Intermediate Capital sinks to loss on bad debts

LONDON (Reuters) - Private equity lender Intermediate Capital Group (ICP.L) said soaring bad debts pushed it into the red last year, prompting a dividend cut, but its shares jumped on hopes it is past the worst of the downturn.

ICG, which lends directly to private equity firms and also invests in buyout debt, made a pretax loss of 67 million pounds in the year to March 31, compared with a profit of 230 million pounds the previous year, the company said on Tuesday.

ICG blamed a jump in bad debt provisions, which rose to 273 million pounds from 46 million pounds a year earlier, and said it was cutting its total dividend to 41 pence per share from 65 pence.

Analysts had expected provisions of between 150 and 200 million pounds, ICG chief executive Tom Attwood told Reuters in an interview.

ICG shares were 15 percent higher at 526 pence by 0900 GMT, making them the biggest riser in the FTSE 250 index, which was up 0.1 percent. The stock has lost two thirds of its value in the past year.

BOTTOMING OUT

Noble Group analyst Nitin Arora said the rally reflected hopes ICG's conservative provisioning policy, which led it to take charges on some loans that are not in default, meant its bad debt provisions were past their high point.

"The numbers looked bad, but they seem to have bottomed out," Arora said, adding that ICG's dividend cut was less steep than some analyst had expected.

ICG's Attwood told Reuters the group might buy the European assets of struggling U.S. private equity house American Capital (ACAS.O).

"We look at a lot of portfolios, and we'll certainly look at that," Attwood said, adding that ICG had also identified opportunites to refinance fundamentally strong companies as competitors retrench.

Reuters reported in April that American Capital was looking to sell its European division in order to bolster its finances after posting a fourth quarter loss of $1.7 billion.

Attwood said that while ICG remained cautious about the outlook this year, there had been no major increase in the number of borrowers facing difficulties recently.

"The number of names on the list we are concerned about has not increased radically in the last three months. We're slightly encouraged by that," he said.

ICG also said its banks had agreed to extend 150 million pounds of its 450 million pound credit facility by two years to 2013. In return, ICG has agreed to reduce the facility by 65 million pounds.

(Reporting by Myles Neligan; Editing by David Cowell)