Conversus Capital, L.P. (Euronext Amsterdam: CCAP) ("Conversus"), a permanent capital vehicle providing its unitholders long–term capital appreciation through a high–quality, seasoned portfolio of private equity interests, today reported its estimated net asset value (NAV) as of August 31, 2008.
As of August 31, 2008, Conversus had an estimated NAV per unit of $27.26. This represents a decrease of 0.9% since July 31, 2008. In evaluating financial performance, Conversus also calculates an "adjusted NAV" which represents the NAV from operations. The adjusted NAV adds back unitholder distributions and net share repurchases. On an adjusted basis, estimated NAV per unit was $27.74 as of August 31, 2008 representing a decrease of 0.5% from the July 31, 2008 adjusted NAV per unit of $27.87. Funded assets were $2,155.7 million while unfunded commitments were $887.6 million as of August 31, 2008.
"During the month of August, we continued to experience modest realized gains in our portfolio while valuations remained stable," commented Bob Long, President and CEO of Conversus Asset Management, LLC. "The decrease in our NAV per unit in August was driven by the distribution declared by Conversus´ Board of Directors on August 5 and unrealized losses related to currency movements. Subsequent to the end of August, we announced our appointment of RBS Hoare Govett Limited and JPMorgan Cazenove Limited as joint corporate brokers to Conversus. These appointments reinforce our commitments to raise the profile of Conversus in the investment community and to take proactive steps to increase shareholder value."
Realized gains were $9.3 million in August. Of these gains, $6.2 million were recorded as unrealized gains in prior periods and were reversed in August. Excluding these reversals and unrealized currency losses in our private holdings of $6.6 million, unrealized losses in our private holdings totaled $4.8 million. As of August 31, 2008, 67% of the investment NAV was comprised of private holdings which were valued based on June 30, 2008 general partner statements, 10% represented private holdings valued based on March 31, 2008 general partner statements and 2% represented private holdings valued based on general partner statements as of other dates.
The public equity securities in Conversus´ portfolio experienced unrealized gains of $4.0 million. Given the maturity of Conversus´ portfolio, approximately 17% of the underlying investment NAV is comprised of public equity securities which were marked to market as of August 31 as further described below in Valuation and Reporting Policies. In August, Conversus entered into a swap with a notional amount of $75.0 million, linked to the S&P 500, to partially hedge the public equity exposure in its portfolio.
| Net Asset Value Estimates as of August 31, 2008 (Amounts are unaudited and subject to change) | |||||||||
| (in millions except per unit data) | August 31, 2008 | July 31, 2008 | July to August | ||||||
| Estimated NAV of Investments | $2,155.7 | $2,164.8 | (0.4 | ) | |||||
| Cash and Cash Equivalents | 9.0 | 5.6 | 60.7 | ||||||
| Other Net Assets (Liabilities) | (173.3 | ) | (159.0 | ) | 9.0 | ||||
| Estimated NAV | $1,991.4 | $2,011.4 | (1.0 | ) | |||||
| Common Units Outstanding | 73.1 | 73.1 | (0.0 | ) | |||||
| Estimated NAV per Unit | $27.26 | $27.51 | (0.9 | ) | |||||
| Adjusted NAV per Unit | $27.74 | $27.87 | (0.5 | ) | |||||
Financial Results
Financial highlights for Conversus for the month ended August 31, 2008 are as follows:
- Net unrealized depreciation on investments of $6.3 million
- Net realized gains on investments of $9.3 million
- Net unrealized foreign currency losses on private holdings of $6.6 million
- Investment income of $0.5 million
- Expenses of $6.5 million
- Net decrease in net assets from operations of $9.6 million
- Distributions to unitholders recorded of $9.1 million
- Share repurchases of $1.4 million
- Net decrease in net assets of $20.1 million
Liquidity and Capital Resources
As of August 31, 2008, Conversus had a cash balance of $9.0 million. In addition to using the positive cash flows from the existing portfolio to meet liquidity needs, Conversus has a $650.0 million credit facility available which is committed through July 2012. As of August 31, 2008, a principal balance of $146.0 million was outstanding under the credit facility.
During the month of August, Conversus received $23.1 million in distributions and funded $18.5 million in capital calls. These cash flows exclude capital calls for management fees and other expenses paid to the funds in which Conversus is invested and distributions of unused capital.
Investment Activity
During the month of August 2008, Conversus closed one commitment of $5.0 million to the InterWest Partners X, L.P. fund.
Conversus has also made commitments to three primary funds which have not yet closed. The details of these investments will be disclosed when concluded, to the extent permitted by the general partners. There can be no assurance as to whether these commitments will close or the actual amounts of the commitments that will be accepted, if any.
