Shortage of demand gives 3i its greatest problem: We could lend half a billion, says group's chief

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The Independent Online
THE 3i venture capital group said yesterday it had between pounds 500m and pounds 1bn available for investment, but a shortage of companies in which to invest.

Unveiling an pounds 88m total return to investors after tax in the year to March compared with pounds 69m the year before, Ewen Macpherson, chief executive, said the group had plenty of resources.

Investment in companies was not held back by the indefinite postponement of the 3i stock market flotation by its clearing bank shareholders. 'We are short of demand rather than anything else,' Mr Macpherson said.

He said 3i had undrawn term loans available of pounds 530m and could 'easily lend half-a- billion plus our cash flow'. There was also pounds 400m in standby loans, though he did not regard these as available for lending. Last year's difficulties in the economy reduced 3i's gross investment from pounds 407m to pounds 310m as demand shrank.

Bad debt provisions rose from pounds 61m to pounds 171m, including pounds 72m against an investment in Isosceles, the Gateway supermarket group, and pounds 30m for withdrawing from overseas businesses, mainly in the US.

Of the Isosceles costs, pounds 44m was a transfer of a previous write-off, which had been taken to reserves, and the rest was mezzanine debt, announced at the half-year.

The group accounts as an investment trust. The result was worse than many conventional investment trusts, but 3i said it turned round sharply in the second half of last year from a pounds 74m drop in value to a pounds 162m positive return to shareholders.

The improvement tracked the change in the UK economy as the value of the group's investments in quoted and unquoted companies rose and disposals were made at better prices. Revenue before tax was 19 per cent higher at pounds 48m after adjusting for an exceptional pounds 8m credit of interest on overpaid tax.

The new chairman, expected to be Sir George Russell of the Independent Television Commission, is to be announced on 28 July at the annual meeting.