Equus Announces Fourth Quarter Net Asset Value
March 19 2012 - 7:02PM
Marketwired
Equus Total Return, Inc. (NYSE: EQS) (the
"Fund" or "Equus") reports net assets as of December 31, 2011, of
$38.1 million, a decrease of $0.8 million since September 30, 2011.
Net assets per share decreased to $3.61 as of December 31, 2011
from $3.69 as of September 30, 2011. Comparative data is summarized
below (in thousands, except per share amounts):
As of the Quarter
Ended 12/31/2011 9/30/2011 6/30/2011 3/31/2011 12/31/2010
---------- ---------- ---------- ---------- ----------
Net assets $38,148 $38,970 $41,432 $36,333 $38,051
Shares outstanding 10,562 10,562 10,562 8,862 8,862
Net assets per share $3.61 $3.69 $3.92 $4.10 $4.29
The changes in net asset value resulted principally from changes
in the fair values of the following portfolio holdings:
- ConGlobal Industries Holding, Inc.
("ConGlobal"). The Fund made its initial investment in the
debt and equity of ConGlobal in 1997, and subsequently restructured
its loan in 2003, 2004, and most recently in 2009. ConGlobal
operates 22 container repair and storage depots located near
shipping ports across the United States, Mexico, and Costa Rica,
catering to major shipping, leasing, and freight movement companies
around the world. The company has national storage capacity of over
600 acres and its network of maintenance depots currently handles
over 6,500 containers per week and can accommodate 175,000 TEU's
(twenty-foot equivalent unit). ConGlobal's EBITDA has declined by
approximately 58% since 2010. As a result of the decline in EBITDA,
the fair value of this investment declined from $8.4 million as of
December 31, 2010 and $5.9 million as of September 30, 2011 to $5.7
million as of December 31, 2011. This figure does not include
accrued but unpaid interest receivable from ConGlobal of $1.7
million as of December 31, 2011.
- Spectrum Management, LLC ("Spectrum").
The Fund made its initial investment in Spectrum in 1999. Spectrum
uses proprietary electronic tracking equipment and software, and a
full suite of custom services to help client organizations, mainly
financial institutions, protect or recover high-value merchandise
and cash. Spectrum markets its services under the brand name
Electronic Tracking Systems or ETS. The company specializes in
assisting communities and law enforcement in recovery of stolen
property. Spectrum's EBITDA has declined by almost 59% between 2010
and 2011 which, combined with other negative factors, resulted in
the application of a liquidation approach for valuation purposes,
which has resulted in a decrease in the fair value of this
investment from $1.4 million as of December 31, 2010 and $1.0
million as of September 30, 2011 to $0.3 million as of December 31,
2011.
- Sovereign Business Forms, Inc.
("Sovereign"). The Fund made its initial investment in
Sovereign in 1996. Sovereign operates five manufacturing plants
with a combined market reach covering much of the central and
eastern United States, Texas and Louisiana. Business forms are
typically custom forms sold to distributors which resell the forms
to the end-users and include snap-out forms, continuous forms,
laser cut sheets and sales/log books. Typical uses of these forms
include bank checks, insurance contracts, auto parts and healthcare
form/label combinations, and are utilized by banks, insurance
companies, auto dealerships and healthcare companies. These types
of products account for approximately 95% of the company's
historical revenue. The principals of Sovereign have been with the
company since inception in 1996 and have extensive experience in
the industry. Sovereign focuses its business on "short run" forms
which are less than 150,000 per order. Sovereign management
estimates the average order is $600, which equates to approximately
50,000 orders per year or 27 orders per day per location (six
locations). These jobs typically have a quick turnaround of less
than 48 hours and allow Sovereign to focus its sales efforts on
service in a price-sensitive industry. Sovereign management also
believes it is advantaged with numerous locations and can manage
work flow by shifting orders to facilities that have excess
capacity and drop-shipping directly to customers. There are few
significant customers in the business with the top five customers
accounting for approximately 10% of historical revenue. The fair
value of this investment increased from $6.6 million as of December
31, 2010 and $6.7 million as of September 30, 2011 to $6.9 million
as of December 31, 2011 due to improved operating performance and
debt reduction during the year.
