Preliminary Results

RNS Number:1696O
ACP Mezzanine Ltd
18 February 2008

18 February 2008





                             ACP MEZZANINE LIMITED


            Preliminary Results for the Year Ended 31 December 2007


ACP Mezzanine Limited ("ACP Mezzanine" or the "Company": ACPM.LN), the
closed-ended investment company focused on lending to European small and
medium-sized enterprises ("SMEs"), today announces its preliminary and unaudited
results for the year ended 31 December 2007 (the "Period").


Highlights


  * Revenue of Euro16.1 million; net income of Euro10.2 million; and diluted
    earnings per share of Euro0.10


  * Final dividend Euro0.05 per share declared (interim dividend of Euro0.045 paid
    in August 2007)


  * Total dividend of Euro0.095 per share - 5.6% ahead of targeted of Euro0.09 per
    share


  * Growth in net asset value to Euro1.02 per share (31 Dec 2006: Euro0.98, 30 June
    2007: Euro1.01)


  * Invested assets under management of Euro122.3 million, up 13.7% from Euro107.5
    million at 31 Dec 2006


  * No credit impairments or losses on assets - negligible exposure to UK
    residential mortgages and no exposure to the subprime residential mortgage
    sector in the US


  * Strong prospects for continued profitable growth - range of attractive
    investment opportunities with potential investments of more than Euro500
    million of primarily SME loan assets clearly identified


  * Intention to raise gross proceeds of up to Euro200 million via an issue of
    new equity to capture these latest opportunities with a transfer of listing
    to Euronext Amsterdam, subject to shareholder approval


  * Five-year debt funding in place - further growth funding lines currently
    under discussion



Derek Vago, Chief Executive Officer of ACP Capital Limited ("ACP Capital":
APL.LN), the parent of ACP Mezzanine's investment manager, commented:


"ACP Mezzanine has performed strongly during its first full year of trading,
surpassing both the earnings and dividend targets stated at the time of listing.
The solid foundations we have built and the strong pipeline of attractive
investment opportunities mean that the Company is well positioned for further
profitable growth.


The exciting new business leads we have are primarily being generated through
ACP Capital's key SME relationships such as GCI Management AG in Germany and
Leasecom Group SAS in France. We anticipate further SME origination joint
ventures and other initiatives in our key markets which would increase and
diversify origination for ACP Mezzanine. In this respect we intend to announce a
new appointment to the board of ACP Mezzanine who is a leading specialist in the
French SME private equity and mezzanine sectors.


ACP Capital is also in discussion with a series of banks on the provision of new
debt funding to assist ACP Mezzanine in its growth and capture the attractive
prospects highlighted in this release. We see excellent opportunities in the SME
debt markets which we expect will significantly benefit ACP Mezzanine over the
next 24 months."


Director's Review


ACP Mezzanine has performed strongly in its first year of trading, generating
revenue of Euro16.1 million and net income of Euro10.2 million. Diluted earnings per
share for the Period were Euro0.10. The Directors have recommended a total dividend
of Euro0.095 per share, which exceeds the stated target level of Euro0.09 per share by
5.6%. Taking into account payment of an interim dividend of Euro0.045 per share on
23 August 2007, the remaining Euro0.05 per share will be paid on 20 March 2008,
subject to shareholder approval at the Annual General Meeting on 18 March 2008.


As at 31 December 2007, the Company had a total asset base of Euro146 million, made
up of Euro122 million of invested assets and Euro24 million of cash and receivables,
and a net asset value per share of Euro1.02. During the Period, ACP Mezzanine
experienced no credit impairments or losses on its assets. The exposure to
assets in the US has remained limited (approximately 1.5% of net assets), with
no exposure to the US subprime market. The exposure to UK residential mortgages
has remained limited (approximately 2% of net assets).


