#, C++, VB.NET, QTP, Management)

Negotiable: Harrington Starr: Automation Test Manager (C#, C++, VB.NET, QTP, M...

Data Quality Analyst (SQL, Excel, Word, Finance, Access)

£20000 - £26000 per annum + benefits+bonus+package: Harrington Starr: Data Qua...

Graduate Developer/QA - (Java, C++, SQL)

£25000 - £32000 per annum: Harrington Starr: Graduate Developer/QA - (Java, C+...

Day In a Page

Brits who migrate to Costa del Sol more unhappy than those who stay at home

It's not always fun in the sun: Moving abroad does not guarantee happiness

Brits who migrate to Costa del Sol more unhappy than those who stay at home
Migrants in Britain a decade on: They came, they worked, they stayed in Lincolnshire

Migrants in Britain a decade on

They came, they worked, they stayed in Lincolnshire
Chris Addison on swapping politics for pillow talk

Chris Addison on swapping politics for pillow talk

The 'Thick of It' favourite thinks the romcom is an 'awful genre'. So why is he happy with a starring role in Sky Living's new Lake District-set series 'Trying Again'?
Why musicians play into their old age

Why musicians play into their old age

Nick Hasted looks at how they are driven by a burning desire to keep on entertaining fans despite risking ridicule
How can you tell a gentleman?

How can you tell a gentleman?

A list of public figures with gallant attributes by Country Life magazine throws a fascinating light on what it means to be a gentleman in the modern world
Pet a porter: posh pet pampering

Pet a porter: posh pet pampering

The duo behind Asos and Achica have launched a new venture offering haute couture to help make furry companions fashionable
A History of the First World War in 100 moments: The mutiny that sent a ripple of fear through the Empire

A History of the First World War in 100 moments

The mutiny that sent a ripple of fear through the Empire
Hot stuff: 10 best kettles

Hot stuff: 10 best kettles

Celebrate St George’s Day with a nice cup of tea. Now you just need to get the water boiled
Sam Wallace: Why Giggs is perfect fit as Manchester United boss... in the longer term

Sam Wallace

Why Ryan Giggs is perfect fit as Manchester United boss... in the longer term
Renaud Lavillenie: The sky's the limit for this pole vaulter's ambitions

Renaud Lavillenie: The sky's the limit for this pole vaulter's ambitions

Having smashed Sergei Bubka's 21-year-old record, the French phenomenon tells Simon Turnbull he can go higher
Through the screen: British Pathé opens its archives

Through the screen

British Pathé opens its archives
The man behind the papier mâché mask

Frank Sidebottom

The man behind the papier mâché mask
Chris Marker: Mystic film-maker with a Midas touch

Mystic film-maker with a Midas touch

Chris Marker retrospective is a revelation
Boston runs again: Thousands take to the streets for marathon as city honours dead and injured of last year's bombing

Boston runs again

Thousands of runners take to the streets as city honours dead of last year
40 years of fostering and still holding the babies (and with no plans to retire)

40 years of fostering and holding the babies

In their seventies and still working as specialist foster parents