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.

PROMOTED VIDEO
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Travel
The shipping news: a typical Snoozebox construction
travelSpending the night in a shipping container doesn't sound appealing, but mobile crash pads are popping up at the summer's biggest events
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
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

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz