Intermediate Capital says bad debts past worst

British private equity lender Intermediate Capital Group Plc reported a return to profitability in the first half of the year and said its bad debts had peaked, pushing its shares higher.

ICG, which lends to private equity firms and also invests in buyout debt, made a pretax profit of £8m in the six months to September 30, down from 39.8 million in the same period last year, it said on Monday.

ICG blamed the decline on higher bad debt charges, which more than doubled to £97.1m, while gains on its investments slumped by 80% to £44m.

However, it said loan impairments were past the worst and were likely to fall in the second half of the year.

The company’s bad debts peaked in the second half of last year, when they rose to £212.1m, pushing it to a full-year loss of £67m.

“While they are still high, we will be disappointed if provisions in the second half are as high as in the first,” ICG said.

“Provisions are down 53% from their peak, and the good thing is they clearly say they’d be surprised if they were at this level in the second half,” said Noble analyst Nitin Arora.

ICG, which raised £351m in a rights issue in July, also said it was ready to take advantage of investment opportunities, adding that stronger equity and bond markets would make it easier to dispose of its investments.

“More new news seems to be good news these days, and that hasn’t been the case for the last couple of years,” ICG chief executive Tom Attwood told Reuters in a telephone interview.

ICG is paying an interim dividend of 6 pence per share, down from 8.5 pence a year ago.