Shares in 3i Infrastructure (3IN) fell nearly 6% after the £3.4bn top performer in its sector shocked investors with news of an impending write-down of its £212m investment in German telecom provider DNS:NET.
The company said its full-year valuation for 31 March would likely include the write-off of the position in DNS:NET, which was investing heavily in the roll-out of a fibre-to-the home network in outer Berlin, Brandenburg and Saxony Anhalt.
This would knock 23p, or 5.6%, off net asset value per share of 407.9p at 30 September. The shares, which have generated 47.8% and 194.9% over five and ten years, fell 20.5p, or 5.5%, to 352.5p, maintaining their 8% discount.
3IN said since its half-year results in November, there had been a “material worsening of the lending appetite for German fibre roll-out businesses”. The trigger for this was a debt restructuring at Deutsche Glasfaser which reportedly had to turn to backers EQT and Omers Infrastructure for €1.7bn of financing after struggling to secure additional funding from lenders.
Investors will hope that the company can recoup some, or all, of this loss from the sale of TCR, the Belgian provider of airport ground support equipment. 3IN began a strategic review of its investment in November when it accounted for 20% of the portfolio, its largest investment. Broker Investec expected an announcement on the sale in the coming weeks.
Today it highlighted TCR as one of three top holdings making good progress The other two were Esvagt, the largest fleet operator of European offshore wind service vessels; and Joulz, the Dutch infrastructure equipment provider.
3IN supported DNS:NET with an additional £20m investment a year ago and had overseen an overhaul in its management.
“DNS:NET is an outlier in the portfolio as the only business we have that is executing an early-stage infrastructure roll-out plan which is highly dependent on the continuing provision of the right mix of new equity and debt funding.
“Given this, we have reassessed the investment case in light of the lack of availability of financing for the continued roll-out of the DNS:NET fibre-to-the-home network.
“Assuming no further debt can be raised to support the continuation of the roll out, we now expect that the value of the existing equity in the company is likely to be written down to zero in our next valuation of the portfolio at the March 2026 year-end,” 3IN said.
Fund manager Bernardo Sottomayor reiterated that this was the only problem in the portfolio. “The material impact of the worsening finance environment around the fibre roll-out sector in Germany and consequently on our investment in DNS:NET is a disappointing outlier.”
Sottomayor, head of European infrastructure at 3i Investments, said aside from that it had been a strong third quarter to 30 January. 3IN generated £53m of income and cash in the three-month period and remained on track to deliver the full-year covered dividend target of 13.45p per share, up 6.3% from 2025.
Our view
James Carthew, head of investment company research at QuotedData, said: “The DNS:NET news is disappointing, but 3i Infrastructure’s impressive long-term track record relative to trusts such as INPP and HICL reflects the additional risk it is prepared to take on and this is never a one-way bet. We have James Dawes on the show on Friday, you can ask him any questions you have about the trust or these results then.”
