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- 3i Infrastructure says portfolio impact has been limited so far and that it is in a strong cash position
3i Infrastructure (3IN) has released a performance update for the period from 1 October 2019 to 18 March 2020. With a market capitalisation of about £1.95bn, 3IN is one of the largest investment trusts, alongside two other infrastructure sector companies, HICL (HICL) and International Public Partnerships (IPP).
3IN said: “The COVID-19 pandemic is affecting most businesses across the world, including our portfolio companies. Our manager is working very closely with the management teams to address these unprecedented circumstances. To date, any operational impact has been limited and, currently, all of our portfolio companies are maintaining continuity of service to their customers.
TCR, our airport ground handling equipment business, is most obviously affected by the dramatic fall in air travel. TCR is in a strong liquidity position, and is taking action to prepare for a scenario of a potentially long period of reduced aircraft movements. TCR will work closely with its airport, airline and ground handling customers through this period of disruption.
The effect of the pandemic on portfolio valuation will be assessed as part of the valuation exercise of the portfolio as at 31 March 2020. This will seek to take account of individual cashflow effects on portfolio companies as well as broader market pricing considerations, which obviously are extremely volatile.”
Commenting on today’s announcement, Richard Laing, chair of 3IN, said: “We have a strong and liquid balance sheet and a defensive portfolio of businesses providing essential services. This positions us well to withstand these extraordinary circumstances.
Phil White, managing partner and head of infrastructure, 3i Investments, the manager, added: “The portfolio performed well overall during the period. Our portfolio company management teams are working very hard to manage their businesses through these exceptional market conditions, and are being well-supported by our 3i team and broader network.”
The manager is working closely with the portfolio companies’ management teams to address the challenges of the Covid-19 pandemic. Following the refinancing activity undertaken in the recent years across the portfolio, 3IN says its businesses are well funded and the company has significant liquidity to support our investments should that be needed.
3IN noted that important element of the determination of the company’s results for the full year to 31 March 2020 will be the valuation exercise carried out on the investment portfolio at that date. It expects to announce its results for the year to 31 March 2020 on 7 May 2020.
The company goes on to say that the portfolio overall is delivering a good level of income. Total portfolio income and non-income cash was £77m in the period, comprising portfolio income of £66m and non-income cash of £11m. This compares with £69m of income and non-income cash received in the same period last year.
At 18 March 2020, the company’s cash balance was £420m with the full Revolving Credit Facility of £300m undrawn and available to fund potential new investment opportunities and to support portfolio companies.
Finally, 3IN noted that approximately half of the proceeds from the sale of WIG have been received, with a quarter payable unconditionally 12 months and a quarter payable unconditionally in 24 months from the completion date of 19 December 2019. The receivables balance in relation to these deferred proceeds, including accrued interest will be £199m at 31 March 2020.
[The market has responded well to 3i Infrastructure’s briefing, with the shares climbing by 16% as of 12:10 pm. GCP Infrastructure Investments’s shares have also climbed sharply. Up until recently, 3i Infrastructure’s shares hadn’t traded at a discount since late February 2018. A decline of about 33% in the shares from 1 March to yesterday’s close seemed excessive given the defensive characteristics of the portfolio. In these unprecedented times, prolific liquidating of conventionally defensive assets has been driven by the desire to raise cash.
3i Infrastructure mentioned that most of TCR’s revenues come from fixed leased rentals. We also note that some airlines have been re-purposing portions of their passenger fleet to increase freight capacity in order to keep global supply chains moving.]
3IN: 3i Infrastructure says portfolio impact has been limited so far and that it is in a strong cash position
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