Electra launches £60m ZDP issue

It is Electra Private Equity’s first ZDP issue and follows recent issuance from two other private equity trusts, JPMorgan Private Equity and JZ Capital Partners.

On Thursday evening, Electra closed up 1.65 per cent or 17p at 1,040p, while its index the FTSE 250 finished up 93.18 points or 1.2 per cent at 7,887.23.

Electra Private Equity said it is launching the fund raising to take advantage of current and future investment opportunities. Although it is only being placed with institutional investors these are likely to include private client stock brokers who represent retail investors, including high net worth individuals paying higher rate tax for whom ZDPs are an attractive investment.

This is because ZDPs incur capital gains tax of 18 per cent upon their sale or redemption rather than pay income tax on dividends, the top rate of which is set to rise from 40 per cent to 50 per cent next year.

ZDPs are said to be in high demand from private client stock brokers, and this was evidenced by the popularity of Ecofin Water & Power Opportunities' recent ZDP issue.

Electra Private Equity said it is doing the ZDP issue because events in the markets over recent months have resulted in distressed sellers across the capital structure while significant falls in equity markets are making the pricing environment attractive. But although competition for deals is reduced there is a shortage of capital to pursue opportunities.

Electra hopes to target the following:

bolt-on acquisitions to existing investments;

capital for restructuring, including buy-outs;

private equity into public companies;

secondary investments including debt; and development capital.

Recently JPMorgan Private Equity launched a bonus subscription share issue which it said was to take advantage of market opportunities.

Electra added that the placing will diversify its sources of and the maturity of its funding, without diluting the value of ordinary shares. The company has also renewed its existing debt facility for a 3.5 year, £185m multi-currency revolving credit facility which expires in January 2013.

However, Electra notes that it has no net borrowings.

Electra said the ZDPs should offer an attractive level of return with a healthy level of cover but has not yet disclosed what the return or the level of cover will be. The conditional allocation and results of the placing is expected to take place on 30 July.