JZ Capital Ptnrs Ltd Q1 2017 Interim Management Statement

 
TIDMJZCP TIDMJZCC TIDMJZCN 
 
JZ CAPITAL PARTNERS LIMITED 
(a closed-end investment company incorporated with limited liability under the 
                laws of Guernsey with registered number 48761) 
 
                      Q1 2017 Interim Management Statement 
                                 29 June 2017 
 
JZ Capital Partners Limited (LSE: JZCP.L, the "Company" or "JZCP"), the London 
listed fund that invests in US and European micro-cap companies and US real 
estate, today releases its Interim Management Statement for the period 1 March 
2017 to 31 May 2017. 
 
Results Highlights 
 
  * Net Asset Value ("NAV") of $833.3 million (28/02/17: $848.8 million) 
  * NAV per share of $9.93 (28/02/17: $10.12) 
  * $43.9 million invested during the period, including: 
      + $12.0 million invested in new co-investment Felix Storch 
      + $4.5 million follow-on investment in Jordan Health Products 
      + $1.2 million net investment in Reflective Apparel Factory ("RAF"), a 
        Technical Services and Solutions ("TSS") vertical add-on acquisition 
  * $16.3 million realised, including: 
      + $12.5 million from the first tranche of proceeds for Fidor Bank 
  * At the end of the period, the portfolio consisted of 34 micro-cap 
    investments across nine industries and four major real estate "assemblages" 
    (59 total properties) located in New York and South Florida 
 
Strategic Initiatives 
 
  * In May 2017, JZCP received shareholder approval for certain initiatives 
    designed to maximize shareholder returns, including the discontinuation of 
    the Company's current dividend policy and inception of a new strategy to 
    allow for the repurchase of shares 
  * In April 2017, JZCP increased its loan facility with Guggenheim Partners 
    from approximately $100 million to $150 million in order to provide 
    additional liquidity to JZCP in order to bridge certain planned 
    realisations. The entire $150 million facility may be repaid, in whole or 
    in part, with no penalty after June 2017 
 
David Zalaznick, Founder and Investment Advisor of JZCP said: "Despite the 
challenging market environment, the strength of our balance sheet has again 
allowed us to put money to work across the US and European micro-cap and US 
real estate sectors. 
 
We continue to believe that the US market presents a number of potential 
realisation opportunities for the Company and we remain confident in the 
outlook for our diversified portfolio." 
 
Net Asset Value 
 
NAV per share for the quarter decreased from $10.12 to $9.93, or 1.9%. 
 
 
NAV Returns 
 
Net Asset Value per Ordinary Share as of 1 March 2017               $10.12 
 
Change in NAV per share due to capital gains and income received / accrued 
on investments 
 
US Micro-cap                                                          0.03 
 
European Micro-cap                                                  (0.05) 
 
Real Estate                                                         (0.06) 
 
Other Investment                                                    (0.06) 
 
Other changes in NAV per share 
 
Change in CULS Fair Value                                           (0.01) 
 
Finance Costs                                                       (0.06) 
 
Foreign Exchange Effect                                               0.08 
 
Expenses and Taxation                                               (0.04) 
 
Net Asset Value per Ordinary Share as of 31 May 2017                 $9.93 
 
The US micro-cap portfolio had a net increase of 3 cents, primarily due to net 
accrued income of 5 cents and write-ups at our healthcare revenue cycle 
management vertical (2 cents) and logistics vertical (1 cent). Jordan Health 
Products was also written up 2 cents. An escrow payment related to our exited 
co-investment Medplast added 1 cent. Offsetting these uplifts in valuation were 
decreases in value at our legacy Nationwide Studios business (1 cent) and our 
ISS vertical (9 cents). 
 
The European micro-cap portfolio had a net decrease of 5 cents, primarily due 
to 1cent of accrued income offset by a 6 cent write-down at Factor 
Energia. 
 
The real estate portfolio had a net decrease of 6 cents, primarily due to 
estimates of debt service, operating costs and other expenses at the property 
level. 
 
Finally, our other investments had a net decrease of 6 cents, primarily due to 
a write-down at Spruceview (6 cents). 
 
The chart below summarises the cumulative total NAV returns and total 
shareholder returns for the most recent three-month, twelve-month, three-year 
and five-year period. 
 
                                          Since 28/ Since 31/ Since 31/ Since 31/ 
                                 31/05/17     02/17     05/16     05/14     05/12 
 
Share price (in GBP)                GBP5.66     GBP5.38     GBP3.90     GBP4.41     GBP3.68 
 
Dividends paid (in USD)                 -         -     $0.16     $0.79     $1.57 
 
Total Shareholders' return              -      5.2%     48.9%     45.3%     95.0% 
(GBP)1 
 
NAV per share (in USD)              $9.93    $10.12    $10.32    $10.08     $9.38 
 
NAV per share total returns1            -    (1.9)%    (2.3)%      6.5%     24.2% 
 
NAV to market price discount          26%       34%       45%       27%       40% 
 
______________ 
 
 1. Total returns are cumulative and assume that dividends were reinvested 
 
RECENT ACTIVITIES 
 
 
Significant Investments and Realisations 
 
US Micro-cap Investments - Verticals 
 
TSS Vertical (formerly known as 'testing' vertical) 
 
In May 2017, JZCP invested $1.2 million (investment net of proceeds from 
refinancing the entire testing vertical) to acquire RAF, which produces 
high-end reflective apparel purchased by transportation, municipal, 
construction and industrial customers. 
 
US Micro-cap Investments - Co-investments 
 
In March 2017, JZCP invested a further $4.5 million in Jordan Health Products, 
to fund the acquisition of Transtate, a business which sells, services, repairs 
and installs refurbished medical imaging equipment, specializing in catheter 
angiography equipment. 
 
