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Investcorp writes down $95m on private equity portfolio

The quoted investment manager suffered a net loss for the first time in its history, due largely to hedge fund positions. Its private equity portfolio is 'in better shape' than many competitors, chief executive Nemir Kirdar has said.

Investcorp, which is listed on the Bahrain and London stock exchange, suffered unrealised losses of $95 million on its private equity portfolio for the six months ended December 2008, a spokesman said.

In contrast, the value of the firm’s private equity portfolio rose by approximately $100 million in the same period in 2007.

Nemir Kirdar

“We are cautiously optimistic about the outlook for the coming six months,” Nemir Kirdar, Investcorp's executive chairman and chief executive, said in a statement. “Based upon publicly available information, our private equity portfolio is in better shape than that of many competitors,” he added. 

Last week, investment bank Credit Suisse disclosed CHF 599 million (€731 million; $944 million) in write-downs on private equity and other investments. 
 
Investcorp booked an overall loss for the first time in its history, making a $511 million net loss during the last half of 2008. Roughly $398 million of that stemmed from hedge fund positions. The firm also saw its net asset income decrease by $526 million in the same period. In contrast, the firm made a profit of approximately $88 million from July 2007 to December 2007.

Rishi Kapoor

To bolster its balance sheet, Investcorp reportedly intends to raise at least $250 million in capital. It has already raised $26 million from mainly institutional and individual investors in the Gulf, Rishi Kapoor, Investcorp’s finance director, told Reuters.

A significant portion of the firm's debt is long term and refinancing needs over the next two years are fully covered through available liquidity, the firm said. Investcorp has net liquidity of $1.5 billion. Its medium-term and long-term debts stand at $1.7 billion and $644 million, respectively.

In January, Standard & Poor’s Rating Services lowered Investcorp’s credit ratings by two notches, from 'BBB/A-2' to 'BB+/B'. The downgrade reflected the plummeting valuations of the firm’s investments due to the financial crisis as well as the firm’s high leverage and narrow business diversification, according to S&P.

Investcorp’s current private equity portfolio comprises 23 companies mostly in the US and Europe. The firm expects to make a second investment out of its $1.1 billion Gulf Opportunity Fund I “in the near future”.

In October, the fund invested $98 million for a 36 percent stake in technology products distributor Redington India. As of the end of December 2008, Investcorp had exposure of $4.2 million to this first investment.

In December, Investcorp eliminated 20 percent of its staff across its offices in Bahrain, London and New York in an attempt to cut costs.

The Bahrain-headquartered firm has five main businesses: private equity, hedge funds, real estate, technology and Gulf growth capital. As of December, it managed $10.3 billion in client assets, down from $12.8 billion at June 2008.