Europe – August 2003

Europe
Monitor
Viennese Whirl
At EVCA’s 20th anniversary annual meeting in June, a panel of leading private equity practitioners took a view on what lies ahead for Europe’s large-cap buyout industry.

If you ever need evidence as to how an industry is faring, then a quick check of the industry association barometer usually helps. Whilst nascent sectors have small, closely-knit gatherings in discrete locations, those that have grown further, faster go for big locations, big venues and get big crowds.

Which would suggest that the European private equity industry is still on a roll. Vienna was the chosen location for the EVCA’s 20th annual meeting, and over 850 delegates sweltered in 30 degree temperatures to witness such scenes as the cast of Cats cavort across celebratory dinner tables, John Singer of Advent International impersonate Freud (as well as demonstrate his waltzing prowess) and a survival specialist explain what African bushmen have to teach the private equity industry. But it wasn’t all play. Some of the leading practitioners within the industry were speaking at the event not just about matters past and present but also tomorrow. And the message at times was deliberately low-key.

One group adopting this stance was a panel of buyout specialists. Mezzanine pioneer Tom Attwood chaired a gathering of heavyweights: KKR’s Johannes Huth, Doughty Hanson’s Nigel Doughty (a rare public appearance as evidenced by the journalists who swarmed around him), Hugh Langmuir of Cinven and Rolly van Rappard at CVC. Attwood was keen to hear how this panel saw the future, and their response was more than predictably cautious. “Can big buyout funds busy in Europe continue to deliver the returns they promised investors?” asked Attwood. And now that leverage is scarce, competition much more serious and multiple arbitrage a technique of the past, is generating two times cash and 30 per cent IRR still a realistic target? These are questions at the front of many LPs’ as well as GPs’ minds at present.

In reply, Attwood’s panellists all touted the current mantra of private equity’s need to effect transformational change on acquired assets, with future returns coming from developing the businesses they invest in. Making substantial changes at a portfolio company (especially given the typical scale of asset these buyers acquire) to create value is going to take time they declared, and this, they reminded, would cause holding periods to lengthen and IRRs to drop accordingly.

“Underperformance will get punished, customers [LPs] will stop buying the product [buyout funds].”

How low will those precious IRRs go? Here the panellists were unsurprisingly coy. Langmuir argued that any prediction would be “hazardous”, and three out of the four speakers settled for the line that generating a “substantial” premium over public markets and a decent multiple of cash invested was what large cap buyouts should be targeting. And in words that reminded many of the message leading LP Sandra Robertson of Wellcome Trust made at EVCA’s Rome meeting two years back (“you’re can’t eat IRRs”), Huth made the point that that it was cash that paid pensions.

In terms of IRR, only van Rappard of CVC was prepared to set a more precise target: pointing to the quality of investment opportunities in the current environment, IRRs of 25 per cent prior to any arbitrage was still what LBO funds in his view should be aiming for in any transaction. Whatever the number, no one on the panel seemed to have any doubt that making it all worthwhile for investors was the main task going forward. Warned Cinven’s Langmuir: “Under-performance will get punished, customers [LPs] will stop buying the product [buyout funds].” As buyout funds currently fundraising will testify, there is a groundswell of scepticism amongst members of the LP community that is making this prediction closer to reality.

Europe
Deals & Exits
Seat goes to BC Partners, CVC, IA, Permira
After three months of negotiations, and a final round of bidding comprising more than a dozen of the world’s largest private equity firms, a consortium of four European houses won the race to acquire Seat Pagine Gialle, the Italian yellow pages business owned by Telecom Italia, in a deal valuing the company at €5.65bn.

BC Partners, CVC Capital Partners, Investitori Associati and Permira joined forces as equal partners to acquire a majority interest in the business, which Telecom Italia decided to sell to reduce debt.

Under the deal, the consortium will pay €3.03bn for the 61 per cent of the business owned by Telecom Italia. The consortium will then offer €0.598 per share for the remaining equity in Seat, currently listed on the Milan bourse, which will give the deal a total value of €5.65bn, making it Europe’s largest ever buyout.

Guy Davies, a London-based partner at Permira who worked on the funding for the transaction, said: “The consortium brought together the leading private equity players in the Italian market with years of private equity investment experience in the country. The financing for the deal has been put in place and we hope to complete the transaction at the end of July, prior to launching a tender offer for the remaining shares.”

