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Citadel narrows H1 loss, boosts investments

Cairo, October 3, 2012

Citadel Capital, a leading private equity firm in the region, said its consolidated second-quarter net loss narrowed to EGP124.2 million ($20.36 million) from a previously stated 180.5 million pounds a year earlier.

The firm, which focuses on the Middle East and Africa, said revenue during the quarter was a negative EGP63.8 million compared to EGP117.9 million pounds last year.

Reporting healthy progress in the first half, Citadel said it has narrowed its loss to EGP283.5 million ($46.9 million) in the first half even as its principal investments surged 14.8 per cent to hit $1.1 billion.

With no exits in the quarter, the company registered a standalone net loss of $1.5 million for the period on revenues of $3.2 million. This represents a substantial narrowing from the previous quarter.

During the last quarter, the losses were inflated by net one-time up-front fees of $9 million related to the refinancing of Citadel’s pre-existing $175 million credit facility and the arrangement of new debt backed by the United States Overseas Private Investment Corporation (Opic), the equity firm said in a statement.

On a consolidated basis, Citadel Capital reported a net loss of $20.6 million on revenues of negative $10.6 million in the second quarter, a 19.2 per cent narrowing from the previous quarter and a 45.4 per cent improvement from last year.

The equity giant registered a 6.9 per cent quarter-on-quarter increase in total invested equity as it began drawing down funds following financial close on a $3.7 billion petroleum refining investment.

The invested assets under management (AUM) too rose $228.8 million in the quarter to hit $3.6 billion, said the equity firm in a statement.

Total investments under control across the firm’s 15-industry footprint stood at $9.5 billion as of the second quarter, while the firm’s standalone net loss narrowed 69.8 per cent quarter-on-quarter and 63.4 per cent year-on-year to $1.5 million, it added.

The firm’s principal investments in its own transactions rose 14.8 per cent in the first half surged to $1.1 billion, with $138.9 million in new investments this year being driven in large part by $93.4 million in new equity invested in the Egyptian Refining Company (ERC), which reached financial close during the second quarter in what stands as the largest single equity raising in Egypt since 2007 and the largest in the Mena region year-to-date.

The ERC reached financial close with total equity commitments of $1.1 billion and a $2.6 billion debt package, said the statement.
The participants in the equity component include leading investors from Egypt, the GCC and international development finance institutions (DFIs), it added.

“Financial close on ERC represents a substantial de-risking for Citadel Capital as we closed one of the largest-ever project finance transactions in Africa,” remarked Citadel Capital chairman and founder Ahmed Heikal.

“We now look forward to a busy fall and winter period as we continue a strategic transformation that will see us take on more and more of the characteristics of a traditional investment / holding company. Management is fully committed to driving the growth of core platform and portfolio companies that are increasingly on the right side of macro fundamentals, as recent moves toward subsidy reform and energy deregulation in Egypt suggest,” said Heikal.

According to him, the Citadel revenues from advisory fees eased 20.9 per cent quarter-on-quarter as all AUM related to the Egyptian Refining Company became non-fee-earning at the time of first draw-down, in keeping with the firm’s contractual agreements.

Moreover, management again adopted a conservative stance with regard to the outlook on the National Petroleum Company (NPC) and accordingly opted not to record advisory fees related to NPC in the second quarter.

The better consolidated performance came as key platform and portfolio companies held as associates posted improvements in performance, said Heikal.

Citadel Capital recorded $11.2 million in losses from its share of associates’ results, a fractional improvement from the previous quarter and a 47.4 per cent narrowing year-on-year.

On a first-half basis, Citadel’s share of associates’ losses narrowed 29.6 per cent year-on-year to $22.3 million, reflecting better performance of the underlying Associates, he stated.

“The return of our associates to pre-revolutionary levels of performance - a time at which the core companies among them were on clear paths toward break-even and profitability - has come through hands-on management during the turbulence of the past year,” remarked Heikal.

“We look forward to accelerated development in the coming 12 months on the back of new equity deployed at key companies via our $150 million Opic facility. This move is very much in line with our view to both increase our stakes in core investments and to shift toward longer holding periods create maximum value for both our limited partners and our public markets investors,” he added.-TradeArabia News Service

Tags: investment | finance | equity | growth | loss | Citadel Capital |

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