Investor 3i halves debt in Q1; remains cautious

LONDON (Reuters) - British private equity firm 3i Group (III.L) said on Wednesday it halved its net debt in its fiscal first quarter, helped by a heavily discounted rights issue and the proceeds from liquidating 3i QPE (Quoted Private Equity).

Also realizations of investments produced 163 million pounds, exceeding new investment by 87 million pounds, it said.

3i, which raised 732 million pounds ($1.2 billion) from shareholders last month, said net debt fell to 961 million pounds at June 30 from 1.91 billion pounds at March 31.

3i set up 3i QPE in 2007 with some 400 million pounds to buy minority positions in listed companies across Europe but in February the venture was wound up after it failed to find many investment targets, giving 3i net cash of 110 million pounds.

"Our focus in the first quarter was on strengthening the balance sheet," Chief Executive Michael Queen said in a statement.

"A substantial increase in liquidity and the reduction in net debt provide further resilience in what remains a fragile environment."

Private equity firms have seen the value of their investments slump as falling revenues and shaky outlooks hit company valuations. And new deals have come to a virtual halt as debt to fund them has dried up.

3i shares were down 2.5 percent at 222.5 pence at 0803 GMT.

Oriel Securities analyst Iain Scouller said the group's leverage position had improved significantly to an estimated 35 percent of net asset value (NAV) from 103 percent in March.

But new deals activity remains subdued said Scouller in a note to investors, highlighting 3i's continued cautious approach to new investment.

In a separate statement, 3i said the recently-named chairman of electronics retailer DSG International (DSGI.L), John Allan, would be joining the board as a non-executive director from September, as would Alistair Cox, chief executive of Hays (HAYS.L).

($1=.6176 pounds)

(Reporting by Simon Meads and Paul Sandle; Editing by Greg Mahlich)