Importantly, ACP Mezzanine has reached three critical milestones during the
Period:


  * Following the successful raising of its second committed leverage
    facility, ACP Mezzanine sees no short-term funding risks;


  * Transactions such as the potential committed funding line to Leasecom
    Group SAS ("Leasecom") and the pipeline of lending opportunities beginning
    to be generated from companies such as GCI Management AG ("GCI Management":
    GCI.GR), illustrate the origination advantages ACP Mezzanine expects to have
    through its 'preferred lender' status in ACP Capital's strategic origination
    network; and,


  * A trading history with no credit impairments or losses further displays
    ACP Mezzanine's diligent and careful investment process.


In light of the successful performance and its robust pipeline of possible
investments, ACP Mezzanine intends to launch a secondary capital raise,
targeting up to Euro200 million of new equity. Conditional on the completion of
this equity capital raise, ACP Mezzanine expects, subject to shareholder
approval, to change its listing from AIM, a market operated by the London Stock
Exchange, to Euronext Amsterdam. The Company will keep shareholders informed of
any progress in this matter.


Strategic Highlights


In May 2007, ACP Mezzanine raised its second committed leverage facility, which
was provided by Deutsche Bank. The facility amounted to Euro150 million and was
entered into on improved terms over the Company's previous leverage facility.
This facility benefits from lower financing costs, the option of leveraging
unrated assets and extending the maturity from two years to five years. The
previous facility raised in 2006 amounted to Euro125 million and was provided by
The Royal Bank of Scotland. ACP Mezzanine believes it has good relationships
with its lending banks and with its current facility in place foresees no
short-term financing risk or funding constraints. As at 31 December 2007, a
total of Euro53 million of assets were leveraged within the Deutsche Bank leverage
facility, resulting in a conservative overall portfolio leverage on invested
assets of approximately 29%.


During the Period, ACP Mezzanine started to benefit from an increased flow of
investment opportunities generated by ACP Capital's strategic origination
network. In July 2007, ACP Mezzanine provided a debt bridge of Euro75 million for
IFR Capital plc's ("IFR": IFR.LN) acquisition of Homann Chilled Food GmbH. This
unrated mezzanine debt bridge was refinanced in December 2007 and syndicated
into senior and second-lien term facilities on attractive terms, which have
received preliminary ratings (expected to be finalised during the first quarter
of 2008). ACP Mezzanine holds Euro17.5 million of this second lien and Euro22 million
of this senior debt that it over time expects to sell down to a final hold of
Euro15 million of second lien debt. In addition, the Company provided IFR with a
Euro24.1 million preferred equity bridge, which is expected to be repaid in 2008.
Overall, the refinancing allowed more than Euro22 million of cash to be released to
ACP Mezzanine for further investment. The transaction demonstrated the Company's
abilities to act as a direct lender, receiving underwriting fees in addition to
interest income.


ACP Mezzanine also agreed to provide an asset-based facility to Leasecom, ACP
Capital's strategic origination partner in France and the holding company for
France's leading independent IT lease broker. The Euro100 million facility, of
which ACP Mezzanine will fund between Euro10 million and Euro20 million post
syndication to senior lenders, will be supported by an equity first loss
position held by Leasecom and secured on lease assets to be originated by the
leasing company. It is expected that the facility will be increased over time as
the origination capacity of Leasecom increases, and with the addition of new
lending products which ACP Capital intends to develop with Leasecom. This
facility is expected to be the first of a series of funding lines provided to
finance ACP Capital's localised origination platforms.


As a result of its preferred lender status, ACP Mezzanine is currently carrying
out due diligence on a number of smaller lending opportunities to SME companies
originated from GCI Management, a leading SME-focused German private equity
house in which ACP Capital is a strategic investor. The Company expects that
similar opportunities will arise shortly through ACP Capital's network in
France.


The transactions above clearly represent the transition to the next stage of ACP
Mezzanine's growth, in which the Company anticipates benefiting from origination
arising from ACP Capital's European origination companies, leading to growth and
diversification of its portfolio.