The consortium received financial advice from Credit Suisse First Boston. The debt financing of the transaction was arranged by BNP Paribas, Barclays, Credit Suisse First Boston and Royal Bank of Scotland. Telecom Italia was advised by Citigroup and Lazard as financial advisors and Gianni Origoni Grippo as legal counsel. See also this month’s Deal Mechanic on page 25 of this issue.

Busy times for Montagu
Montagu Private Equity, the private equity firm spun out of HSBC Group, has completed a first round of transactions since its management buyout in March.

Most recently, Montagu in late June completed the purchase of UK familyowned group Linpac in a deal worth £860m, backed with a debt package from Deutsche Bank. Linpac, based in Lincolnshire in England, is a packaging, materials handling and automotive components business with £1bn in turnover.

Prior to this, the firm led the €420m secondary buyout of Actaris from LBO France, just 18 months after the French private equity firm bought out the manufacturer of metering systems for €340m. The deal, which excludes transaction costs and working capital funding, was financed by a combination of institutional equity from Montagu and Actaris management, and senior debt from Mizuho Corporate Finance.

Actaris generated sales of approximately €650m in the year to December 2002 and EBITDA of €88m. The management team will remain the same following the deal and will roll over the bulk of its equity participation into the new ownership structure.

In May, the firm acquired Marlow Foods from AstraZeneca for £70m in a deal financed with 60 per cent equity capital and the balance in debt. Founded in 1975, Marlow makes a range of branded chilled and frozen foods but is probably best known as the maker and distributor of meat-substitute Quorn. The firm had annual sales revenue last year of over £80m – with more than 75 per cent of sales coming from the UK.

On the exit front, the firm sold Risdon Pharma, a Germany and France-based manufacturer of primary plastic packaging for the pharmaceutical industry, to Rexam, the world’s largest maker of drinks cans, for €125m. Montagu backed the €97m management buyout of Risdon from Crown Cork & Seal in March 2002.

Advent restored as buyer of BTC
Boston-based private equity firm Advent International was in late June restored as the buyer of stateowned Bulgarian Telecommunications Co. (BTC) after the Bulgarian Supreme Administrative Court ruled in the firm’s favour and overturned the decision last month by the Bulgarian Privatisation Agency to block the sale.

In its ruling the court said Advent’s program for investments was approved for a five-year period, whereas the Supervisory Board rejected the bid on the basis that the investments were concentrated in the fourth and fifth years. Advent also announced that it would boost its offer for BTC to €280m, and said it was ready to settle for a 50 per cent dividend from BTC’s 2002 profit if chosen as buyer.

General Atlantic picks up Baan
General Atlantic Partners, the US private equity firm that focuses on the IT sectors, has acquired Baan, the Dutch enterprise resource planning software company, from UK group Invensys. The firm has agreed to pay $135m for a business the engineering group will most likely want to forget. Invensys paid £470m ($757m) for Baan in 2000. Soon after, the then CEO of Invensys, Allen Yurko, declared that the Dutch software company was close to “financial meltdown.”

Candover in €182.5m financial services buyout
Candover, the London-based private equity firm, has led the €182.5m management buyout of the trust and fiduciary services division of Insinger de Beaufort, the Anglo Dutch private banking and asset management group.

Candover acquired a majority stake in the business, which will be trading as Equity Trust. Insinger retains a significant minority stake, while the company’s management team have exchanged previous shareholdings in either the trust business or its banking parent for equity in Equity Trust.

Details of the financial structure of the transaction have not been disclosed. However, Charlie Green, a director at Candover, said more equity than debt capital has been used to finance the deal. Royal Bank of Scotland is arranging debt funding. “We expect the sector to consolidate and intend to play a significant role in that process”, said Green, adding that overleveraging the deal on day one would not help such a strategy.

For Candover, it is the ninth investment out of its Candover 2001 Fund, which it closed in June 2002 on €2.7bn. The fund is now over 50 per cent invested.

BC meets Advent on price for Aviagen
European private equity group BC Partners has agreed to sell Aviagen Group, the meat poultry breeding business, to Advent International, in a £255m secondary buyout backed by debt provided by Royal Bank of Scotland.

