TIDMHSLE TIDMHSLC
RNS Number : 3371S
HarbourVest Senior Loans Europe Ltd
18 November 2011
HARBOURVEST SENIOR LOANS EUROPE LIMITED
INTERIM MANAGEMENT STATEMENT
HarbourVest Senior Loans Europe Limited (the "Company"), is
publishing this Interim Management Statement in accordance with DTR
4.3 of the FSA Handbook.
This Interim Management Statement has been produced solely to
provide additional information to shareholders as a body to meet
the relevant requirements of the UK Listing Authority's Disclosure
and Transparency Rules. It should not be relied upon by any other
party or for any other purpose. The Statement has not been
audited.
This Interim Management Statement relates to the period from 30
June 2011 to 17 November 2011, unless otherwise stated. Through
this statement, the Group refers to the Company and its
wholly-owned Luxembourg subsidiaries.
Investment Policy & Objective
The Company's investment objective is to provide shareholders
with a combination of a high level of income and capital growth
over time, whilst preserving capital. The Company invests in senior
secured loans of private equity-backed European mid-market
companies. The Company purchases loans on a secondary basis,
generally at a discount to their par value, from motivated or
distressed sellers and invests in primary loans. The Company will
not buy distressed loans.
Manager Review
During the period ended 17 November 2011 the global economic
situation has deteriorated significantly and financial markets
declined while volatility increased considerably. The manager
anticipated such developments and managed its investment pace and
the positioning of the Company's portfolio accordingly. A high
selectivity ratio, a focus on defensive credits and the search for
appropriate compensation for the level of risks underwritten have
remained the key investment themes for HSLE.
The Company is currently accounting for two separate pools of
assets in connection with the net proceeds of its Ordinary Shares,
which were admitted to trading on the London Stock Exchange on 26
May 2010, and the net proceeds of its C Shares, which were admitted
to trading on the London Stock Exchange on 4 May 2011. This
separate accounting procedure will cease after the October NAV
announcement, as the two classes of shares will be merging by 12
December 2011 on the basis of their respective net asset values
("NAV") at the close of business on 31 October 2011.
At 31 October 2011 the estimated net asset value of the Company
is 95.11 pence per Ordinary Share and 96.66 pence per C Share. The
estimated net asset value of the Company's Ordinary and C Shares at
30 November 2011 is due to be published on 19 December 2011.
Ordinary Shares
The net proceeds of the Company's ordinary share capital (the
"Ordinary Portfolio") are invested in or committed to 17 loans,
representing approximately 97.8% of its net proceeds. The
weighted-average coupon on this portfolio of 17 loans is
approximately Libor +440 basis points. The NAV exposure of the
Ordinary Portfolio is approximately 47% to euros and 53% to
sterling. With respect to the committed and completed loans, the
currency is split 48% to euro and 52% to sterling at 31 October
2011 as measured by the loans' par value. On a geographical basis,
the Company's completed and committed transactions provide exposure
to the following six countries as measured by the loans' book
value: the UK (51%), the Netherlands (19%), Germany (12%), Italy
(9%), France (5%) and Sweden (4%). The Company's Ordinary Portfolio
is currently invested in a ratio of 45% to secondary and 55% to
primary transactions on a completed and committed basis.
C Shares
The net proceeds of the Company's C share capital (the "C Share
Portfolio") are invested in or committed to nine loans,
representing approximately 87.0% of its net proceeds. The
weighted-average coupon on this portfolio of nine loans is
approximately Libor +485 basis points. The Company's NAV exposure
of the C Share Portfolio is approximately 31% to euros and 69% to
sterling. With respect to the committed and completed loans, the
currency is split 56% to euro and 44% to sterling at 31 October
2011 as measured by the loans' par value. On a geographical basis,
the Company's completed and committed transactions provide exposure
to the following five countries as measured by the loans' book
value: the UK (44%), the Netherlands (27%), Belgium (20%), Germany
(8%) and France (1%). The Company's portfolio is currently invested
in a ratio of 64% to secondary and 36% to primary transactions on a
completed and committed basis.
Outlook
Looking forward, the Group is looking to add one or two loans to
complete its portfolio and deploy the final GBP2 million to GBP3
million of net proceeds. The pipeline of opportunities remains
robust, in particular secondary opportunities.
Material Events and Transactions
On 25 October 2011 the Company announced that, following
admission of the C Shares to the Official List and to trading on
the London Stock Exchange on 4 May 2011, the assets attributable to
the C Shares are now invested or committed in excess of 80%.
Calculation time for the conversion of the C Shares into Ordinary
Shares is the close of business on 31 October 2011 and the
conversion will therefore be made on the basis of the respective
NAV of the C Shares and the Ordinary Shares by no later than the
close of business on 12 December 2011.
Primary Loan Investments
There are nine primary loans in the Company's Ordinary
Portfolio, representing a book value of GBP52.8 million and a
current value of GBP50.0 million at 31 October 2011. There are
three primary loans in the Company's C Share Portfolio,
representing a book value of GBP8.1 million and a current value of
GBP7.7 million at 31 October 2011.
