ICG plc 2012 interim results 21 November 2012 Intermediate Capital Group plc
Highlights Operational Performance AUM up 6% to € 12.1bn; third party AUM up 5% to € 9.1bn thanks to the highly successful fundraising of ICG Europe Fund V Positive momentum in new products Portfolio broadly resilient in difficult economic environment but weaker assets are underperforming IC new investments of £157m; repayments of £52m Financial Performance Fund Management profit flat at £17.2m (£17.1m in H1 12) Investment profit of £22.4m, down 76% primarily due to provisions on 2 large assets Group profit before tax of £39.6m, down 64% Intermediate Capital Group plc 1
Market update Intermediate Capital Group plc 2
Investment market update ICG offer adapted to sharp regional contrasts Europe: Opportunistic US: Dynamic Asia Pacific: Attractive Long recovery; low inflation Slow but secure recovery China’s policy driving strong and interest rates regional growth Greater diversity of lenders, Lack of debt ; CDO run off strong CDO market Less financing problems but some concentration issues. No Low LBO volumes Pragmatic view of valuation institutional lenders and competitive tension Refinancing issues and LBO market remains strong sponsorless opportunities LBO volume recovering Attractive sponsorless market Opportunistic Mezzanine for LBOs mezzanine funds Mezzanine for LBOs Sponsorless – Growth Direct lending & debt funds Capital CLOs & Debt funds Real estate debt & Debt funds mezzanine funds Intermediate Capital Group plc 3
Fundraising market update Quest for yield favours established debt managers Drivers Manager Selection Uncertainty over economic growth/currencies Consolidation of relationships Investment upside difficult to ascertain Track record is paramount Equity might be cheap but is it borne out by Credibility/sustainability of strategy low growth prospects? Experience of team Focus on downside risk Complex mandates Yield is seen as offering better protection of Operational/compliance platform matters returns Flight to quality Traditional fixed income asset classes offer low yield Attraction of debt products with higher yield Favours established players and consolidation Intermediate Capital Group plc 4
Fund Management Intermediate Capital Group plc 5
Priorities for FY 13 Good progress towards objectives in H1 FY13 Priorities Update Mezzanine Final close in H2 – already above target with Final close on ICG Europe Fund V € 2.3bn of commitments Launch of Asia Pacific successor fund FY14 Launch of ICG Longbow successor fund First close expected in H2 CFM Launch of Senior Debt Partners fund First close expected in H2 Open ended funds Building track record Segregated mandates Increased size of existings Hired Sal Gentile – developing strategy for US strategy mezzanine and senior debt Intermediate Capital Group plc 6
Fund management – mezzanine ICG Europe Fund is a success Received € 1.8bn of third party commitments (and € 500m from ICG) – of which € 995m is included in the September AUM number Final close in H2 € 300m above target already despite difficult fund raising environment Third party commitments 50% above that of Fund IV (ICG European Fund 2006) Close to “hard - cap” of € 2.5bn Success due to strong track record and improved distribution Intermediate Capital Group plc 7
Fund management – mezzanine Well balanced investor base by geography Geographically balanced LP base Investment in Asian and US distribution delivered early results Strong base for future US and Asian funds ICG European Fund 2006: Geography ICG Europe Fund V : Geography Europe / Middle East North 33% America 10% Europe / North Middle East America 70% 32% Asia Pacific 20% Asia Pacific 35% Intermediate Capital Group plc 8
Fund management – mezzanine Well balanced investor base by investor type Replaced banks with more long-term investors: pension funds, sovereign wealth funds Maintained insurance base More “sustainable” LP base Strong investor base for other credit products ICG European Fund 2006: Type ICG Europe Fund V: Type Insurance Banks Companies Banks 1% 14% 21% Pension Asset Funds Managers 17% 11% Pension Insurance Foundations Funds Companies 3% 38% 17% Sovereign Sovereign Wealth Wealth Funds Asset Funds 16% Foundations Managers 33% 3% 26% Intermediate Capital Group plc 9
