The FTSE 250 company said spreads were continuing to tighten in its area and that, from its point of view, prices and structures were expected “to get worse before they get better”. This would prompt net interest income to fall.
Intermediate Capital also said that it continues to see high levels of repayments for its loans “as companies seek to replace mezzanine with cheaper debt” and does not anticipate that this trend will slow down in the short term.
Broker Merrill Lynch said that the group’s investment portfolio stood at £1.7bn (US$3.38bn) at the end of March, which was 5.6% lower than its estimates.
Chairman John Manser said: “In these circumstances we are finding ourselves turning down many more transactions because risk is not being recognised or properly priced and there is often little or no margin for error.”
He added: “Therefore it is possible that our balance sheet may fail to grow and even if it does grow, net interest income may fall as spreads tighten.”
In March ICG closed its European Fund 2006 with €2.25bn (US$3bn) of commitments, comprising €1.25bn (US$1.66bn) of equity and €1bn (US$1.33bn) of leverage.
So far this year, ICG has provided mezzanine financing for Industri Kapital’s secondary buyout of Nordic care services business Attendo from Bridgepoint for an undisclosed sum.