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American Capital and European Capital back Candover refinancing

The European Capital deal follows its share buy-back and increased dividend this week, as it reported a first quarter earnings loss related to its introduction of 'fair value' accounting.

American Capital, the alternative investment firm, and European Capital, its London Stock Exchange-listed affiliate, have provided $85 million (€54.9 million) of mezzanine debt for the refinancing of Qioptiq, a Candover-owned optical company.

The refinancing was arranged and underwritten by RBS and Unicredit, two European banks.

Qioptiq provides high-precision optics for the defence, medical and industrial markets. Candover invested €220 million ($340.9 million) in the company in December 2006.

European Capital provided $57 million, while American Capital invested $28 million.

Candover declined to comment about the refinancing. RBS could not be immediately reached for comment.

Earlier this week, European Capital declared a second quarter dividend of €0.15 per share, a 50 percent increase on its second quarter 2007 dividend of €0.10 per share. European Capital has now paid or declared a total of €72.6 million in dividends since its May 2007 initial public offering.

The company also announced a share buy-back of €30 million of shares. The company’s share price has nearly halved since it listed, raising €125 million at €9.84 per share. The shares were trading up 6.58 percent at €5.75 per share. 

European Capital reported an earnings loss of €1.49 per share during the first quarter of 2007, compared to profits of €0.36 per share. This loss was due to €165 million of unrealised depreciation during the first quarter of 2008.

During this quarter European Capital implemented fair value accounting standard 157, which it said “caused certain changes to the methodologies used in valuing the company's investments”. A number of other firms have reported losses, in part related to implementation of the accounting standard in uncertain markets, including The Blackstone Group, which yesterday reported a loss of $58 million for its private equity division.

The firm’s realised earnings increased 19 percent to €0.32 per share for the first quarter of 2008, compared to €0.27 per share for the first quarter of 2007. Its net operating income also rose to 0.24 per share, up from €0.23 per share in the first quarter of 2007.

Its net asset value per share decreased €1.64 per share or 17 percent during the quarter to €8.03 per share. The firm’s discount to NAV has decreased to 28.4 percent following the share price gains and the NAV falls. 

Last week European Capital’s buyout head Simon Henderson left the company. He was replaced by two of his colleagues Giles Cheek and Alex Morey.