JZ Capital Ptnrs Ltd Q1 2018 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 2018 Interim Management Statement 
                                 27 June 2018 
 
LEI: 549300TZCK08Q16HHU44 
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1) 
 
JZ Capital Partners Limited (LSE: JZCP.L, the "Company" or "JZCP"), the London 
listed fund that selectively invests in US and European micro-cap companies and 
US real estate, today releases its Interim Management Statement for the period 
1 March 2018 to 31 May 2018. 
 
Results Highlights 
 
  * Net Asset Value ("NAV") of $819.2 million (28/02/18: $837.6 million) 
  * NAV per share of $9.78, a decrease of 2.0% for the quarter (28/02/18: 
    $9.98) 
  * $84.1 million invested during the period, including: 
      + $10.0 million in a new Flexible Packaging vertical, through the 
        acquisitions of Phoenix Converting and Valley Packaging Supply 
      + $9.1 million invested in the Testing Services vertical, $15.1 million 
        invested in the ISS vertical and $4.3 million invested in K2 Towers II 
      + $20.4 million in follow-on real estate investments in our Williamsburg, 
        Greenpoint, Fulton, Design District and Wynwood assemblages 
  * $124.1 million realised, including: 
      + $105.7 million from the sale of Bolder Healthcare Solutions (a further 
        c.$4.2 million in proceeds is expected) 
      + $15.7 million from Paragon Water Systems (a further c.$0.5 million in 
        proceeds is expected) 
  * $1.3 million used to buy back a total of 188,685 shares. A further $4.1 
    million used to buy back an additional 636,489 shares, post-period end 
    (June 2018) 
  * At the end of the period, the portfolio consisted of 38 micro-cap 
    investments across nine industries and five major real estate "assemblages" 
    (59 total properties) located in New York and South Florida 
 
David Zalaznick, Founder and Investment Advisor of JZCP said: "We made good 
progress with our realization program at or above NAV during the period. The 
uplifts were again offset by pre-development and carrying costs in our real 
estate portfolio but we expect these will decline going forward when we take in 
outside investors into the development projects. The acceleration of our 
buyback program further underlines the Board's confidence in the future 
prospects of the Company." 
 
Net Asset Value 
 
NAV per share for the quarter decreased from $9.98 to $9.78, or 2.0%. 
 
NAV Returns 
 
Net Asset Value per Ordinary Share as of 1 March 2018                        $9.98 
 
Change in NAV per share due to capital gains and income received / accrued on 
investments 
 
US Micro-cap                                                                  0.02 
 
European Micro-cap                                                            0.03 
 
Real Estate                                                                 (0.17) 
 
Other changes in NAV per share 
 
Change in CULS Fair Value                                                     0.01 
 
Finance Costs                                                               (0.07) 
 
Foreign Exchange Effect                                                     (0.01) 
 
Expenses and Taxation                                                       (0.02) 
 
Appreciation from Share Buyback                                               0.01 
 
Net Asset Value per Ordinary Share as of 31 May 2018                         $9.78 
 
The US micro-cap portfolio had a net increase of 2 cents, primarily due to 
write-ups at our Felix Storch investment (6 cents), our Water vertical (3 
cents) and net accrued income of 5 cents. These increases were offset by 
write-downs at our ISS vertical (6 cents) and Nationwide investment (5 cents). 
 
The European micro-cap portfolio had a net increase of 3 cents, primarily due 
to accrued income. 
 
The real estate portfolio had a net decrease of 17 cents, primarily due to 
pre-development operating expenses and debt service. 
 
The chart below summarizes the cumulative total NAV returns and total 
shareholder returns for the most recent three-month, twelve-month, three-year 
and five-year period. 
 
