European Capital Limited News
European Capital Declares euro 0.15 Q2 2008 Dividend, Reports euro 0.24 NOI and euro 0.32 Realised Earnings In Q1 2008
ST. PETER PORT, Guernsey,
SECOND QUARTER 2008 DIVIDEND DECLARATION
European Capital's Board of Directors has declared a second quarter 2008 dividend of
2008 DIVIDEND GUIDANCE
European Capital reiterates its 2008 dividend forecast of
euro 0.16 for Q3 2008, 23% increase over Q3 2007; and euro 0.16 for Q4 2008, 14% increase over Q4 2007.
FIRST QUARTER 2008 RESULTS
Net Operating Income (NOI)European Capital also announced today its results for the first quarter of 2008. NOI for the quarter increased 4% to
Realised Earnings
Realised Earnings increased 19% to
Earnings
European Capital's Earnings for the first quarter of 2008 was a loss of
European Capital's net asset value ("NAV") per share at
"We delivered excellent NOI and Realised Earnings for the quarter." said
For the first quarter of 2008, net appreciation, depreciation, gains and losses totalled
— euro 102 million of depreciation associated with the adoption of SFAS 157, including the widening of investment spreads; — euro 51 million of depreciation associated with the write down of Private Finance investments; — euro 10 million of depreciation from its Structured Products, due to the continuing widening of investment spreads; — euro 21 million of net depreciation from foreign currency translation; — euro 10 million of reversals of prior foreign currency appreciation associated with realised gains; and — euro 2 million of net depreciation on derivatives.
"Credit quality remains good in light of the economic environment," stated
In the first quarter of 2008, European Capital invested
As of
"M&A volumes declined in the first quarter but high quality companies continue to come to market even in this somewhat tighter lending environment," said
Since inception, European Capital has earned a 15% compounded annual return, including interest, dividends, fees and net gains, on 29 realisations of senior debt, subordinated debt and equity investments, totalling euro 1.2
billion of committed capital. These realisations represent 35% of all amounts invested by European Capital since inception.
"Over the past several months, numerous firms have been forced to issue dilutive equity in order to fix their balance sheets," stated
During the first quarter, European Capital was also required to adopt Statement of Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which gave the Company the option to fair value its financial liabilities in its financial statements. European Capital did not elect the fair value option for any of its eligible financial liabilities. However, European Capital will begin providing its shareholders with supplemental information on the fair value of its financial liabilities. The cost basis and fair value of European Capital's financial liabilities as of
MATERIAL DIFFERENCES BETWEEN FAIR VALUE AND REALISABLE VALUE
European Capital believes that approximately
The current lack of liquidity in the financial markets has caused investment spreads between the cost of funds and investment income to widen dramatically on investments, which in most cases results in current fair values that are materially lower than the Company anticipates realising on settlement or maturity.
The Company is following US Regulatory Disclosures regarding SFAS 157 that allows it to disclose material differences between US GAAP fair value and values anticipated to be realised upon settlement or maturity (Realisable Value). Because European Capital believes its US GAAP fair values diverge materially from the amounts it anticipates to realise on settlement or maturity, the Company will begin to provide pro forma information on the Realisable Value of its assets in comparison to the fair value determined under US GAAP.
The following table summarises the current cost basis and fair value of our investments as of
Difference Between Realisable Value and Net US GAAP Asset Cost Net Apprec./ Currency Fair Value Realisable Fair Class Basis (Deprec.) Movement US GAAP Value(1) Value (euro) (euro) (euro) (euro) (euro) (euro) Private Finance 1,995 (145) (109) 1,741 1,841 100 Structured Product 24 (10) - 14 24 10 Derivatives 1 (1) 8 8 8 - Total 2,020 (156) (101) 1,763 1,873 110 (1) Realisable Value is a non-GAAP financial measure that is the future value that we anticipate realising on the settlement or maturity of our investments.