Portfolio Highlights


As at 31 December 2007, the Company's portfolio consisted of 18 assets from 12
borrowers, with an average exposure of Euro6.8 million; the largest asset totalling
Euro24.1 million and the smallest asset totalling Euro1.1 million. The largest single
borrower is IFR with a total of Euro63.6 million of principal.


The portfolio structure as at 31 December 2007 is as follows (as percentages of
invested assets):

     Asset Type           Interest Rate           Geography            Currency             Rating

SME Loans      52.1%      Fixed     19.7%      UK         9.4%      EUR      88.9%      BBB      0.0%

Middle-market  3.9%       Floating  80.3%      Germany   52.1%      GBP       9.4%      BB      55.4%
Loans

Leveraged Loan 30.7%                           Other     38.5%      USD       1.7%      B       20.9%
CLO(1)

CDO(2)          7.8%                                                                    CCC      0.0%

RMBS(3)         5.5%                                                                    NR      23.7%

Total           100%       Total     100%       Total     100%       Total    100%       Total   100%

1  Structured portfolio of leveraged loan assets ("Collateralised Loan Obligations")

2  Structured portfolio of debt assets ("Collateralised Debt Obligations")

3  Structured portfolio of residential mortgage assets ("Residential Mortgage
Backed Securitisation")

Portfolio characteristics as at end of the Period:

  * Average asset size:          Euro6.8 million  (31 Dec 2006: Euro7.7 million)
  * Largest asset size:         Euro24.1 million  (31 Dec 2006: Euro40 million)
  * Smallest asset size:         Euro1.1 million  (31 Dec 2006: Euro1.2 million)
  * Largest obligor:            Euro63.6 million  (IFR Capital plc) (31 Dec 2006:
    Euro60 million)


The weighted average unleveraged return of the invested assets at the end of the
Period of Euro122 million was approximately 11.9%, with a weighted average margin
(over EURIBOR/LIBOR) of 7.1% and a weighted average margin net of financing
interest of 6.9%


Financing interest cost on leveraged assets (margin over EURIBOR/LIBOR) was
0.75% at the end of the Period (31 Dec 2006: 1.5%)


The portfolio continued to be leveraged conservatively with a total leverage on
invested assets on balance sheet at the end of the Period amounting to c. 29% -
targeted to increase to a conservative 65%-70% rate on a long-term stabilised
basis


Dividend


The Directors of ACP Mezzanine are satisfied that the Company continues to
outperform its stated targets and recommend a dividend for the second half of
2007 of Euro0.05 per share. Together with the interim dividend of Euro0.045 per share,
the total dividend for 2007 would amount to Euro0.095 per share, representing a
dividend yield of 10.6% to the share price as at 14 February 2008 of Euro0.895 per
share. The dividend is subject to shareholder approval at the Annual General
Meeting to be held on 18 March 2008, and, should it be approved at that meeting,
will be paid on 20 March 2008 to all shareholders on the register at close of
business on 29 February 2008.


Liquidity Analysis


As at 31 December 2007, the Company had Euro15 million of cash. In addition, at
least Euro22 million of unleveraged assets are in the process of being added to the
leverage facility, which, when finalised, will release more than Euro14 million for
further investments. The Company had Euro9.6 million of short-term receivables and
Euro8.3 million of short-term liabilities at the end of the Period. ACP Mezzanine's
ongoing costs are fully covered by the income generated by the Company's assets.


Net Asset Value


The Company's net asset value at 31 December 2007 was equal to Euro1.02 per share.
This compares with net asset value of Euro0.98 per share as at 31 December 2006 and
Euro1.01 per share as at 30 June 2007.