                                31/05/18   28/02/18   31/05/17  31/05/15  31/05/13 
 
Share price (in GBP)                GBP4.64      GBP4.51      GBP5.66     GBP4.55     GBP4.89 
 
NAV per share (in USD)              $9.78      $9.98      $9.93    $10.69     $9.90 
 
NAV to market price discount          37%        38%        26%       35%       25% 
 
                                           3 month    12 month   3 year    5 year 
                                            return     return    return    return 
 
Dividends paid (in USD)                 -          -          -     $0.47     $1.25 
 
Total Shareholders' return              -       2.9%    (18.0)%     10.2%     14.1% 
(GBP)1 
 
Total NAV return per share              -     (2.0)%     (1.5)%    (4.3)%     11.9% 
(USD)1 
 
______________ 
 
 1. Total returns are cumulative and assume that dividends were reinvested 
 
RECENT ACTIVITIES 
 
 
Share Buybacks 
 
In JZCP's first fiscal quarter of 2018, we began to buy back our stock at a 
significant discount and plan to continue doing so as it represents an 
excellent investment opportunity for the Company. 
 
In the three-month period ended 31 May 2018, JZCP invested approximately $1.3 
million to repurchase a total of 188,685 of its ordinary shares. 
 
Post-period (June 2018), JZCP has repurchased a further 636,489 of its ordinary 
shares. 
 
Significant Investments and Realizations 
 
US Micro-cap Investments - Verticals 
 
In May 2018, JZCP invested approximately $10 million in a new Flexible 
Packaging vertical, which was used to make the first two acquisitions into the 
vertical: Phoenix Converting and Valley Packaging Supply. The initial focus of 
our strategic build-up is niche film and pouch packaging conversion businesses. 
We have targeted companies specializing in shorter-run, complex pouch packaging 
conversion, a growing segment of the market that is currently underserved and 
remains highly fragmented. In time, we hope to incorporate additional product 
and service adjacencies, which could include co-packing, shrink sleeve, label 
and lidding and other flexible packaging formats serving the same customer base 
and benefitting from the same demand drivers. 
 
In April 2018, JZCP invested approximately $15.1 million in its Industrial 
Services Solutions ("ISS") vertical, primarily to pay down a line of credit 
with a third-party lender which had been used to make four acquisitions into 
the vertical in 2016 (PTI, Buna, CPL, IPEC). 
 
In March 2018, JZCP invested approximately $9.1 million in Tech Safety, the 
first acquisition into the newly established Contamination Control and 
Certification ("CCC") sub vertical of our Testing Services build-up. Via the 
CCC sub vertical, we intend to acquire companies that provide comprehensive 
testing, certification and validation services for cleanroom, critical 
environments and containment systems. 
 
Co-investments 
 
In March 2018, JZCP invested a further approximately $4.2 million in K2 Towers 
II, a portfolio of cell tower assets across the United States. 
 
Other US Micro-cap Investments 
 
In March 2018, JZCP invested a further approximately $3.5 million in Avante 
(formerly known as Jordan Health Products), to acquire EMS, a business which 
sells, services, and installs refurbished medical imaging equipment, 
specializing in MRI and CT equipment. 
 
Real Estate Investments 
 
In the three-month period ended 31 May 2018, JZCP invested a total of $20.4 
million in follow-on investments in our Williamsburg, Greenpoint, Fulton, 
Design District and Wynwood assemblages. 
 
Realizations 
 
Paragon Water Systems 
 
In March 2018, Paragon was acquired by Culligan Water, the world leader in 
residential, office, commercial and industrial water treatment. 
 
Founded in 1988 and headquartered in Tampa, Florida, Paragon develops and 
produces "point-of-use" water filtration products for leading global Original 
Equipment Manufacturer ("OEM") clients, big brand suppliers to specialty and 
big box retailers, direct sales organisations and companies with national or 
international water filtration dealership networks. 
 
JZCP expects to realise approximately $16.2 million in gross proceeds 
(including escrows) from the sale, representing an increase of approximately 
$3.7 million, or 29.6% on the carrying value of Paragon of approximately $12.5 
million as of 31 January 2018. This transaction represents a gross multiple of 
invested capital ("MOIC") of approximately 1.8x and a gross internal rate of 
return ("IRR") of approximately 18.4%. 
 
Bolder Healthcare Solutions 
 
In March 2018, BHS was acquired by a subsidiary of Cognizant, one of the 
world's leading professional services companies. 
 
Headquartered in Louisville, Kentucky, BHS offers a full suite of healthcare 
revenue cycle management services to the hospital and physician marketplace in 
the United States. BHS was formed through a co-investment partnership between 
JZCP and the Edgewater Funds. 
 