THIRD PARTY VALUATION OF PORTFOLIO INVESTMENTS
European Capital's Board of Directors is responsible for determining the fair value of European Capital's portfolio investments on a quarterly basis. In that regard, the Board retains
For those portfolio company investments that
Financial highlights for the quarter are as follows: EUROPEAN CAPITAL LIMITED CONSOLIDATED BALANCE SHEETS As of 31 March 2008 and 31 December 2007 (in thousands, except per share data) 31 March 2008 31 March 31 December Versus 2008 2007 31 December 2007 (unaudited) euro euro euro % Assets Investments at fair value (Cost basis of euro 2,020,116 and euro 1,968,468, respectively) 1,762,681 1,925,696 (163,015) -8% Cash and cash equivalents 39,741 2,575 37,166 NM Restricted cash 20,082 30,214 (10,132) -34% Other 19,699 9,558 10,141 106% Total assets 1,842,203 1,968,043 (125,840) -6% Liabilities and Shareholders' Equity Debt (maturing within one year euro 582,114 and euro 793,237, respectively) 948,582 896,157 52,425 6% Due to European Capital Financial Services (Guernsey) Limited 3,616 718 2,898 404% Accrued dividends payable 16,255 15,171 1,084 7% Other 3,666 8,377 (4,711) -56% Total liabilities 972,119 920,423 51,696 6% Commitments and contingencies Shareholders' equity: Ordinary shares (nil par value, authorised to issue unlimited number of shares, 108,364 issued and outstanding, 2007: 108,364) - 1,030,888 (1,030,888) -100% Other reserve 1,030,888 - 1,030,888 NM Undistributed net realised earnings 55,614 37,235 18,379 49% Net foreign currency (depreciation) appreciation (59,823) (28,391) (31,432) -111% Net (depreciation) appreciation of investments (156,595) 7,888 (164,483) NM Total shareholders' equity 870,084 1,047,620 (177,536) -17% Total liabilities and shareholders' equity 1,842,203 1,968,043 (125,840) -6% NM = Not Meaningful EUROPEAN CAPITAL LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended 31 March 2008 and 2007 (in thousands, except per share data) Three Months Ended Three Months Ended 31 March 31 March 2008 2007 2008 Versus 2007 (unaudited)(unaudited) euro euro euro % OPERATING INCOME: Interest and dividend income 53,447 34,282 19,165 56% Fee and other income 320 3,290 (2,970) -90% Total operating income 53,767 37,572 16,195 43% OPERATING EXPENSES: Interest 16,029 6,940 9,089 131% Management fee and reimbursed expenses 9,421 11,366 (1,945) -17% Incentive fee - - - - General and administrative 2,152 1,530 622 41% Total operating expenses 27,602 19,836 7,766 39% OPERATING INCOME BEFORE INCOME TAXES 26,165 17,736 8,429 48% Provision for income taxes (81) (144) 63 -44% NET OPERATING INCOME 26,084 17,592 8,492 48% Net foreign currency gains 8,576 2,286 6,290 275% Net loss on investments (26) - (26) NM TOTAL NET REALISED EARNINGS 34,634 19,878 14,756 74% Net foreign currency depreciation (31,432) (3,782) (27,650) -731% Net (depreciation) appreciation of investments (164,483) 11,013 (175,496) NM (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (\"EARNINGS\") (161,281) 27,109 (188,390) -695% NET OPERATING INCOME PER SHARE: Basic & Diluted 0.24 0.23 0.01 4% NET REALISED EARNINGS PER SHARE: Basic & Diluted 0.32 0.27 0.05 19% NET EARNINGS PER SHARE: Basic & Diluted (1.49) 0.36 (1.85) -514% WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 108,364 75,000 33,364 44% Diluted 108,364 75,714 32,650 43% DIVIDENDS DECLARED PER SHARE 0.15 0.21 (0.06) -29% NM = Not Meaningful EUROPEAN CAPITAL LIMITED OTHER FINANCIAL INFORMATION Three Months Ended 31 March 2008, 31 December 2007 and 31 March 2007 (in thousands, except per share data) (unaudited) Q1 Q4 Q1 2008 Versus 2008 2007 Q4 2007 euro euro euro % New Investments: Senior Debt 1,035 25,000 (23,965) -96% Subordinated Debt 164,037 149,937 14,100 9% Preferred Equity 3,072 3,263 (191) -6% Common Equity 115 1,775 (1,660) -94% CDO/CLO Investments - - - NM Total 168,259 179,975 (11,716) -7% European Capital Sponsored Buyouts - - 0 100% Financing for Sponsored Buyouts 152,949 178,625 (25,676) -14% Direct Investments - - - NM Add-on Financing for Acquisitions 14,000 1,350 12,650 937% Add-on Financing for Recapitalisations 1,310 - 1,310 NM Total 168,259 179,975 (11,716) -7% Realisations: Senior Loan Refinancings - 40,000 (40,000) -100% Principal Prepayments 83,580 68,218 15,362 23% Payment of Accrued