Fund management – mezzanine ICG Europe Fund V – strong pipeline Investment strategy has evolved to reflect changes in market – Sponsored mezzanine – Sponsorless transactions – Stressed sellers Pricing highly favourable Fund 17% invested in 4 transactions with strong pipeline Investment Country Deal Type Expected Returns Benelux Sponsored 2.1x Riverland UK Stressed 1.6x Global Stressed 1.6x UK Sponsorless 2.0x Intermediate Capital Group plc 10
Transaction description Investment rationale A leading global producer of pigments for the ceramic tile Leading position in every segment. Leader in design, innovation, industry technical support and customer service. Strong, experienced and committed management team, highly regarded in the industry Headquartered in Spain but a truly global business with significant emerging market exposure and negligible Spanish Geographical diversification with large presence in high growth revenues areas € 262m of sales in 2011 and EBITDA of € 40m Industry leading profitability margins ICG underwrote the full € 105m Private Senior Loan (PSL) and Solid cash flow generation throughout the cycle € 6.6m of equity at a historically low entry valuation to support Attractive valuation and low leverage multiples the secondary buyout of Investcorp from 3i Very attractive risk-reward profile: senior secured PSL, richly priced and with a relatively “low” leverage Expected 3-year blended return is 16.8% IRR, 1.6x MM ICG’s value added Notional amount € m % LTM EBITDA x ICG Private ICG local team knew asset well (prior DD) and identified 105 54 2.4x Senior Loan opportunity early ICG has a longstanding relationship with sponsor and approached the sponsor with a credible financing option Lending market in Spain is shut. This market dislocation created an attractive opportunity for us. We were retained as the preferred financing solution. The PSL product was significantly more expensive than alternative financing but provided certainty and additional financing flexibility Intermediate Capital Group plc 11
Fund management – mezzanine Update on other funds US Hired new Head of the US Strengthening team Launch of Fund I expected in Q4 FY13 Asia Pacific Funds I and II continue to perform strongly Fund II is 61% invested following the SCF transaction with a strong pipeline Launch of Fund III expected in H1 14 ICG Longbow Strong performance of Fund II raised in 2010 (£242m of commitments) Fully invested in 15 deals 17.4% IRR ; 10.8% cash yield Launched Fund III, expecting first close in H2, target of £500m Exploring options in senior debt Intermediate Capital Group plc 12
Fund management – credit funds Managed accounts inflows drive AUM growth CFM third party AUM up 3% as CLO run off of € 130m in H1 more than offset by inflows in new products, particularly in managed accounts 4 managed accounts with € 342m of AUM, up by € 186m in H1 Encouraging pipeline for managed accounts Pooled Funds Total Credit Fund launched on 13 July; up 6.3 % to date – received first 3rd party commitment HY up 16% YTD and 35% since inception on 31/12/2009 – raising AUM remains a challenge given competition with market giants but performance starting to trigger interest, 3 yrs track record complete at 31/12/12 should unlock door to consultants SDP launched, expecting 1st close in H1 13 calendar, already received 2 commitments; – Fund target size of € 500m – completed 1 investment to demonstrate execution capability – material pipeline Intermediate Capital Group plc 13
Investment company Intermediate Capital Group plc 14
Investment Company Positive net new lending New Investments 5 transactions in the period – 3 in Europe alongside ICG Europe Fund V – SCF in Asia Pacific, Convergint in US New lending of £157m (£122m in FY12) Deep pipeline across geographies Exits Slowdown in exits due to economic environment and less liquidity to support new transactions Repayments of £52 million Delay will positively impact money multiples Net new lending of £105m, following two years of balance sheet reduction Intermediate Capital Group plc 15
IC portfolio Performance vs. prior year shows resilience % of assets performing at or above prior year 80% 70% 60% 50% 40% 30% 20% 10% 0% Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 Low of 52% in June due to strong H1 11 comparables, currently 58% above or at last year’s level; 62% on a weighted basis Intermediate Capital Group plc 16
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