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LONDON (Alliance News) - US and European microcap investor JZ Capital Partners Ltd on Wednesday reported a marginal increase in annual net asset value per share as the company embarks on a USD100 million capital return and USD100 million debt repayments.
At February 28, JZ Capital's NAV per share stood at USD10.04 compared to USD9.98 the year before, a 0.6% increase.
The investment company's net assets decreased 3.3%, however, to USD810.3 million from USD837.6 million.
JZ Capital said its US microcap portfolio performed "well" in the year, adding 49 US cents to NAV per share. The investment company said this was primarily due to net accrued income of 19 cents.
The increased earnings from portfolio company refrigerators and freezers supplier Felix Storch Inc added 13 cents. JZ Capital writing its Water Treatment and Waterline Renewal investments up to their respective sale value added 36 cent to NAV.
The European microcap portfolio performed "very well", adding 22 cents to NAV. The company attributed this to accrued income of 9 cents and write-ups at portfolio companies Petrocorner, Fincontinuo, SAC, Alianzas en Aceros and Eliantus adding a combined 13 cents.
The investment company's Real Estate investment portfolio subtracted 22 cents from NAV. The investment company attributed the fall to pre-development and carrying costs.
"We are pleased with the continued strong underlying performance of the US and European microcap portfolios during the period. In addition, we expect the ongoing improvement in real estate performance to continue going forward, following the successful completion of the previously announced Fulton Mall Assemblage joint venture partnership," said Co-Founder & Investment Adviser David Zalaznick.
The company's portfolio at the end of the financial year consisted of 41 US and European microcap businesses across 11 industries and five real estate developments in Brooklyn, New York and south Florida consisting of 61 total properties.
Going forward, the company will seek shareholder approval for a number of initiatives. JZ Capital will look to return about USD100 million in capital to shareholders, at a maximum discount to NAV of 5%, through a series of tender offers. Additionally, JZ Capital is hoping to repay about USD100 million of debt.
The company said the USD200 million in cash required for these initiatives will be generated from portfolio realisations and the secondary sale of "certain portfolio assets", planned for calendar 2019 and 2020.
The first tender offer is intended to be USD30 million, with JZ Capital hoping to launch it in July.
"In order to conserve cash for successive share buybacks and debt repayment, we will be investing in fewer new deals or investing a smaller percentage in each new deal. As such, the board has asked our investment adviser to develop a strategy similar to our investment in JZI Fund III LP for European microcap companies, where, in effect, JZ Capital puts up a much smaller percentage in each new investment," said Chair David Macfarlane.
"We have continued to make significant progress in realising portfolio assets, at or above NAV, which will help fund the strategic initiatives for a series of tender offers and the repayment of debt. We believe these proposals will benefit all shareholders whilst strengthening JZCP's balance sheet, hopefully ensuring our underlying performance translates into positive long-term shareholder value," added Zalaznick.
JZ Capital will also be looking for shareholder approval for a US side-car fund, JZ Partners II, which will have USD450 million available and will be used to invest side-by-side with JZ Capital in US microcap deals.
Macfarlane said: "JZ Partners II, which will be substantially funded by third-party limited partners, should allow JZ Capital to conserve considerable cash over the next five years, as JZ Partners II will take up a larger percentage of each new US microcap deal. The current thinking is to hold a first closing for JZ Partners II in the fourth quarter of JZ Capital's current financial year."
The investment company also has a succession plan in place to replace Macfarlane by 2021.
Macfarlane added: "The board has great confidence in the value of JZ Capital's assets; we believe our NAV has been fairly, if not conservatively, valued."
Shares in JZ Capital were untraded Wednesday but last closed at 466.00 pence each.