SVG asks shareholders for £200m after bets go sour

By SIMON DUKE FOR MAILONLINE
Updated:

One of Britain's biggest private equity groups is asking shareholders for a £200million handout after its investment portfolio almost halved in value since the summer.

In a humiliating move, SVG Capital has decided to appeal for funds after taking a £580million hit from its bets on debt-laden takeovers. The cash crunch at SVG is a major blow for private equity giant Permira.

SVG - Permira's biggest investor - has been forced to slash its planned investment in the group by more than two thirds to £343million.

SVG Capital has been forced to ask shareholders for £200million to keep it going

SVG Capital has been forced to ask shareholders for £200million to keep it going

With very few banks now willing to lend to private equity firms, Permira will find it difficult to fund takeovers in the future, analysts warned.

That SVG has had to resort to a rights issue highlights the turmoil engulfing the buy-out industry.

Like other private equity groups, Permira borrowed billions during the credit boom to fund a slew of deals, such as the takeovers of frozen-food group Bird's Eye and fashion house Hugo Boss.

But since 2007, the value of those investments has plummeted as investors gave a wide berth to companies with huge debts. Chairman Nicholas Ferguson admitted he did not have 'the foggiest idea' when investor appetite for debt-laden deals would return.

News of the capital raising sent SVG shares plunging 37 per cent or 663/4p to 1151/4p - its lowest level in at least a decade.

A one-for-one rights issue priced at 100p a share is expected to raise around £139million, with the remainder of the emergency cash coming from a placing of new shares.

Around 48 per cent of existing shareholders have already backed the rights issue, which is being handled by JP Morgan Cazenove.

As part of the cash call, SVG is paying down some of its debt and has also re-negotiating the terms of its loans. Its bank overdraft will also drop by £190million to £524million.

Ferguson said the ' comprehensive packages of measures' would quash any concerns over SVG's financial position.

Analysts said SVG would not be the last private equity player to have to raise new equity.

Last month Permira partner Charles Sherwood warned that it would require a 'mathematical miracle' for private equity firms to turn a profit on deals struck near the top of the credit bubble.

Permira revealed yesterday that its flagship fund will fall by £1.4billion to £9.1billion as investments are cut.

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