Payment-in-kind Interest and Dividends and Original Issue Discount 6,503 3,304 3,199 97% Sale of Equity Investments 24,664 - 24,664 100% Total 114,747 111,522 3,225 3% Appreciation, Depreciation, Gains and Losses: Gross Losses (26) - (26) NM Portfolio Loss (26) - (26) NM Net Gains for Foreign Currency Translation 8,576 46 8,530 NM Total Gains and Losses 8,550 46 8,504 NM Gross Appreciation at 8, 7 and 6 Portfolio Companies 19,683 18,819 864 5% Gross Depreciation at 42, 7 and 1 Portfolio Companies (184,166) (24,769) (159,397) -644% Current Portfolio Net (Depreciation) Appreciation (164,483) (5,950) (158,533) NM Net Depreciation for Foreign Currency Translation (31,432) (13,782) (17,650) -128% Total (Depreciation) Appreciation (195,915) (19,732) (176,183) (9) Net Gains, Losses, Appreciation and Depreciation (187,365) (19,686) (167,679) (9) Other Financial Data: Net Asset Value per Share 8.03 9.67 (1.64) -17% Market Capitalisation 653,435 756,381 NA NA Total Enterprise Value 1,562,276 1,649,963 NA NA Credit Quality: Weighted Average Effective Interest Rate on Debt Investments 12.6% 12.7% Loans on Non-Accrual at Cost 21,165 29,875 (8,710) NM Loans on Non-Accrual at Fair Value 4,290 - 4,290 NM Past Due Loans at Cost - - - NM Past Due and Non-Accrual Loans at Cost as a Percentage of Total Loans 1.3% 1.9% Past Due and Non-Accrual Loans at Fair Value as a Percentage of Total Loans 0.3% 0.0% Number of Portfolio Companies on Non-Accrual and Past Due 1 1 Return on Equity: LTM Net Operating Income Return on Average Equity at Cost 9.7% 9.4% LTM Realised Earnings Return on Average Equity at Cost 10.8% 9.9% LTM Earnings Return on Average Equity -12.8% 7.0% Current Quarter Net Operating Income Return on Average Equity at Cost Annualised 10.1% 11.2% Current Quarter Realised Earnings Return on Average Equity at Cost Annualised 13.4% 11.2% Current Quarter Earnings Return on Average Equity Annualised -67.3% 3.7% Dividends: Dividend Coverage (Realised Earnings per Basic Share/ Dividend per Share) 2.13 x 1.93 x Dividend Payout Ratio (Dividend per Share/ Realised Earnings per Basic Share) 0.47 x 0.52 x Q1 Q1 2008 Versus 2007 Q1 2007 euro euro % New Investments: Senior Debt 118,539 (117,504) -99% Subordinated Debt 138,016 26,021 19% Preferred Equity 8,477 (5,405) -64% Common Equity 1,733 (1,618) -93% CDO/CLO Investments - - NM Total 266,765 (98,506) -37% European Capital Sponsored Buyouts 254,681 (254,681) -100% Financing for Sponsored Buyouts - 152,949 NM Direct Investments - - NM Add-on Financing for Acquisitions 12,084 1,916 16% Add-on Financing for Recapitalisations - 1,310 NM Total 266,765 (98,506) -37% Realisations: Senior Loan Refinancings 61,479 (61,479) -100% Principal Prepayments 88,765 (5,185) -6% Payment of Accrued Payment-in-kind Interest and Dividends and Original Issue Discount 5,667 836 15% Sale of Equity Investments 6,983 17,681 253% Total 162,894 (48,147) -30% Appreciation, Depreciation, Gains and Losses: Gross Losses - (26) NM Portfolio Loss - (26) NM Net Gains for Foreign Currency Translation 2,286 6,290 275% Total Gains and Losses 2,286 6,264 274% Gross Appreciation at 8, 7 and 6 Portfolio Companies 11,899 7,784 65% Gross Depreciation at 42, 7 and 1 Portfolio Companies (886) (183,280) NM Current Portfolio Net (Depreciation) Appreciation 11,013 (175,496) NM Net Depreciation for Foreign Currency Translation (3,782) (27,650) -731% Total (Depreciation) Appreciation 7,231 (203,146) NM Net Gains, Losses, Appreciation and Depreciation 9,517 (196,882) NM Other Financial Data: Net Asset Value per Share 10.07 (2.04) -20% Market Capitalisation NA NA NA Total Enterprise Value NA NA NA Credit Quality: Weighted Average Effective Interest Rate on Debt Investments 12.7% Loans on Non-Accrual at Cost - 21,165 NM Loans on Non-Accrual at Fair Value - 4,290 NM Past Due Loans at Cost - - NM Past Due and Non-Accrual Loans at Cost as a Percentage of Total Loans 0.0% Past Due and Non-Accrual Loans at Fair Value as a Percentage of Total Loans 0.0% Number of Portfolio Companies on Non-Accrual and Past Due - Return on Equity: LTM Net Operating Income Return on Average Equity at Cost 9.8% LTM Realised Earnings Return on Average Equity at Cost 10.4% LTM Earnings Return on Average Equity 12.9% Current Quarter Net Operating Income Return on Average Equity at