For a detailed breakdown of Conversus´ Private Equity Portfolio as of August 31, 2008, please visit the Investor Relations section of Conversus´ website at www.conversus.com and view the following headings: "Reports and Financial Statements" and "Investment Information."
Liquidity Enhancement Activity
During the month of August, a total of 58,229 Conversus units were repurchased pursuant to a Liquidity Enhancement Agreement (the "Agreement") at a total purchase price of $1.4 million, or an average price per unit of $23.82. Over the life of the Agreement, a total of 514,778 units have been repurchased at a total purchase price of approximately $12.0 million, or an average price per unit of $23.35. The repurchased units are held on Conversus´ balance sheet as Treasury units. As it deems appropriate, Conversus expects to continue to repurchase its units pursuant to the Agreement at attractive prices relative to NAV.
Joint Corporate Broker Appointments
On September 2, 2008, Conversus announced the appointments of RBS Hoare Govett Limited ("RBS") and JPMorgan Cazenove Limited ("JPMC") as joint corporate brokers to Conversus. In their role as corporate brokers, both RBS and JPMC will provide Conversus with strategic advice, sales support and assistance in accessing and communicating with the financial markets.
Quarterly Distributions
On August 5, 2008, Conversus´ Board of Directors declared a quarterly distribution of $0.125 per unit payable to unitholders of record as of August 29, 2008. The approved distribution represents an annualized yield of 2.2% based on the closing price of Conversus´ units on the declaration date. The distribution will be paid on or about September 22, 2008. This represents the fourth distribution declared since Conversus´ inception.
Additional information regarding Conversus´ quarterly distributions and its distribution policy can be found in the Investor Relations section of Conversus´ website at www.conversus.com under the heading "Tax and Distribution Information."
Financial Report
Conversus filed its Financial Report for the six months and quarter ended June 30, 2008 on August 28, 2008. The report has also been posted to the Conversus website. To access the Financial Report, please visit the Investor Relations section of the Company´s website at www.conversus.com under the heading of "Reports and Financial Statements."
Valuation and Reporting Policies
Conversus carries investments on its books at fair value in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Conversus uses the best information it has available to estimate fair value. Fair value for private equity interests begins with the most recent financial information provided by the general partners, adjusted for subsequent transactions, such as calls or distributions, as well as other information judged to be reliable that indicates valuation changes, including realizations and other portfolio company events. The value of any public equity security known to be owned by the funds based on the most recent information reported to us by the general partners has been marked to market as of August 31, 2008 and a discount has been applied to such securities based on an estimate of the discount applied by the general partners in calculating NAV.
Conversus will issue quarterly financial reports as of March 31, June 30 and September 30 as well as an annual financial report as of December 31 of each year. These reports will include financial statements prepared in accordance with U.S. GAAP. Conversus is required to consider, and will consider, all known material information in preparing such financial statements, including information that may become known subsequent to the issuance of each monthly report. Accordingly, amounts included in the quarterly and annual financial statements may differ from amounts included in the monthly NAV reports.
About Conversus Capital
Conversus Capital, L.P. (Euronext Amsterdam: CCAP) ("Conversus") is the largest publicly traded portfolio of third party private equity funds. It is a permanent capital vehicle providing its unitholders long–term capital appreciation through a portfolio of high–quality, seasoned private equity interests. Conversus´ objective is to provide unitholders with immediate exposure to a diversified portfolio of private equity assets, access to best–in–class general partners and consistent NAV growth that outperforms the public markets. Conversus reinvests the distributions from its current investments in primary fund commitments, secondary fund purchases and direct co–investments. Conversus Asset Management, LLC ("CAM"), an independent asset manager, implements Conversus´ investment policies and carries out the day to day operations of Conversus pursuant to a services agreement. CAM leverages the platforms of Bank of America and Oak Hill, its primary owners, in sourcing investments for the benefit of Conversus.
Legal Disclaimer
These materials are not an offer for sale of securities in the United States. Securities may not be sold in the United States absent registration with the U.S. Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. Conversus is not a registered investment company under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"), and the resale of Conversus securities in the United States or to U.S. persons that are not qualified purchasers as defined in the Investment Company Act is prohibited. Conversus does not intend to register any offering in the United States or to conduct a public offering of its securities in the United States.
Forward–Looking Statements
These materials may contain certain forward–looking statements with respect to the financial condition, results of operations, liquidity, investments, business, net asset value and prospects of Conversus. By their nature, forward–looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future, and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward–looking statements. Conversus does not undertake to update any of these forward–looking statements. Past performance is not necessarily indicative of future results.