- Orco Germany, S.A. ("Orco Germany"). In
May 2011, the Fund acquired 8,890 4% bonds due May 2012 ("Bonds")
issued by Orco Germany, a commercial and multi-family residential
real estate holding company and developer based in Berlin. Equus
also received $1.6 million in cash from the selling bondholders.
The consideration provided to the selling bondholders consisted of
an aggregate of 1,700,000 newly issued shares of common stock of
the Fund. On January 12, 2012, Orco Germany announced that a
meeting of its bondholders would be held January 27, 2012 to
approve the conversion to equity of the Bonds into ordinary shares
of Orco Property Group S.A. ("OPG"), the parent corporation of Orco
Germany. On January 27, 2012, holders of greater than a two-thirds
majority of all 148,077 Bonds approved a conversion of the Bonds
into "bonds convertible into shares" (Obligations Convertibles en
Actions - "OCA"). The OCA will convert into an initial tranche of
an aggregate of 19,250,000 OPG shares, which shares are not
tradable until April 12, 2012. The shares of OPG are traded
principally on the NYSE Euronext under the ISIN LU0122624777. OPG
is a commercial and multi-family residential real estate holding
company and developer headquartered in Paris that owns a variety of
hotels, office buildings, apartment complexes, condominiums, and
vacant land in Luxembourg, Poland, the Czech Republic, Slovakia,
Croatia, Hungary, and Russia. As the Fund holds 6% of the total
Bonds issued, Equus would expect to receive approximately 1,155,700
OPG shares in this initial tranche. As of the date of this release,
Equus has not yet received these OPG shares. Equus and the other
Orco Germany bondholders (collectively, the "Bondholders") are also
entitled to receive a second payment, the nature of which is
dependent upon OPG's ability to convert certain of its own bonds
into equity by April 12, 2012. If such OPG bonds are so converted,
the Bondholders would receive an additional tranche of 7,996,158
OPG shares. Of this amount, the Fund expects to receive 6%, or
480,060 additional OPG shares. If the OPG bonds are not converted,
OPG may elect to pay the Bondholders an aggregate of EUR 50.0
million in cash or, failing such election, the Bondholders would
receive, at their option, either: (i) the 7,996,158 additional OPG
shares noted above, or (ii) 55% of the outstanding ordinary shares
of Orco Germany. Although uncertainty exists regarding both the
timing and consideration of the second tranche, the Fund believes
the most likely scenario is for Equus to receive the 480,060
additional OPG shares. The fair value of the Bonds held by the Fund
increased from $5.4 million as of September 30, 2011 to $5.7
million as of December 31, 2011. This was the result of the
application of a valuation methodology from a variety of valuation
approaches in consultation with a third party valuation
expert.
The Fund has formed Equus Energy Fund, L.P., a Delaware limited
partnership focused on making investments in companies in the
energy sector, with particular emphasis on oil & gas properties
and services. Equus Energy Fund, L.P. is intended to be managed by
Equus Energy, LLC, a wholly-owned subsidiary of the Fund which also
will serve as the general partner.
About Equus The Fund is a business
development company that trades as a closed-end fund on the New
York Stock Exchange, under the symbol "EQS." Additional information
on the Fund may be obtained from the Fund's website at
www.equuscap.com.
This press release may contain certain forward-looking
statements regarding future circumstances. These forward-looking
statements are based upon the Fund's current expectations and
assumptions and are subject to various risks and uncertainties that
could cause actual results to differ materially from those
contemplated in such forward-looking statements including, in
particular, the risks and uncertainties described in the Fund's
filings with the SEC. Actual results, events, and performance may
differ. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as to the date hereof.
Except as required by law, the Fund undertakes no obligation to
release publicly any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. The
inclusion of any statement in this release does not constitute an
admission by the Fund or any other person that the events or
circumstances described in such statements are material.
Contact: Patricia Baronowski Pristine Advisers, LLC (631)
756-2486
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