The first loan to be completed, representing at the time of
investment in August 2010 approximately 2.1% of the Ordinary
Portfolio, was to a leading provider of nurseries and
pre/after-school care services in the Dutch childcare market. This
borrower was acquired by a prominent private equity sponsor with
experience and a track record in the industry. The structure and
pricing are both favourable, a reflection of the primary market
conditions at the time. The Group invested EUR2.5 million in the
term loan B tranche of the senior loan package.
The second loan to be completed, representing at the time of
investment in November 2010 approximately 8.6% of the Ordinary
Portfolio, was made to the dominant local provider of business
applications for professional accountants and small and medium
enterprises (SMEs) in Italy. The borrower delivers a range of
business-critical software products to a diversified base of
customers. This business was also acquired recently by a leading
and renowned private equity sponsor with considerable experience
and a track record in the sector. Leverage and pricing were
favourable. The Group invested EUR10 million in the term loan B
tranche of the senior loan package.
The third loan, representing approximately 6.1% of the Ordinary
Portfolio at the time of investment in March 2011, was made to a
Netherlands-based leading specialty chemicals distributor to Europe
and the Asia Pacific region. The Group invested EUR7 million in the
term loan B tranche of the senior loan package.
The fourth loan, representing approximately 10.1% of the
Ordinary Portfolio at the time of investment in March 2011, was
made to a UK-based leading provider of specialty healthcare
services. The Group invested GBP10 million in the term loan B
tranche of the senior loan package.
The fifth loan, representing approximately 4.4% of the Ordinary
Portfolio at the time of investment in March 2011, was made to a
German specialised retail company. The Group invested EUR5 million
in the term loan A tranche of the senior loan package.
The sixth loan, representing approximately 4.5% of the Ordinary
Portfolio at the time of investment in April 2011, was made to a
French-based specialist provider of calibration services to
industries including aeronautics and aerospace, defence, automotive
and transport, electronics and microelectronics, utilities and life
sciences. As with the first two primary loans, this business is
backed by a well-known and long-established private equity sponsor.
The Group has invested EUR5 million in the term loan B tranche of
the senior loan package.
The seventh loan, representing approximately 7.1% of the
Ordinary Portfolio at the time of investment and approximately 7.2%
of the C Share Portfolio at the time of investment, was made to a
German industrial company. The Group has invested EUR10 million in
the term loan B tranche of the senior loan package of and this
investment is shared pro rata by the Ordinary Portfolio and the C
Share Portfolio.
One secondary loan in the Ordinary Portfolio was refinanced in
the second quarter of 2011. The Group has invested in the new loan
being arranged by the same issuer although with a slightly smaller
exposure (EUR7 million compared to EUR8.7 million previously). This
commitment is shared pro rata by the Ordinary Portfolio and the C
Share Portfolio. As a consequence of this transaction, the loan has
been reclassified as a primary loan and represents the eighth loan
in the Company's Ordinary Portfolio and the second loan in the
Company's C Share Portfolio.
The ninth loan, representing approximately 5.6% of the Ordinary
Portfolio at the time of investment and approximately 19.0% of the
C Share Portfolio at the time of investment, was made to a Dutch
specialist business process outsourcing company. The Group has
invested EUR12 million in the term loan B tranche of the senior
loan package and this investment is shared by the Ordinary
Portfolio and the C Share Portfolio.
Secondary Loan Investments
The Group has invested or committed to ten distinct senior loans
on the secondary market but one of them was refinanced in the
second quarter of 2011, as described above. There are eight
secondary loans in the Company's Ordinary Portfolio, representing a
book value of GBP44.1 million and a current value of GBP43.8
million at 31 October 2011. There are five secondary loans in the
Company's C Share Portfolio, representing a book value of GBP7.5
million and a current value of GBP7.4 million at 31 October 2011.
The C Share portfolio is committed to two additional secondary
transactions representing a book value of GBP7.1 million.
The first investment was made in a small portfolio of four loans
on the secondary market sourced from a single lender. The Group
invested approximately GBP19.7 million in aggregate, representing
approximately 19.9% of the Ordinary Portfolio at the time of
investment in November 2010. These loans were purchased at a slight
discount to par but offer compelling risk-return profiles. They are
moderately leveraged and benefit from tightly drafted and
conservative legal documentation and structures. These loans are to
firms operating in diverse industries, all based in the UK:
-- A global market leader in the provision of intellectual
property and trademark management services to law firms and
corporations worldwide, with a core focus on patent and trademark
renewal services;
-- A gaming, leisure and entertainment company;
-- A dominant auto auction firm operating throughout Europe; and
-- A mid-size provider of pension outsourcing services to trustees, private companies and public organisations
These four investments had a weighted-average net senior debt to
EBITDA ratio of 3.2 times at the time of acquisition by the
Group.
