3i Group suffers credit downgrade despite move to raise cash - Business News - Business - The Independent

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.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
Arts and Entertainment
Emma Thompson and Bryn Terfel are bringing Sweeney Todd: The Demon Barber of Fleet Street to the London Coliseum
theatre

Returning to the stage after 20 years makes actress feel 'nauseous'

News
peopleThe Times of India said actress should treat it as a 'compliment'
PROMOTED VIDEO
News
news

Watch this commuter make a mad 320-metre, 75-step dash to work
Property
Home body: Badger stays safe indoors
lifeShould we feel guilty about keeping cats inside?
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK edition of wedding show forced to recast after wave of drop-outs
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise
student

Top conservatoire offers ‘groundbreaking’ arts degree

Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Consultant - Soho - IT, Pharma, Public Sector

£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week