Social Icons

Wednesday, September 15, 2010

New Private Equity Initiative for SMEs

Great news for SMEs looking for start-up or growth finance is that another new initiative, this time through private equity firm Trinitas is injecting further finance into promising business plans. The company has raised R430m to invest in high cash-generating businesses and wants to increase this to as much as R1bn in the next 12 months.

Executive director Andrew Hall said yesterday Trinitas had been raising funds for the past 18 months, in one of the "toughest ever environments" because of the global crisis.

It had found investors who were convinced there was value in the company's business model, which is focused on mid- capitalised companies.

Trinitas Private Equity is being run by private equity experts John Stipinovich, Soteris Theorides and Mr Hall, who were also shareholders in the fund. Other shareholders are Sasfin and the black women's empowerment group Peotona, which has a 25% stake.
At its first closing in March, Trinitas Private Equity had raised R430m from five local investors from sectors such as banking and pension funds.

"We are happy with the level of interest by investors and ideally we want to raise more money and the fund is open for another 12 months to raise between R750m and R1bn in total, including the R430m we have raised," Mr Hall said yesterday.

Trinitas would focus on companies with enterprise values of between R150m and R1bn, because it believed companies in this segment had greater opportunity to create value for investors, including achieving organic growth in their sectors.

Mr Hall said the fund would invest from R50m to R150m over three to seven years in virtually any sector as long as it made business sense, particularly from a cash generation perspective. But mining was excluded because of its highly cyclical nature.

It had already invested R50m in a personal care and cosmetics manufacturer, Le Sel Research, a company based in Midrand and which makes products for customers such as Woolworths, Unilever and Aspen .

There were opportunities to invest, particularly in companies where management wanted to buy out the owners, or those in which the owners wanted additional capital and did not mind their shareholding being diluted.

Mr Hall said the recession had exposed small and medium-size companies who had overborrowed or expanded without any strategic intent, adding capacity which became idle overnight as demand collapsed. " Even when things are going well, it is better to keep the business lean," he said.
Source: Business Day

IDC may issue bonds to boost equity finance

Great news for South African entrepreneurs and new businesses with business plans waiting to be financed, is the information coming through today that South Africa's Industrial Development Corporation (IDC) may issue bonds and dispose of 26 billion rand worth of its stake in listed firms to raise money for new investments, its CEO said on Tuesday.
With regular banks in the country still not lending at the level required to stimulate the small business sector and especially new businesses starting up, the government wants to support the growth amongst entrepreneur with a much needed cash injection.
The state-owned development finance institution has been tasked by government to invest in the private sector to support economic growth and stem job losses after last year's recession.
The IDC lends to medium-sized businesses at more favourable rates and terms than commercial banks.
In a presentation to lawmakers in parliament, chief executive Geoffrey Qhena said the company needed 9 billion rand capital injection by 2015 to keep its equity/debt ratio below 60 percent and it would consider new sources of funding such as bond issuances.
"IDC's ability to attract other investors to projects and thus leverage more private sector investments could reduce its funding needs," he said.
"In the base case, IDC would need to raise 53 billion rand of borrowings (64 billion rand in the high road scenario)," he said, adding the company would dispose of 26 billion rand worth of shares it owned in listed companies.
The IDC who last year approved 1.4 billion rand in loans to companies distressed by a global and local recession has targeted the bio-fuels, automotive and energy sectors for investment and set aside 3.2 billion rand for 2011 to help companies hit by a recession.
Last year it approved 1.4 billion rand in loans to companies distressed by a global and local recession.
Source: Thomson Reuters