European Capital Limited Reports 2012 Net Operating Income of euro 21 Million and Net Earnings of euro 78 Million

ST. PETER PORT, Guernsey, April 16, 2013 /PRNewswire/ -- European Capital Limited ("European Capital" or the "Company") today issues a Management Statement announcing net operating income ("NOI") for the half year and year ended 31 December 2012 of €22 million and €21 million respectively.  Net earnings for the half year and year were €55 million and €78 million respectively.  As at 31 December 2012, net asset value ("NAV") was €705 million, an 8%, or €55 million increase from the 30 June 2012 NAV of €650 million and a 12%, or €78 million increase from the 31 December 2011 NAV of €627 million.

2012 FINANCIAL SUMMARY


  • €21 million NOI
    • €32 million, or 60%, decrease over 2011
  • €1 million net realised gain on investments
    • €29 million improvement over 2011
  • €57 million net unrealised appreciation on investments excluding foreign exchange
    • €60 million increase over 2011
  • €78 million net earnings
    • €80 million increase over 2011
  • €82 million of cash proceeds from realisations
  • €37 million of securitised debt repaid
  • €151 million of committed investments
    • €122 million in new portfolio companies
  • Net Asset Value €705 million
    • €78 million, 12% increase from 31 December 2011

H2 2012 FINANCIAL SUMMARY

  • €22 million NOI
    • €8 million increase compared to H2 2011
  • €1 million net realised gain on investments
    • €14 million improvement compared to H2 2011
  • €39 million net unrealised appreciation on investments excluding foreign exchange
    • €141 million improvement compared to H2 2011
  • €55 million net earnings
    • €143 million improvement compared to H2 2011
  • €27 million of cash proceeds from realisations
  • €17 million of securitised debt repaid
  • €56 million of committed investment
    • €37 million in new portfolio companies
  • Net Asset Value €705 million
    • €55 million, 8% increase from 30 June 2012

"Two thousand and twelve capped a good year for European Capital.  NAV grew by €78 million, or 12% in 2012, with investments performing better than we had expected considering the weak economy in some parts of Europe," said Malon Wilkus, Chairman and Chief Executive Officer.  "We generated €82 million of cash realisations and invested €151 million of which €122 million was in new portfolio companies."

PORTFOLIO LIQUIDITY AND ORIGINATIONS
In the half year and year ended 31 December 2012, €27 million and €82 million of cash proceeds were received from realisations of portfolio investments respectively.  The Company also made new committed investments of €56 million in the second half of the year and €151 million for the full year respectively.  Of the full year total commitments, €122 million was committed to new portfolio companies and €29 million in our existing portfolio for growth, acquisitions and refinancings. 

"During the second 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 investments in both debt opportunities and for One Stop Buyouts®.  We are seeing increasingly attractive opportunities in European credit as a result of the regulatory environment making it difficult for banks to lend to mid market companies as they had in the past.  As a result, we are seeing more lending opportunities with better pricing and terms."

PORTFOLIO VALUATION
For the half year and year ended 31 December 2012, net unrealised appreciation of investments totalled €39 million and €57 million respectively; with €40 million of appreciation for the year attributable to our controlled portfolio driven by performance improvements in the portfolio and €17 million of appreciation attributable to the sponsored finance portfolio.

Since inception, European Capital has invested €3.5 billion in 105 portfolio companies and has realised €1.9 billion from portfolio company exits.  Out of the €1.9 billion we have exited fully 45 portfolio companies, realising an aggregate of €1.2 billion comprising:

  • €826 million of principal repayments;
  • €166 million from loan syndications and sales;
  • €128 million of collections of PIK notes and dividends; and
  • €113 million from sales of equity. 

These exits achieved an aggregate IRR of 9.9%. The equity investments of these exited portfolio companies have achieved a 29.1% IRR.

The European Capital portfolio as of 31 December 2012 stood at fair value of €1.2 billion, with an average investment size of €25 million per portfolio company.  European Capital's largest investment represents 15.0% of total investment assets at fair value and the ten largest investments represent 56.4% of total investment assets at fair value as of 31 December 2012. 

As at 31 December 2012, loans with a cost of €307 million and a fair value of €60 million were on non-accrual, representing 8.0% of total loans at fair value, compared to €263 million cost and €60 million fair value of non-accrual loans, representing 8.2% of total loans at fair value as at 30 June 2012.  Fair value of loans remained stable during the second half although cost of loans on non-accrual increased as result of loans added to non-accrual status with nil fair value.