Cost Annualised 9.5% Current Quarter Realised Earnings Return on Average Equity at Cost Annualised 10.7% Current Quarter Earnings Return on Average Equity Annualised 14.5% Dividends: Dividend Coverage (Realised Earnings per Basic Share/Dividend per Share) 1.29 x Dividend Payout Ratio (Dividend per Share/Realised Earnings per Basic Share) 0.78 x EUROPEAN CAPITAL LIMITED STATIC POOL INFORMATION Portfolio Statistics for Investments Made in Each of the Following Years (in thousands) Portfolio statistics(1)(10)(12) 2005 2006 2007 2008 Aggregate Internal Rate of Return - All Investments(2)(9) 16.0% 9.4% 11.2% 13.2% 11.1% Internal Rate of Return - All Investments(3)(9) 16.0% 5.8% 2.9% 11.6% 6.6% Internal Rate of Return - Equity Investments only(3)(9)(11) 33.7% 7.3% (4.4)% (33.4)% 6.3% Original Investments and Commitments(9) 237,612 1,211,837 1,487,669 152,820 3,089,938 Total Exits and Prepayments of Original Investments(9) 118,833 659,763 354,027 - 1,132,623 Total Interest, Dividends and Fees Collected(9) 41,179 113,080 72,467 1,725 228,451 Total Net Gains on Investments 202 3,666 - - 3,868 Current Cost of Investments 131,080 598,990 1,157,311 132,607 2,019,988 Current Fair Value of Investments 143,996 466,608 1,016,300 127,867 1,754,771 Net Appreciation (Depreciation)(13) 12,930 (85,240) (82,423) (983) (155,716) Non-Accruing Loans at Cost - 21,165 - - 21,165 Non-Accruing Loans at Fair Value - 4,290 - - 4,290 Equity Interest at Fair Value 31,933 165,941 153,223 7,074 358,171 Debt to EBITDA(4)(5) 5.3 5.7 6.2 6.2 6.0 Interest Coverage (4) 2.7 2.6 4.0 2.3 3.4 Debt Service Coverage(4) 1.8 2.1 3.1 2.3 2.7 Average Age of Companies 128 years 88 years 44 years 23 years 60 years Ownership Percentage 14.4% 34.0% 13.9% 2.0% 18.4% Average Sales(6) 311,383 542,402 295,500 170,945 354,232 Average EBITDA(7) 53,519 76,071 52,440 26,737 57,090 Average EBITDA margin(7) 19.1% 14.8% 17.0% 16.9% 16.1% Total Sales(6) 2,502,168 16,183,809 16,601,779 583,045 35,870,800 Total EBITDA(7) 477,548 2,395,909 2,817,436 98,439 5,789,332 % Senior Loans(8) 3.0% 22.2% 33.9% 0.0% 25.8% % Loans with Lien(8) 100.0% 100.0% 100.0% 100.0% 100.0% (1) Static pool classification is based on the year the initial investment was made. Subsequent add-on investments are included in the static pool year of the original investment. (2) Assumes investments are exited based on Realisable Value that is anticipated to be received upon settlement or maturity (3) Assumes investments are exited at current US GAAP fair value. (4) These amounts do not include investments in which we own only equity. (5) For portfolio companies with a nominal EBITDA amount, the portfolio company's maximum debt leverage is limited to 15 times EBITDA. (6) Sales of the most recent twelve months, or when appropriate, the forecasted twelve months. (7) EBITDA of the most recent twelve months, or when appropriate, the forecasted twelve months. (8) As a percentage of our total debt investments. (9) Non euro-denominated amounts are retranslated at the exchange rate ruling at the date of original investment. (10) Non euro-denominated balances, other than those referred to in (9), are retranslated at the exchange rate ruling at the balance sheet date. (11) Excludes equity investments that are the result of conversions of debt and warrants received with the issuance of debt. (12) Excludes derivative instruments. (13) Balance Sheet appreciation (depreciation) of investments excluding foreign exchange revaluation. A summary of European Capital's dividend history post IPO and forecast follows. For more information, please visit our website at www.EuropeanCapital.com or call our Investor Relations Department at +44 (0) 207 539 7100. % Change of % Change of Regular Dividend Total Dividend Over Prior Over Prior Year and Quarter Dividend Year Total Year (euro) (euro) Total 2007 to Q2 2008 0.67 2008 0.62 68% 0.62 68% Q4 FORECAST 0.16 14% Q3 FORECAST 0.16 23% Q2 DECLARED 0.15 50% Q1 0.15 N/A 2007 0.37 N/A 0.37 N/A Q4 0.14 Q3 0.13 Q2 (IPO = 10 MAY 2007) 0.10
SHAREHOLDER CALL
European Capital invites shareholders, analysts and other interested persons to attend the European Capital Shareholder Call on Wednesday 14 May at
Point your browser to www.EuropeanCapital.com and click on the Q1 2008 Shareholder Call Slide Show button.
