Electra Trust cashes in

Electra Investment Trust, a UK-listed closed-ended private equity fund, has taken £70.9m (US$124.7m) in profits from the refinancing of one of its portfolio companies.

Capital Safety Group, a specialist designer and manufacturer of height safety and fall protection equipment, has kept its equity stake in the Barclays Bank-run refinancing of Capital Safety, which is valued at US$30.3m for the 51.3% that Electra owns.

Electra and CSG were advised by Close Brothers Corporate Finance.

CSG, which generates its sales worldwide with 68% sourced in North America, achieved unaudited sales of £76.5m in the year ended March 31 and an unaudited operating profit of £13.6m. This compared with sales of £68.8m for 2004 and operating profit of £12.2m.

The refinancing has led to renewed speculation that Electra could be looking to exit the company, which it has owned since the £102m management buyout in 1998. Those close to the company said that nothing further should be read into the activity, however.

Private equity firms have been going through a spate of recapitalisations and refinancings ahead of planned exits. At the upper end of the market, Nordic Capital put a change of control clause into its SKr9.045bn refinancing of Ahlsell that allows the debt to roll over to a new owner. (See IFRBuyouts, issue 22.)

US-based directories company Dex Media had also completed a refinancing in the last year ahead of being sold on October 3 to US trade rival RH Donnelly.

According to ratings agency Standard & Poor’s, an increasing number of private equity investors have been taking out dividends early in the life of their transactions. This increases credit risk by creating a misalignment between the equity sponsors and the debt-holding company.

A recent report said such cash payments might later justify a lower exit price but misalignment might mean an increased risk of either insufficient capital expenditure or of sub-par debt repayment.

0Correction: Alchemy acquired its recent pub portfolio from Sprit Group not Punch Tavern as was said in issue 22.