On the heels of a $2.5 billion equity mandate which Finvest Asset Management won several weeks ago, the firm has already taken active steps to allocate capital to several companies.
Press Release (PressBurner) Jan 27, 2009 - Switzerland, Swiss Confederation - On the heels of a $2.5 billion equity mandate which Finvest Asset Management won several weeks ago, the firm has already taken active steps to allocate capital to several companies. The companies typically have an attractive and sound business model, require capital to either replace or meet debt obligations, or need funding to allocate to new acquisitions or projects. The extent of the capital allocations which Finvest makes varies from between $10 million to $1 billion, and is facilitated through a new share issue by the company which is recipient to the capital. Finvest's investment committee is only considering companies that are listed on a major exchange, companies which have a market capitalization of over $300 million, and companies which are actively traded. Although there are no limitations to specific industries or market sectors, businesses which operate in emerging markets are being excluded from the mandate, due to risk considerations.
"The impact of such an infusion of cash certainly would improve a balance sheet," said portfolio specialist Mayer Greenwald. "Clearly, the improved risk profile of the company can make a significant impact on shareholder value."
As the new issue in shares could potentially dilute earnings, it is important that the targeted companies exhibit a high level of confidence in the possibility that the cash infusion will add to their company's bottom line. Given the challenging lending environment, and the lack of capital which is available as a function of the credit crunch, the provision of capital through equity has been welcomed. The interest displayed by a wide spectrum of companies in sourcing capital through an equity issue is strong.
"An advantage to dealing with companies which are publicly listed is that a sizeable amount of information on the company is publicly available, the time frame for the required due diligence which needs to be conducted is shortened, and consequently we can act reasonably quickly," says Greenwald. "We are aggressively moving forward in our efforts to identify listed companies that are seeking additional capital," he added. "In the current environment, this has become an attractive and viable alternative to debt."
