London, UK, 29 November 2022

Edison issues update on Princess Private Equity (PEY/PEYS)

Princess Private Equity Holding's (PEY's) portfolio has fared quite well in 2022, with the +3.7% NAV total return (TR) in Q322 bringing the 9M22 TR decline to a moderate 4.0%. This was likely assisted by PEY's sector mix and the temporary allocation of excess funds into senior loans in H221 (gradually redeemed throughout 2022). However, this was overshadowed by PEY's decision to suspend its second interim dividend amid holding-level liquidity concerns due to high cash outflows for foreign exchange (fx) hedges and subdued M&A markets. This allowed PEY to build a liquidity buffer (c €88m at 18 November) to cushion against potential further headwinds due to a strong US dollar and muted portfolio realisations.

Following the recent sell-off, PEY's shares now trade at a 37% discount to NAV (significantly wider than its five-year average of 15%). The dividend suspension has disappointed some investors but we note that PEY now has a meaningful safety margin in terms of liquidity. We also note that its cash and undrawn facility are higher than the outstanding commitments considered by the company as likely to be called (c €35m at end-September 2022). PEY highlighted that it could resume dividend payments as early as June 2023 if fx markets stabilise and M&A activity in private markets resumes. PEY's near-term liquidity profile could be further assisted by an upsizing of its credit facility or changes to its fx hedging approach. While PEY has stopped any new direct investments for now, it highlighted that its portfolio companies have sufficient resources to continue pursuing add-on acquisitions.  

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