Also in March 2017, JZCP invested $12.0 million in Felix Storch, a business 
that manufactures and distributes specialty refrigeration products and 
appliances. 
 
European Micro-cap Investments 
 
In April and May 2017, JZCP made three short-term loans to EuroMicrocap Fund-B, 
L.P., totalling $5.4 million, to bridge investments in Docout, Ombuds and One 
World Packaging. 
 
We expect these loans to be paid back before their stated maturity dates of 31 
July 2017. 
 
Real Estate Investments 
 
In the three-month period ended 31 May 2017, JZCP invested a total of $10.4 
million in follow-on investments in our Williamsburg Retail, Design District 
and Greenpoint properties. 
 
Realisations 
 
JZCP sold its interest in Fidor Bank ("Fidor") to Groupe BPCE, the second 
largest banking group in France. The transaction closed in December 2016. JZCP 
invested a total of $13.8 million and is expected to receive total gross 
proceeds of approximately $25 million from the sale. JZCP received its first 
tranche of proceeds totalling $12.5 million in March 2017. 
 
 
 
PORTFOLIO SUMMARY 
 
At 31 May 2017, the Company's portfolio consisted of 34 micro-cap investments 
across nine major industries and four major real estate "assemblages" (59 total 
properties) located in New York and South Florida. 
 
($'000)                               At 31/05/17   At 28/02/17 % Gross Assets 31/ 
                                                                             05/17 
 
US Micro-cap Portfolio                    442,147       424,502              38.9% 
 
European Micro-cap Portfolio              162,183       154,277              14.2% 
 
Real Estate Portfolio                     474,758       468,599              41.7% 
 
Other Portfolio                            15,844        21,802               1.4% 
 
Total Private Investments               1,094,932     1,069,180              96.2% 
 
Cash                                       42,262        29,064               3.7% 
 
Total Investments (and Cash)            1,137,194     1,098,244              99.9% 
 
Other Current Assets                          596           511               0.1% 
 
Total Investments (and Cash)            1,137,790     1,098,755             100.0% 
 
At 31 May 2017, 3.7% of gross assets were invested in "liquid" assets (cash). 
The remaining portion of the portfolio was invested in private investments in 
US or European micro-cap companies or real estate.  These investments are 
valued at fair value by JZCP's directors each quarter. 
 
We value our privately held businesses carefully. Our average multiple used for 
our US micro-cap businesses is 8.2x trailing EBITDA.  In addition, we do not 
have substantial debt in these businesses. The multiple of debt senior to 
JZCP's position is approximately 3.4x EBITDA. 
 
 
 
Top Ten Investments 
 
Our ten largest investments as of 31 May 2017 are summarised below: 
 
($000's)                                     Asset          Valuation       % Gross 
                                            Category         31/05/17        Assets 
                                                                           31/05/17 
 
Design District Assemblage                Real Estate         100,570          8.8% 
 
Industrial Services Solutions Vertical         US              77,653          6.8% 
 
Greenpoint                                Real Estate          75,524          6.6% 
 
Healthcare Rev. Cycle Management Vertical      US              70,273          6.2% 
 
Williamsburg Retail                       Real Estate          68,718          6.0% 
 
Fulton Assemblage                         Real Estate          62,011          5.5% 
 
EuroMicrocap Fund-C, L.P.                   European           61,077          5.4% 
 
TierPoint                                      US              46,813          4.1% 
 
Jordan Health Products                         US              37,354          3.3% 
 
RedBridge                                 Real Estate          36,445          3.2% 
 

Top Ten Investments                                           636,438         55.9% 
 
Remaining Assets                                              501,352         44.1% 
 
Gross Assets                                                1,137,790        100.0% 
 
 
 
Balance Sheet 
 
Below is a summary of JZCP's balance sheet as of the relevant dates: 
 
($000's)                                              31/05/17         28/02/17 
 
Cash and cash equivalents                               42,262           29,064 
 
Investments & other assets                           1,095,528        1,069,691 
 
(-) Other net liabilities                            (247,780)        (195,976) 
 
(-) ZDPs due 2022                                     (56,669)         (53,935) 
 
Net Asset Value                                        833,341          848,844 
 
At 31 May 2017, "other net liabilities" includes $60.2 million from the 
issuance of Convertible Unsecured Loan Stock ("CULS") in July 2014, which 
carries an interest rate of 6%, and $147.6 million from a six-year term loan 
with Guggenheim Partners, which carries an interest rate of LIBOR plus 5.75%. 
 
 
For Further Information: 
 
Ed Berry / Kit Dunford                                                   +44 
(0) 20 3727 1046 / 1143 
FTI Consulting 
 
David Zalaznick                                                            +1 
212 485 9410 
Jordan/Zalaznick Advisers, Inc. 
 
Teresa Le Couteur-Tembo                                             +44 (0) 
1481 745741 
JZ Capital Partners, Ltd. 
 
 
About JZCP 
 
JZCP is a London listed fund which invests in US and European micro-cap 
companies and US real estate. Its objective is to achieve an overall return 
comprised of a current yield and capital appreciation. JZCP receives investment 
advice from Jordan/Zalaznick Advisers, Inc. ("JZAI") which is led by David 
Zalaznick and Jay Jordan. They have worked together for 30 years and are 
supported by teams of investment professionals in New York, Chicago, London and 
Madrid. JZAI's experts work with the existing management of micro-cap companies 
to help build better businesses, create value and deliver strong returns for 
investors. JZCP also invests in mezzanine loans, first and second lien 
investments and other publicly traded securities. For more information please 
visit www.jzcp.com. 
 
 
 
END 
 

(END) Dow Jones Newswires

June 29, 2017 02:00 ET (06:00 GMT)