Interim Management Statement -- European Capital Limited Reports 2012 Net Operating Loss Of Euro (1) Million And Net Earnings Of Euro 23 Million

ST. PETER PORT, Guernsey, Aug. 30, 2012 /PRNewswire/ -- European Capital Limited ("European Capital" or the "Company") today issues an Interim Management Statement announcing net operating income ("NOI") for the half year ended 30 June 2012 of €(1) million and  Net earnings for the half year were €23 million.  As at 30 June 2012, net asset value ("NAV") was €650 million, a 4%, or €23 million increase from the 31 December 2011 NAV of €627 million and a €65 million decrease from the 30 June 2011 NAV of €715 million.

H1 2012 FINANCIAL SUMMARY

• €(1) million NOI
  • Materially impacted by 1 particular asset put on non-accrual status
• €(3) million net realised loss on investments
• €18 million net unrealised appreciation on investments
• €23 million net earnings
• €56 million of cash proceeds from realisations
• €20 million of securitised debt repaid
• €95 million of committed investment
  • €84 million in new portfolio companies

"NAV grew by €23 million in the first half, performing better than we had expected considering the weak economy in some parts of Europe," said Malon Wilkus, Chairman and Chief Executive Officer.  "In the past six months our aggregate portfolio companies experienced moderate revenue and EBITDA growth, year over year.  We believe this reflects the fact that 99% of European Capital's portfolio companies are located in countries with AA credit ratings or better.  We were busy in the first half, generating €56 million cash realisations and investing €95 million of which €89 million was in senior loans.  We remain poised to consider new investments particularly if attractive pricing develops."

PORTFOLIO VALUATION

For the half year ended 30 June 2012, net unrealised appreciation of investments totalled €18 million on our private finance portfolio mainly driven by improvements in the performance of portfolio companies. 

PORTFOLIO LIQUIDITY AND PERFORMANCE

In the first half of 2012, €56 million of cash proceeds were received from realisations of portfolio investments.  The Company made €95 million in new committed investments in the first half of the year with €84 million committed to new portfolio companies and €11 million to support the current portfolio. 

"During the first half, we continued to see liquidity in the portfolio and deployed our capital into areas that add to shareholder value." said Ira Wagner, President.  "We are committed to supporting our existing portfolio companies as well as originating new, attractive investments.  We are actively pursuing additional attractive investment opportunities in both Debt investments and for One Stop Buyouts®".

Since inception, European Capital has invested €3.4 billion in 100 portfolio companies.  European Capital has realised €1.9 billion from the portfolio since inception, including senior debt syndications.  Out of the €1.9 billion we have exited fully 43 portfolio companies, realising an aggregate of €1.2 billion comprising:

• €809 million of principal repayments;
• €166 million from loan syndications and sales;
• €125 million of collections of PIK notes and dividends; and
• €111 million from sales of equity. 

These exits achieved an aggregate IRR of 9.7%.  The equity investments of these exited portfolio companies have achieved a 28.8% IRR.

European Capital's portfolio as of 30 June 2012 at fair value was €1.0 billion, with an average investment size of €20 million per portfolio company.  European Capital's largest investment represents 15.4% of total investment assets at fair value and the ten largest investments represent 56.3% of total investment assets at fair value as of 30 June 2012. 

As at 30 June 2012, loans with a cost of €269 million and a fair value of €60 million were on non-accrual, representing 8.2% of total loans at fair value, compared to €245 million cost and €40 million fair value of non-accrual loans, representing 7.8% of total loans at fair value as at 31 December 2011.  The €20 million increase in the fair value of loans on non-accrual was driven by additional loans being placed on non-accrual during the first half and appreciation in the fair value of loans already on non-accrual status.

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.  There were no new investments made in 2009 to 2011.

(1)    Assumes investments are exited at current US GAAP fair value.
(2)    Includes fully exited investments of existing portfolio companies.
(3)    Excludes investments in Structured Products.
(4)    Excludes equity investments that are the result of conversions of debt and warrants received with the issuance of debt.
(5)    Majority Owned Portfolio Company ("MOPC") investments represents investments in which European Capital, or its affiliates, have a fully diluted ownership  percentage of 50% or more or has over 50% board representation at the portfolio company.
(6)    Adjusted EBITDA may reflect certain adjustments to the reported EBITDA of a portfolio company for non-recurring, unusual or infrequent items or other pro-forma items or events to normalize current earnings which a buyer may consider in a change in control transactions.  These adjustments may be material and are highly subjective in nature.  Portfolio company reported EBITDA is for the most recently available twelve months, or when appropriate, the forecasted twelve months or current annualized run-rate.
(7)    For portfolio companies with a nominal Adjusted EBITDA amount, the portfolio company's maximum debt leverage is limited to 15 times Adjusted EBITDA.
(8)    Excludes investments in which we own only equity.
(9)    For the most recent twelve months, or when appropriate, the forecasted twelve months.
(10)  As a percentage of our total debt investments.
(11)  Weighted average based on fair value.
(12)  Weighted average based on fair value of equity investments.
(13)  Non euro-denominated amounts are retranslated at the exchange rate ruling at the date of original investment.
(14)  Non euro-denominated balances, other than those referred to in (14), are retranslated at the exchange rate ruling at the balance sheet date.
(15)  Balance Sheet appreciation (depreciation) of investments excluding foreign exchange revaluation.
(16)  Calculated as the estimated enterprise value of the MOPC's less the cost basis of any outstanding debt of the MOPC's.

IMPORTANT DISCLOSURES

NAV

Any valuation information relating to the portfolio companies of European Capital stated or referred to in this release has been determined by the Board of European Capital in good faith, on a basis consistent with past practice and for the purposes of complying with its reporting obligations under applicable laws.

Forward-looking statements

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.  Additionally, European Capital's current performance may be lower or higher than the performance data quoted above.

Basis of preparation

This interim management statement has been prepared to provide further transparent information about European Capital and should not be relied on by any person for any other purpose.  Certain financial information in this interim management statement is based on unaudited management accounts.  Nothing in this document is intended to be, or should be construed as, a profit forecast.

ABOUT EUROPEAN CAPITAL

European Capital is an investment company for pan-European equity, mezzanine and senior debt investments with €1.2 billion in assets under management.  European Capital is a wholly-owned affiliate of American Capital, Ltd ("American Capital").  It is managed by European Capital Financial Services (Guernsey) Limited ("ECFSG" or the "Investment Manager"), a wholly-owned affiliate of American Capital.  The Investment Manager has offices in London and Paris.  As of 30 June 2012 the Investment Manager had 5 investment teams with 21 investment professionals and employed 26 support staff.  European Capital and its affiliate, American Capital, will consider senior and mezzanine debt investment opportunities from 10 million to 40 million in either euros or sterling and up to 400 million for One Stop Buyouts®.  For further information, please refer to www.EuropeanCapital.com.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded private equity firm and global asset manager.  American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products.  American Capital manages $17 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $100 billion of total assets under management (including levered assets).  From its seven offices in the U.S. and Europe, American Capital and its affiliate, European Capital, will consider investment opportunities from $10 million to $500 million.  For further information, please refer to www.AmericanCapital.com.

Contact: European Capital Financial Services Limited                    + 44 207 539 7000

Ira Wagner, President
Juan Carlos Morales Cortes, Director
Richard Smith, Finance Director

SOURCE European Capital Limited