Outlook - overview of origination strategy


As stated at the time of the Company's admission to trading to AIM, ACP
Mezzanine aims to build up over time a diversified portfolio of assets, by such
characteristics as type, rating and geography. ACP Mezzanine would like to take
the opportunity to further clarify its target breakdown on the basis of debt
product / origination source:


SME Lending - Direct Origination


This group of assets are those originated directly by ACP Capital and its
origination platforms and joint ventures such as GCI Management. These will
predominantly include secured non-investment grade leveraged loans, both senior
and mezzanine, although other assets such as preferred equity will be considered
where there are compelling investment opportunities. As ACP Mezzanine would
normally be the sole lender, these assets would not typically be rated by
external agencies. Revenue from these assets would primarily be upfront
underwriting fees and ongoing interest income.


Committed Funding Lines


Committed Funding Lines are debt lines provided by ACP Mezzanine to companies
such as Leasecom in order to finance the latter's ongoing balance sheet lending,
such as in the transaction with Leasecom. It is envisaged that ACP Mezzanine
would provide the whole funding line where the borrower provides a first loss
equity position and the senior debt portions are syndicated out. These debt
lines will typically be rated on a structured portfolio basis. Revenue from
these assets would primarily be upfront underwriting fees, interest income on
the drawn advances and commitment fees on the undrawn portions of the facility.


Underwriting


Where ACP Mezzanine has underwritten a comparatively larger debt position with
the intention of syndicating a portion to other lenders in order to achieve its
desired final holding, the portion to be syndicated is included within this
category. ACP Mezzanine may decide to have an asset in this category rated by an
external agency in order to facilitate syndication or when recommended by its
investment committee. Revenue from these assets would primarily include net
underwriting fees (total underwriting fees less any amounts paid to syndicate
investors) and interest income incurred for the underwriting period.


Market Purchases


Assets that fall under 'Market Purchase' comprise of leveraged loans, bonds and
other sub-investment grade facilities purchased as part of primary syndication
or by way of secondary market purchase. Such assets often possess a public or
private rating from Moody's, S&P and / or Fitch. These assets are acquired on an
opportunistic basis in order to adjust the portfolio or where relative value is
deemed attractive. Revenue from the assets would primarily be interest income.


Enquiries:


Rob Bailhache & Nick Henderson, Financial Dynamics        [phone]
(Media Relations)

Sacha Macintosh, ACP Capital UK LLP                       [phone]

Chris Wells, Stewart Wallace, Collins Stewart             [phone]



For further information on ACP Mezzanine, please visit www.acpcapital.com.


Analyst Presentation


There will be an analyst presentation to discuss the results at 9:30 am on 18
February 2008 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings,
WC2A 1PB.


Those analysts wishing to attend or to register to dial-in on the conference
call are asked to contact Rob Bailhache / Nick Henderson at Financial Dynamics
on [phone] / [phone] or at [e-mail] /
[e-mail].


About ACP Mezzanine


ACP Mezzanine Limited (LSE AIM: ACPM) is a Jersey-incorporated, closed ended
investment company listed on AIM. It is a provider of sub-investment grade
finance to European small and mid-sized enterprises - with a primary focus on
the UK, France, Germany and Italy - originating, structuring and underwriting
the majority of its investments through ACP Capital Limited ("ACP Capital":
APL.LN) and ACP Capital's European network. ACP Mezzanine aims to optimise
risk-adjusted returns by actively managing its portfolio and to distribute at
least 85% of profits as dividends. ACP Capital Limited owns 47% of ACP Mezzanine
and, through a subsidiary, acts as its investment manager.


Fundamental changes in the market, such as Basel II, are expected to accelerate
demand for alternatives to traditional bank financing in these segments. As a
non-regulated lender, ACP Mezzanine is not affected by Basel II. In line with
its strategy, ACP Mezzanine has a small exposure to the retail mortgage backed
securities sector as well as an anticipated negligible exposure to the US
(expected to be limited to certain US infrastructure assets).


By taking control of a majority of the underwriting process through ACP
Capital's investment manager, ACP Mezzanine benefits from a diversified flow of
assets whilst ensuring a risk-balanced growth.


By the end of 2009, the Company intends to have Euro550 million of assets under
management and looks set to achieve its target balance sheet mix as stated in
its admission document.