Originally BC Partners had been looking to sell the business for a price closer to £300m. Negotiations with Advent over a deal reportedly lapsed in mid-May, but the two parties subsequently resumed talks to finally reach an agreement.

According to a source close to the transaction, BC Partners achieved a return of more than three times its investment in Aviagen. The disposal comes ahead of a new fundraising campaign for the firm, slated to officially launch some time next year.

TAC sale nets strong exit for EQT
EQT Partners, the Swedish private equity house, has sold integrated buildings systems supplier TAC in what is the firm’s third exit of 2003. German electric group Schneider Electric has agreed to pay approximately SKr4bn (€420m) in cash for the business, a provider of information technology to the construction industry.

While EQT owned the business, TAC made acquisitions in the US, Denmark, Norway and Finland.

According to EQT, the sale resulted in a capital gain of SKr2.6bn (€290m). EQT bought TAC in March 1998 and its total investment in the company amounted to about SKr790m (€86.1m).

“The sale of TAC is a fantastic exit for EQT,” said Thomas von Koch, partner at EQT Partners. Under EQT’s stewardship, TAC’s profit increased from SKr45m in 1998 to its current level of SKr380m. During the same period, TAC’s turnover quadrupled, reaching SKr3.15bn in 2002.

Advent buys €30m Hungarian radio station
Private equity firm Advent International bought out UK commercial radio broadcasting group GWR’s interest in Danubius Radio of Hungary in a €30m transaction. Debt financing for the deal is being provided by Mezzanine Management Central Europe, which invested from its Accession Mezzanine Capital fund, a mezzanine finance last year held a first closing on €76m.

Hungarian commercial radio station Danubius broadcasts popular music nationwide, targeting the 18-49 year old age group. With an average weekly audience share of 33 per cent, Danubius generated revenues of $12.4m in 2002.

Europe
Funds & Buyside
Altor raises €650m in four months
Altor Capital Partners, the Stockholm-based midmarket buyout firm set up by Industri Kapital cofounder Harald Mix, in June held a final closing on its debut fund at €650m. Altor had held a number of pre-marketing meetings in December 2002 and January this year before launching the fund formally in the third week of February. First commitments to the fund were confirmed as early as mid-March.

Commenting on the fundraising, Fredrik Strömholm, one of Altor’s four founding partners, said: “We had an extremely positive spontaneous reaction from investors. Once they had bought into our regional focus, they looked at the team dynamics, and many became quite excited.” The other founding members of the team are Jaakko Kivinen, formerly of Soros Private Equity, and Pontus Pettersson, who has worked for Investcorp and Goldman Sachs.

Altor attracted a long list of blue chip investors to the fund, which was significantly oversubscribed. Limited partners in the fund include Adams Street Partners, Allianz Capital, Goldman Sachs Private Equity Group, Local Government Pensions Institution of Finland, NIB Capital Private Equity, and funds advised by Standard Life Investments (Private Equity).

Deutsche Beteiligungs at second close
Deutsche Beteiligungs, the German private equity firm listed on the Frankfurt stock exchange, has held a second close on DBAG Fund IV at €180m. The current fundraising campaign is the first time that non-shareholders have been invited to become limited partners in the fund.

Since last October, when the firm held a €120m first closing, the fund has received a further €59m in commitments from institutional investors. A Deutsche Beteiligungs spokesperson declined to give details of the fund’s limited partner base, but said the firm was confident of reaching its €250m target by late summer.

The firm will invest chunks of up to €60m of equity in individual transactions from DBAG Fund IV, and plans to invest up to €100m annually. Atlantic Pacific is acting as placement agent for the fundraising.

SVLS closes third fund on $402M
Boston and London-based life sciences sector Schroder Ventures Life Sciences has closed its third fund on $402m. The firm’s third fund attracted 18 new investors, with half of the commitments coming from North America and half coming from the UK and Europe.

The fund will focus on providing start-up, early stage, and expansion capital to life science companies in the US and Europe. The firm focuses on companies in the biotechnology, pharmaceutical, medical devices, healthcare information technology and healthcare services industries. The typical investment size for the fund will be between $5m and $20m.

“This is a strong result in a difficult fundraising environment,” James Garvey, chief executive officer and managing partner of Schroder Ventures Life Sciences, said in the statement. “We set out deliberately to broaden our investor base and are delighted to welcome a significant number of new investors.”

