EUROPE - 3i licking wounds – to aide healing?

While the news may stoke the fire of critics calling the end of play for many listed vehicles, it could actually represent an effort to make aggressive value reductions now to concentrate bad news, rather than more gently and across the entire year, so that growth may resume later in 2009. The figures also revealed a renewed drive to realise investments and a substantial drop-off in deal activity.

The group has warned of further value declines in its portfolio when the full year results are announced in March, on top of an estimated drop in value of 21% against the top 50 assets alone reported in January. The slide could be severe, as the firm has also stated its intention to move all assets from a cost-base valuation for the full year reports - at 30 September 2008 25% of the portfolio was held at cost.

3i confirmed realisations for the 11 month period to 28 February 2009 totalling £1.1bn. This is down from £1.6bn in the corresponding period of 2008, though considering the sharp writedown in asset values, this decline does not accurately reflect the scale of the ongoing de-leveraging excersise.

The realisation total includes £181m generated in the first two months of 2009 through sales of non-core venture holdings, several growth capital disposals, and the placing of almost 10% of the share capital of 3i Infrastructure.

Earlier this year 3i Group also reached agreement with the board of 3i Quoted Private Equity plc (QPEP) on the terms of an acquisition that will see the latter acquired through a solvent acquisition. The deal will result in a cash inflow to the firm of around £110m and is expected to be fully approved following the EGM of 3i QPEP shareholders at the end of April.

In terms of investments, 3i's retrenchment is confirmed by the huge drop off in activity. The group invested a combined total of £898m in the 11 month period and just £57m in the opening two months of this year - down from £2.2bn and £841m respectively in 2008.

The group will continue this consolidation strategy going forward as it continues with its objective of reducing its debt-pile, which stood at more than £2bn in January. 3i is hoping that this impetus will mean that unlike some of its listed larger buyout cousins, which are stymied by an inability to make realisations, it will live (and have the cash) to fight another day.

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