SVG: Permira holdings, realisations on the rise

Listed fund of funds SVG Capital – whose £1 billion-plus [€1.3 billion and $1.6 billion] private equity funds portfolio is primarily composed of Permira funds – has given both Permira and the broader private equity industry a glowing review in its latest earnings statement.

2010 was a “year of progress in the private equity sector”, chairman Nicholas Ferguson said in a statement that also noted “although there is no doubt the sector has yet to return to ‘normality’, it has been encouraging to see private equity picking back up”.

Reporting a 41.7 percent increase in net asset value and a number of measures taken to improve its balance sheet, SVG highlighted a “strong recovery in the operational performance” of Permira portfolio companies throughout the year. SVG’s 40.1 percent return on its private equity fund holdings was driven in large part by some of the largest companies owned by Permira’s fourth fund, according to the statement.

Lynn Fordham

A good example was the largest holding in the SVG portfolio, clothing retailer Hugo Boss and VFG, which increased its value by £44.7 million during 2010 and increased its EBIDTA by 31 percent over the year. The statement also noted that semiconductor company Freescale had reported six consecutive quarters of earnings growth and increased its value by £30 million, while German TV company ProSiebenSat had increased in value to £66.7 million from zero.

The latter two companies’ improving performance should provide cheer for more than just Permira LPs; consistently pointed to as poster children of the credit-fuelled mega-LBO boom that occurred pre-credit crisis, the two companies have in the past been pointed to as proof that large deals agreed pre-credit crisis were doomed.

SVG Capital chief executive Lynn Fordham told PEI that measures taken by the manager had helped to drive portfolio rebounds.

Among those measures was de-leveraging and strengthening capital structures, according to the earnings report. Aggregate debt across Permira funds’ top 20 companies was decreased 6 percent over the year, with less than 15 percent of portfolio company debt due to mature before 2014.

Permira was expected to tell investors on Monday that its funds had increased in value by 31 percent over 2010.

Fordham also quipped that “a brick and some mortar” had materialised, but not quite the whole “wall” of cash in distributions that Permira in late 2009 reportedly told investors was on the horizon.

In 2010, SVG received distributions of £77.4 million from its private equity portfolio. That stemmed in part from the realisation of Cognis, which generated a 2.9x return on invested capital, as well as the partial exit of Danish telecom operator TDC, whose recent share sale resulted in a 1.9x multiple.

Asked what SVG’s strategy might be going forward, Fordham joked that she'd “like to see a few more bricks before we start talking about that”.

Permira co-heads Tom Lister and Kurt Björklund sat down late last year with PEI to discuss how the European private equity powerhouse was faring in the post-crisis world; click here to read.