AXA holds €120m first close for new fund of funds
AXA Private Equity, the private equity arm of French insurance group Axa, has scheduled a €120m first close for its new fund of funds, AXA Private Equity Fund-of-Funds II, for July 2003. The fund has a €250m target, which it expects to reach by the end of this year.

The fund is structured to make private equity fund investments in North America and the European Union, principally in the secondary market, taking secondary positions in funds. AXA Private Equity Fund-of-Funds II will also make some primary fund commitments.

The new fund is supported by a team of 25 professionals, headed by the executive committee of Axa’s fund of funds group comprising president Vincent Gombault, Christophe Florin, Stephan Illenberger and James Pitt from offices in London, New York, Paris and Frankfurt.

Deutsche shuts down fund placement unit
Deutsche Bank’s Alternative Investment Fundraising Group (AFG), the bank’s private equity fund placement division, has closed. According to sources, all members of the group, which until recently had comprised 40 corporate finance and sales professionals, have left the bank. Between 1996 and 2002, AFG worked on 72 placement mandates raising approximately $30bn of capital, according to a Deutsche Bank marketing document.

Last year Deutsche Bank terminated fundraising efforts for a mezzanine vehicle and a secondaries private equity fund that AFG had been working on. In January and February of this year, the team’s corporate finance analysts were gradually let go, followed by the sales executives in Europe, the Middle East and eventually the US.

A source described the winding down process as “amicable”, aimed at making sure AFG’s closure would cause minimum disruption to its remaining external clients. These included Caduceus Private Investments II, a US healthcare and biotechnology fund, as well as Globespan Capital Partners IV, a US IT and communications vehicle. Both funds are thought to be near a final closing. AFG also represented Wayland Distressed Opportunities Fund, a US distressed investor.

Capvis exceeds target with €340m Capvis Equity II
Capvis Equity Partners, the Swiss private equity firm, has held an above-target closing on its second midmarket buyout fund, raising €340m. Capvis Equity II, which had an original target of €300m, was substantially oversubscribed, according to a company statement, and attracted commitments from Europe, North America and Asia.

In total, commitments were secured from 19 institutional investors. The firm has not disclosed the details of investors in the fund, although UBS contributed just under ten per cent of the fund’s capital. UBS is Capvis’ most important client: in 1999, the bank accounted for 40 per cent of the capital committed to Fund I, which raised €200m.

“To close a fund above target in this environment is very pleasing,” said Daniel Flaig, a partner at Capvis. “Many of our previous investors increased their commitment to the fund.” Capvis was advised by Mvision, the London-based private equity fund placement group.

Procuritas closes third fund at €230m
Procuritas, the Scandinavian buyout firm based in Sweden and Denmark, has held a final close of its third fund, Procuritas Capital Investors III (PCI III), on €230m, €70m below its original target of €300m. The fund received commitments from a group of international investors including Verizon, Statoil, Nordea Group and Sampo.

PCI III will invest in midmarket buyouts across the Nordic region, where the firm believes the market is less competitive than at the large-cap buyout end. PCI III, 2.5 times bigger than its predecessor, will primarily invest in midsized Scandinavian companies with sales between €50m-200m.

Procuritas chief investment officer Lars Krogsgaard said the market in the Nordic region remained challenging because of a significant gap in price expectations between buyers and sellers. “There is still a difference in the value perception between buyers and vendors which is making it difficult to complete deals, although we are seeing a lot of interesting opportunities.”

Pantheon closes US FoF V on $313m
Private equity fund of funds manager Pantheon Ventures has held a final close for its Pantheon USA Fund V fund of funds on $313m, well in excess of its $200m target. The new fund of funds, which drew support from investors in North America, Europe and Australia, will invest pro rata alongside other Pantheon clients and funds of funds over a three-year period.

Investors in PUSA V include public and corporate pension plans, endowments, foundations and family partnerships. “We are also proud that the close of PUSA V coincides with the tenth anniversary of Pantheon’s first US fund of funds,” Pantheon founder and senior partner Rhoddy Swire said.

TANEO hits target with note-based FoF
TANEO, the Greek fund manager that last year launched a New Economy Development Fund in conjunction with the Greek government, has raised €105m in the international debt markets.