EUROPEAN CAPITAL LIMITED

CONSOLIDATED BALANCE SHEETS

As of 31 December 2012 and 31 December 2011

(in thousands)


















 31 December 


 31 December 


31 December 2012 Versus
31 December 2011


2012


2011






%









Assets








Investments at fair value (Cost basis of €1,650,113, €1,568,941 and €1,555,191, respectively)

1,126,862


973,607


153,255


16%

Cash and cash equivalents

2,573


2,803


(230)


-8%

Restricted cash and cash equivalents

87,569


142,056


(54,487)


-38%

Interest receivable

3,603


5,588


(1,985)


-36%

Derivatives agreements at fair value

9


-


9


100%

Other

5,191


4,529


662


15%

Total assets

1,225,807


1,128,583


97,224


9%

Liabilities and Shareholder's Equity








Debt (maturing within one year €1,074, €1,965 and  €2,356, respectively)

441,846


439,017


2,829


1%

Due to European Capital Financial Services (Guernsey) Limited

2,123


1,439


684


48%

Derivatives agreements at fair value

26,571


24,238


2,333


10%

Other

50,467


37,153


13,314


36%

Total liabilities

521,007


501,847


19,160


4%

Shareholder's equity:








Share Capital

224,475


224,475


-


0%

Undistributed net realised earnings 

1,098,368


1,078,718


19,650


2%

Net unrealised foreign currency depreciation

(101,090)


(110,079)


8,989


8%

Net unrealised depreciation of investments

(516,953)


(566,378)


49,425


9%

Total shareholder's equity

704,800


626,736


78,064


12%

Total liabilities and shareholder's equity

1,225,807


1,128,583


97,224


9%









NM = Not Meaningful
















 

EUROPEAN CAPITAL LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months and Year Ended 31 December 2012 and 2011

(in thousands)












Six Months Ended


Six Months Ended


Year ended


Year ended


31 December


31 December


31 December


31 December


2012


2011


2012 Versus 2011


2012


2011


2012 Versus 2011





%





%


(unaudited)


(unaudited)













OPERATING INCOME:
















Interest and dividend income

44,969


39,484


5,485


14%


69,227


€105,724


€(36,497)


-35%

Fee and other income

123


407


(284)


-70%


723


915


(192)


-21%

Total operating income

45,092


39,891


5,201


13%


69,950


106,639


(36,689)


-34%

OPERATING EXPENSES:
















Interest

10,521


13,584


(3,063)


-23%


23,818


26,471


(2,653)


-10%

Management fee

11,452


11,686


(234)


-2%


22,695


22,666


29


0%

General and administrative

1,299


1,015


284


28%


2,248


4,718


(2,470)


-52%

          Total operating expenses

23,272


26,285


(3,013)


-11%


48,761


53,855


(5,094)


-9%

OPERATING INCOME BEFORE INCOME TAXES

21,820


13,606


8,214


60%


21,189


52,784


(31,595)


-60%

Provision for income taxes

(31)


(44)


13


30%


(50)


(88)


38


43%

NET OPERATING INCOME

21,789


13,562


8,227


61%


21,139


52,696


(31,557)


-60%

















Net realised loss on extinguishment of debt

-


-

-

-


100%


-


(8,240)


8,240


100%

















Net realisations on investments
















Portfolio company investments

925


(13,208)


14,133


107%


445


(28,826)


29,271


102%

Foreign currency translations

3,004


(9,335)


12,339


132%


4,815


(5,307)


10,122


191%

Derivative agreements

(3,212)


(289)


(2,923)


-1011%


(6,749)


3,492


(10,241)


-293%

Total net realisations on investments

717


(22,832)


23,549


103%


(1,489)


(30,641)


29,152


95%

















NET REALISED EARNINGS / (LOSS) 

22,506


(9,270)


31,776


NM


19,650


13,815


5,835


42%

















Net unrealised appreciation / (depreciation) on investments
















Portfolio company investments

38,768


(101,955)


140,723


138%


56,504


(3,624)


60,128


NM

Foreign currency translations

(2,694)


23,294


(25,988)


-112%


8,989


(11,932)


20,921


175%

Derivative agreements

(3,470)


(164)


(3,306)


-2016%


(7,079)


(599)


(6,480)


-1082%

Total net unrealised appreciation / (depreciation) on investments

32,604


(78,825)


111,429


141%


58,414


(16,155)


74,569


462%

















NET INCREASE / (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
("NET EARNINGS")

€55,110


(88,095)


€143,205


NM


€78,064


€(2,340)


€80,404


NM

































NM = Not Meaningful