JZCP will realise approximately $110.0 million in gross proceeds from this sale 
(including escrows), which represents an increase in NAV of approximately $37.1 
million, or 4.5% of NAV, as of January 31, 2018. 
 
PORTFOLIO SUMMARY 
 
At 31 May 2018, the Company's portfolio consisted of 38 micro-cap investments 
across nine major industries and five major real estate "assemblages" (59 total 
properties) located in New York and South Florida. 
 
($'000) 
                                    At 31/05/18   At 28/02/18   % Gross Assets 31/ 
                                                                05/18 
 
US Micro-cap Portfolio                    409,911       488,258              36.3% 
 
European Micro-cap Portfolio              116,310       103,457              10.3% 
 

Real Estate Portfolio                     469,096       463,391              41.6% 
 
Other Portfolio                            16,302        16,897               1.4% 
 
Total Private Investments               1,010,619     1,072,003              89.6% 
 
Cash and Liquid Investments               112,269        83,962              10.0% 
 
Total Investments (and Cash)            1,123,888     1,155,965              99.6% 
 
Other Current Assets                        5,011           507               0.4% 
 
Total Investments (and Cash)            1,128,899     1,156,472             100.0% 
 
At 31 May 2018, 10.0% 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. Our micro-cap investments 
are valued at fair value by JZCP's directors each quarter whereas our real 
estate portfolio is valued at least annually and based upon third party 
appraisals, generally done prior to JZCP's fiscal year end. 
 
We value our privately held businesses cautiously. Our average multiple used 
for our US micro-cap businesses is 8.3x trailing EBITDA.  In addition, we do 
not have substantial debt in these businesses. The multiple of debt senior to 
JZCP's position is approximately 3.6x EBITDA. 
 
Top Ten Investments 
 
Our ten largest investments as of 31 May 2018 are summarized below: 
 
($000's)                                 Asset       Valuation      % Gross 
                                       Category       31/05/18      Assets 
                                                                   31/05/18 
 
Design District Assemblage            Real Estate        93,660         8.3% 
 
Industrial Services Solutions             US             89,454         7.9% 
Vertical 
 
Fulton Assemblage                     Real Estate        69,323         6.1% 
 
Williamsburg Retail Assemblage        Real Estate        66,817         5.9% 
 
Greenpoint                            Real Estate        64,573         5.7% 
 
TierPoint                                 US             46,813         4.2% 
 
Avante.                                   US             37,098         3.3% 
 
Roebling                              Real Estate        31,588         2.8% 
 
Redbridge                             Real Estate        30,462         2.7% 
 
Esperante                             Real Estate        29,688         2.6% 
 
Top Ten Investments                                     559,476        49.5% 
 
Remaining Assets                                        569,423        50.5% 
 
Gross Assets                                          1,128,899       100.0% 
 
Balance Sheet 
 
Below is a summary of JZCP's balance sheet as of the relevant dates: 
 
($000's)                               31/05/18      28/02/18 
 
Cash and cash equivalents            112,269       83,962 
 
Investments & other assets           1,016,630     1,072,510 
 
(-) Other net liabilities            (248,253)     (256,056) 
 
(-) ZDPs due 2022                    (61,467)      (62,843) 
 
Net Asset Value                      819,179       837,573 
 
At 31 May 2018, "other net liabilities" includes $56.9 million from the 
issuance of Convertible Unsecured Loan Stock ("CULS") in July 2014, which 
carries an interest rate of 6%, and $149.4 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. 
 
Paul 
Ford 
[phone] 
JZ Capital Partners Limited 
 
About JZCP 
 
JZ Capital Partners ("JZCP") is one of the oldest closed-end investment 
companies listed on the London Stock Exchange. It seeks to provide shareholders 
with a return by investing selectively in US and European microcap companies 
and US real estate. JZCP receives investment advice from Jordan/Zalaznick 
Advisers, Inc. ("JZAI") which is led by David Zalaznick and Jay Jordan. They 
have worked together for more than 35 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. For 
more information please visit www.jzcp.com. 
 
 
 
END 
 

(END) Dow Jones Newswires

June 27, 2018 02:00 ET (06:00 GMT)