                         Consolidated Income Statement


                                                                                            Audited
                                                                  Unaudited             31 May 2006 to
                                                               Year Ending 2007        31 December 2006

Revenue                                                               Euro                        Euro

Investment income                                                     13,489,908                 3,035,995
Loss on disposal of loans and receivables                                (6,250)                         -
Fee income                                                             2,596,892                     2,885
                                                                      16,080,550                 3,038,880

Interest payable and other related financing costs                   (2,798,202)                  (67,401)
Exchange movements                                                     (809,032)                  (42,398)
Equity-settled share-based payments                                     (64,569)                  (41,069)
Investment manager's fees                                            (1,942,767)                 (753,460)
Other operating expenses                                               (252,109)                  (96,838)
Profit before tax                                                     10,213,871                 2,037,714
Income taxes                                                                   -                         -
Profit for the period attributable to the equity                      10,213,871                 2,037,714
shareholders


Earnings per share
Basic (Euro cents)                                                         10.07                      2.01
Diluted (Euro cents)                                                        9.98                      1.99


All activities relate to continuing operations

There are no recognised gains and losses other than the profit for the period stated above. Accordingly,
a separate consolidated statement of recognised income and expense is not presented in these financial
statements.



                           Consolidated Balance Sheet


                                                         Unaudited                        Audited
                                                       Year Ending 2007              31 December 2006

Assets                                                       Euro                               Euro
Non-current assets
Investments measured at fair value through                       63,018,969                              -
profit or loss
Loans and receivables                                            58,728,562                    107,522,875

                                                                121,747,531                    107,522,875

Current assets

Investments measured at fair value through                          538,460                              -
profit or loss
Trade and other receivables                                       9,025,040                      1,507,980
Cash and cash equivalents                                        15,157,208                     15,798,227
Total current assets                                             24,720,708                     17,306,207

Total assets                                                    146,468,239                    124,829,082

Equity & Reserves

Issued capital                                                            -                              -
Share premium                                                    95,783,580                     95,783,580
Share-based payment reserve                                       1,767,142                      1,781,071
Retained earnings                                               5,738,303                        2,037,714

Equity Shareholders'  funds                                     103,289,025                     99,602,365

Non-current liabilities
Loans and borrowings                                             34,854,559                     19,265,934
Total non-current liabilities                                    34,854,559                     19,265,934

Current liabilities
Trade and other payables                                          8,324,655                      5,960,783
Total current liabilities                                         8,324,655                      5,960,783

Total liabilities                                                43,179,214                     25,226,717

Total equity and liabilities                                    146,468,239                    124,829,082




                        Consolidated Cash Flow Statement


                                                                                           Audited
                                                      Unaudited                         31 May 2006 to
                                                    Year Ending 2007                   31 December 2006

Cash flow                                                 Euro                                   Euro

Opening cash and cash equivalents                            15,798,227                                   -

Cash flow from operating activities
New lending / investments                                 (132,820,420)                       (101,850,248)
Sale / repayment of investments                             103,981,379                                   -
Investment income                                            13,345,397                           1,566,230
Fee income                                                    2,596,841                                   -
Investment manager's fee                                    (1,895,833)                           (607,627)
Other operating expenses                                      (194,676)                            (57,246)

Net cash flow from operations                              (14,987,312)                       (100,948,891)

Cash flow from financing activities
Proceeds from issues of share                                         -                         100,000,000
capital
Costs of issues of share capital                                      -                         (2,476,418)
Repayment of financing                                     (21,024,486)                                   -
Interest paid and other related financing                   (2,476,676)                                   -
costs
Net drawdown of financing                                    44,664,837                          19,265,934
facilities
Dividend                                                    (6,591,780)                                   -
Net cash flow from financing activities                      14,571,895                         116,789,516

Effect of exchange rate                                       (225,602)                            (42,398)
fluctuations
Closing cash and cash equivalents                            15,157,208                          15,798,227





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