BEFORE THE CALL:
REVIEW SLIDE PRESENTATION IN ADVANCE OF THE SHAREHOLDER CALL
The quarterly shareholder presentation includes a slide presentation to accompany the call that participants may download and print prior to the call. You may wish to take the time to review the slides in advance of the Shareholder Call.
DURING THE CALL:
VIEW STREAMING SLIDE PRESENTATION DURING THE SHAREHOLDER CALL
During the Shareholder Call you may watch and listen to the webcast or listen to the Shareholder Call by phone and step through the slides at your own pace.
AFTER THE CALL:
LISTEN AND VIEW AUDIO SLIDE PRESENTATION AFTER THE CALL
The audio of the Shareholder Call combined with the slide presentation will be made available after the call on 14 May on our website www.EuropeanCapital.com.
AUDIO ONLY PRESENTATION AVAILABLE AFTER THE SHAREHOLDER CALL:
There will be a phone recording available from
For further information or questions, please do not hesitate to call our Investor Relations Department at +44 (0)207 539 7100 or send an email to IR@EuropeanCapital.com.
ABOUT EUROPEAN CAPITAL
European Capital is a publicly traded investment company for pan-European equity, mezzanine and senior debt investments with current capital resources of approximately
European Capital invests in and sponsors management and employee buyouts, invests in private equity buyouts and provides capital directly to private and public companies headquartered primarily in
The investment objective of European Capital is to provide investors with dividend income and the potential for share value appreciation by investing in debt and equity investments in private and public companies headquartered primarily in
European Capital seeks to achieve this through pursuing the following types of investments:
European Capital One Stop Buyouts(TM)
Through our One Stop Buyouts(TM), European Capital provides equity, mezzanine debt and senior debt as the lead investor in the buyout of private and public companies.
Mezzanine Direct with Sponsors
European Capital provides debt and equity financing for buyouts sponsored by private equity firms where European Capital is either the sole or lead mezzanine debt investor.
Syndicated Mezzanine and Senior Debt
European Capital provides mezzanine and senior financing for buyouts sponsored by private equity firms where European Capital is neither the sole nor lead mezzanine or senior debt investor.
Direct Investments
European Capital provides debt and equity financing directly to private and public companies, which is used for growth, acquisitions or recapitalisations, and investing in structured finance vehicles.
Companies interested in learning more about European Capital's flexible financing should contact
ABOUT AMERICAN CAPITAL
American Capital is the only private equity fund and alternative asset management company that is a member of the S&P 500. With
American Capital, both directly and through its global asset management business, is an investor in management and employee buyouts, private equity buyouts, and early stage and mature private and public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions, recapitalisations and securitisations. American Capital and its affiliates invest from
IMPORTANT DISCLOSURES
This document may contain "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Many of these risks and uncertainties relate to factors beyond European Capital's control or which cannot be estimated precisely. These factors include, but are not limited to, uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, and changes in the conditions of the industries in which European Capital has made investments. Actual outcomes and results may therefore differ materially from any outcomes or results expressed or implied by any such forward-looking statements.
Performance data quoted above represents past performance of European Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in European Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, European Capital's current performance may be lower or higher than the performance data quoted above.
Nothing in this document is intended to be a profit forecast.
SOURCE European Capital Limited
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