Since the initial purchase, the Group made a number of
additional purchases in the first and third loans of this
portfolio, sourced from a variety of other lenders. An investment
was made in September 2011 in the first loan, representing 15.3% of
the C Share Portfolio at the time of investment. A second
investment was made in August 2011 in the third loan, representing
1.7% of both the Ordinary Portfolio and the C Share Portfolio at
the time of investment, while a third investment was made to the
same loan in October 2011, representing 10% of the C Share
Portfolio at the time of investment.
The fifth loan was made to a leading global provider of
information services to the energy, metals and mining industries.
The Group invested GBP9.9 million, representing approximately 10%
of the Ordinary Portfolio at the time of investment in November
2010 and in January 2011, in the term loan A and term loan B
tranches of the senior loan package. A second investment in this
loan was made in September 2011, representing 7.7% of the C Share
Portfolio at the time of investment.
The sixth loan was made to a UK market leader in software
solutions for small and medium sized accounting and legal
businesses. The Group invested GBP6.3 million in the term loan B
tranche of the senior loan package on terms that could yield a
return in excess of that available in the primary market in the
event that it is refinanced ahead of its maturity. This transaction
represents approximately 6.4% of the Company's net proceeds at the
time of investment in December 2010. A second investment in this
loan was made in August 2011, representing 3.4% of the Ordinary
Portfolio at the time of investment and 3.3% of the C Share
Portfolio at the time of investment.
The seventh loan is to a leading global provider of kidney
dialysis services based in Sweden. The Group invested EUR4.6
million in the term loan B tranche of the senior loan package on
terms that could yield a return in excess of that available in the
primary market in the event that the loan is refinanced ahead of
its maturity. This transaction represents approximately 3.9% of the
Ordinary Portfolio at the time of investment in December 2010.
The eighth loan, representing approximately 0.7% of the Ordinary
Portfolio at the time of investment and approximately 0.7% of the C
Share Portfolio at the time of investment, was made to an operator
of private hospitals in France. The Group has invested EUR1 million
in the term loan B tranche of the senior loan package and this
investment is shared pro rata by the Ordinary Portfolio and the C
Share Portfolio.
The ninth loan was made in October 2011 to a Belgian publisher
of business information. The Group invested EUR5.2 million in the
term loan B tranche of the senior loan package on terms that could
yield a return in excess of that available in the primary market in
the event that the loan is refinanced ahead of its maturity. This
transaction represents approximately 17.1% of the C Share Portfolio
at the time of investment.
Dividend
During the period, the Company declared its third interim
dividend of 1.0 pence per Ordinary Share. The dividend was paid to
ordinary shareholders on 30 September 2011 at a total cost of
GBP1,010,900.
Holders of C Shares will be entitled to a special dividend in
respect of income accrued on the C Share Portfolio assets for the
period from Admission on 4 May 2011 to the date on which the C
Shares convert to Ordinary Shares. The special dividend will be
announced at the same time as the conversion ratio on 24 November
2011.
From 1 July 2011 the investment manager will aim to deliver to
shareholders annual returns of dividends of Libor +300 to 350 basis
points for the life of the Company, payable in March and
September.
Report and Accounts
The Company's second semi-annual Report and Accounts will be
produced for the period ended 31 December 2011 and will be
distributed to shareholders within two months of the period
end.
Financial Highlights
31 October 30 September 30 June 2011 31 March
2011 2011 2011
------------------- ----------- ------------- ------------- ---------
Estimated monthly
NAV per Ordinary
Share 95.11p 94.62p 99.27p 97.30p
------------------- ----------- ------------- ------------- ---------
Estimated monthly
NAV per C Share 96.66p 96.64p 97.67p N/A
------------------- ----------- ------------- ------------- ---------
The financial information for the period ended 17 November 2011
contained within this Interim Management Statement has not been
audited.
Other Notices
The Company intends to publish its estimated NAV for the month
ending 30 November 2011 on 19 December 2011.
By order of the Board.
BNP Paribas Fund Services (Guernsey) Limited, for and on behalf
of HarbourVest Senior Loans Europe Limited as Company Secretary
KEY DATA OVERVIEW
Ordinary Shares: 101,090,000
C Shares: 26,688,900
Total Voting Rights: 127,778,900
Estimated NAV per Ordinary Share
at 31 October 2011: 95.11p
Estimated NAV per C share
at 31 October 2011: 96.66p
Ordinary Share price: 92.00p
Premium/Discount to NAV per Ordinary Share: -3.3%
C Share price: 100.50p
Premium/Discount to NAV per C share: 4.0%
Share prices are official London Stock Exchange closing
prices.
Sources:
London Stock Exchange
Company's Administrator
HarbourVest Senior Loan Advisers L.P.
KEY FACTS
Ordinary Shares
ISIN GG00B4N5LG23
SEDOL B4N5LG2
LSE HSLE
Bloomberg HSLE.LN
Reuters HSLE.L
AIC Sector Global High Income
C Shares
ISIN GG00B6883D13
SEDOL B6883D1
LSE HSLC.L
Bloomberg HSLC.LN
Reuters HSLC.L
AIC Sector Global High Income
This information is provided by RNS
The company news service from the London Stock Exchange
END
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