The notes, which have a ten-year life, benefit from a credit rating of ‘A’ from both Standard & Poor’s and Fitch. They offer a floating interest rate and a share of profits from TANEO investments. The Greek government is guaranteeing the capital and interest on the notes.

TANEO chief executive, George Kintis, said in a statement: “The response to the notes issue has been tremendous. Using the debt markets to finance venture capital in this way is a real innovation. The vision and support of the Greek government, the European Commission and our partners has been vital. The funding raised will now be put to use in supporting the best teams in, or entering, the venture capital sector in Greece.”

TANEO’s investment programme will be advised by Westport Private Equity, a UK-based investment advisor and fund of funds manager. The government has taken a €45m stake in preference shares in the fund in addition to the €105m raised from institutions.

The TANEO fund of funds vehicle will commit capital to some ten new and recently launched venture capital funds operating in the Greek market. It will provide up to 50 per cent of each fund’s overall total.

The joint arrangers for the notes issue were Deutsche Bank, EFG Telesis Finance and NBG International. Legal Advisors to the transaction were Clifford Chance, Dracopoulos & Vassalakis and Deucalion Rediadis & Sons.

Innovacom launches €100m Fund 5
Innovacom, the Franco-US information technology investor, has held a first close of its latest fund on €50m. Innovacom 5 has raised €50m ahead of a projected €100m final close. Investors in the fund include Access Capital Partners, AGF Private Equity, CIC Finance, the European Investment Fund, the FPCR (Caisse des Depots Group), and France Telecom, which in 1988 sponsored the firm at launch.

As with the firm’s previous funds, Innovacom 5 will target investment in information technology companies. 75 per cent of the fund’s capital will be invested in Europe, with the remainder going to North America, where the firm has a San Francisco headquarters.

“We have convinced prestigious investors from France, as well as from England, Germany, and Denmark, reinforcing our position among the leading venture capital firms in Europe. The Innovacom team will be focused on the key sectors and geographies that have sustained our track record over the past 15 years,” said Denis Champenois, general partner at Innovacom, in a statement. “We will continue to take a long-term approach in helping our entrepreneurs build great companies.”

Cape launches mid-cap Italian fund
Cimino & Associati Private Equity (Cape), a Milan-based private equity firm, is looking to raise a fund of up to €110m to invest in buyouts and build-ups in the North East of Italy. Cape Natexis Private Equity Fund has been launched in association with Paris-based Natexis Private Equity International (NPEI). NPEI will be the cornerstone investor in the fund and has backed the team since October 2001 with a coinvestment agreement.

The fund, the fourth to be advised by Cape since its inception in 1999, will target small-mid cap buyouts in the North and North East of Italy, particularly in the industrial triangle marked by the cities of Milan, Padua and Bologna. The fund will invest in companies with enterprise values typically below €30m. Cape has appointed Acanthus Advisers to act as placement agent for the fund.

Fundraising for Cape Natexis Private Equity Fund is expected to start in September 2003 as soon as final approvals are received by the Italian regulatory authorities, and is expected to be completed in 2004. The vehicle will be an Italian closed-end fund with standard terms and conditions.

Global Finance, EBRD launch SE Europe fund
A group of European investors have launched a private equity fund aimed at investment in small to medium-sized enterprises (SMEs) in Bulgaria and Romania. The European Bank for Reconstruction and Development (EBRD) and Global Finance, a private equity investment company operating in Southeast Europe, are the fund’s main sponsors. Other investors include Bulgarian Post Bank, Banc Post Romania and the European Commission with €6.5m through the EU/EBRD SME Finance Facility. The fund’s initial capitalisation will be €16.25m, which could be extended to €20m.

Managed by Global Finance, the fund is targeting companies with strong management, good potential for growth and which are building strong brand names and distribution networks, while taking strong positions in the local markets. It will also look for companies that are using local resources and are highly competitive within their field.

People
Europe
Investcorp hires former Bertelsmann chief
Investcorp, the private equity firm with offices in London, Bahrain and New York, has named Thomas Middelhoff head of its European corporate investment team. Middelhoff, the former chief executive of German media group Bertelsmann, left the company last year, reportedly falling out with the company’s owners over plans to seek a public listing in 2005.

Middelhoff will report to Chris O’Brien, global head of Investcorp’s private equity business. According to a company source, the appointment ends a nine-month search for a head of Investcorp’s European operations, a new position created by the company last year.

IK adds to French buyout coverage
Industri Kapital, the European buyout firm headquartered in London, has expanded its presence in the French market with the appointment of Dan Soudry from ABN Amro Capital. The appointment strengthens the team headed up by Christopher Masek, who is responsible for the French and Southern European markets.

His team now comprises Jean-Baptiste Wautier, Stefano Sirolli (both deputy directors), Rémi Buttiaux and Josep Turró Bassols (both associates). Industri Kapital set up French operations in 2000, although the team continues to work from London.

SJ Berwin poaches French team
European corporate law firm SJ Berwin has built its French private equity and M&A team with the appointment of four new professionals at its Paris office. The four, including two new partners, have moved across from rival Clifford Chance.

Christophe Digoy and Maxence Bloch joined the firm as partners in June while two associates, Jér^me Jouhanneaud and David Diamant, have also come on board.

SJ Berwin’s Paris office opened in March 2001, doing private equity legal and taxation work. The office also has mergers and acquisitions and corporate law capabilities.

The new recruits are joining a team of 25 lawyers. The Paris office is headed by George Pinkham. Other Paris-based partners are Sylvie Vansteenkiste, Jean Goncalves, Pierre-Louis Périn, Laurence Pinot-Lacan, Nathalie Duguay and Benjamin Aller.

Lehman strengthens European mezzanine platform
Global investment banking firm Lehman Brothers has appointed Jon Macintosh a managing director and principal of its European mezzanine investment team. Macintosh, who joins the firm from DB Capital Partners, will work alongside Julian Entwisle, who has been leading the European mezzanine investment team.

Macintosh worked for Deutsche’s private equity unit Morgan Grenfell Private Equity, before it was rolled into DB Capital Partners.

He previously served in Schroders’ investment banking division. At Morgan Grenfell, he was on the team that sold 1,900 pubs to Enterprise Inns, and worked on the acquisition of betting shop Coral from Ladbrokes.

TPG strengthens London buyout team
Texas Pacific Group has named Philippe Costeletos the fourth partner to be based in the London office. Costeletos joins TPG from Investcorp, the Bahrain-headquartered private equity group. He will be working alongside London-based partners Andrew Dechet, Stephen Peel and Cornel Riklin.

Carlyle brings in Dutch advisor
Cees van Lede, CEO and chairman of pharmaceuticals, coatings and chemicals group Akzo Nobel from 1994 to May 2003, has joined the advisory board of US private equity firm The Carlyle Group’s €1bn Carlyle Europe Partners (CEP). Van Lede’s appointment takes the number of advisors on CEP’s board to 16.

Van Lede will be advising the firm primarily on its investment activities in the Netherlands. In a statement, Christopher Finn, London-based managing director of Carlyle, commented: “[Van Lede] is a prominent and well-respected member of the Dutch industrial community and will be of enormous value for us.”

Fundraising for Carlyle’s second dedicated European investment vehicle is currently underway.

EVCAelects Sofinnova’s Schmidt chairman
The European Private Equity and Venture Capital Association (EVCA), meeting in Vienna in June at its 20th annual general assembly, has elected Jean-Bernard Schmidt, chairman and managing partner at French high-tech venture capital firm Sofinnova Partners, as chairman for the period June 2003 to June 2004. Schmidt takes over from Max Burger-Calderon, executive director at UK firm Apax Partners, who has held the position since June 2002.

Latham & Watkins hires Frankfurt partner
Latham & Watkins, the US M&A specialist law firm, has appointed Hans-Jürgen Lütt as a partner at the firm’s German office in Frankfurt. Lütt, a former partner at German law firm Luther Menold, is a mergers and acquisitions specialist. Recently, he has been involved in a number of significant private equity transactions. He played a leading role in several of the largest M&A transactions in Germany this year and is presently representing BC Partners in its ongoing purchase of the TeleColumbus cable television assets from Deutsche Bank.

Berwin Leighton Paisner expands PE practice
Berwin Leighton Paisner (BLP), the European law firm with offices in London and Brussels, has recruited a new partner as part of a continuing expansion of its private equity activities. The firm has hired Geraint Lloyd, who joins from Osborne Clarke as a partner in BLP’s private equity and funds group. Lloyd counts a number of private equity firms among his clients, including the Close Brothers Group and Matrix Securities.