Dear Shareholders,
I would like to inform you first-hand about the negotiated financing solution for Private Equity Holding AG:
Over the recent months Private Equity Holding (PEH) was engaged in intensive negotiations with Swiss Life and other interested parties regarding its long-term refinancing. As a consequence of the market developments and the high unfunded capital commitments a timely and comprehensive solution was called for in order to prevent the impending threat of illiquidity. In the context of a comprehensive appraisal procedure a range of different alternatives were evaluated. The proposals included the total sale of the portfolio with a subsequent liquidation of the company, the replacement of the financing partner and a simultaneous transfer of the management agreement, or a partial sale of the portfolio. The Board of Directors considered most offers not to be in the best interests of the company and its shareholders. The chosen solution consists of a partial sale of the investment portfolio, conserving the largest possible value of the company and significantly reducing the risks to its shareholders.
A private equity fund managed by Credit Suisse First Boston (CSFB) will take over investments from PEH with a total fair value as of March 31, 2003 of CHF 616 million and outstanding commitments amounting to CHF 305 million. The fair value of the remaining portfolio of PEH amounts to CHF 268 million. Through this transaction the fair value per share is reduced from CHF 131.70 (as of March 31, 2003) to approx. CHF 60 (pro forma as of March 31, 2003). The new PEH portfolio comprises primarily venture funds (approx. 60%) and direct investments (approx. 25%) with the share of balanced and buyout funds amounting to approx. 15%. The unfunded commitments, which will be financed with distributions from the portfolio and credit facilities, were reduced by more than 80% to CHF 59 million. Furthermore PEH is granted an earn-out to share in future net distributions, above defined hurdles, originating from the qualitatively best part of the portfolio sold to the CSFB-fund. The value of this earn-out right depends on future market developments and is not included in the pro forma fair value per share of approx. CHF 60.
Swiss Life Private Equity Partners will continue to manage the remaining investment portfolio of Private Equity Holding.
The outstanding loan from Swiss Life amounting to CHF 325 million will be repaid in full by PEH. To facilitate the financing of this transaction Swiss Life grants a secured and highly rated loan of CHF 150 million for four years to the CSFB-fund.
The Board of Directors of Private Equity Holding will propose to the Annual General Meeting on August 26, 2003, to book the accumulated deficit against the share capital premium and to reduce the nominal value of the shares of Private Equity Holding. As announced previously, Private Equity Holding will announce its annual results 2002/03 on May 27, 2003, and will hold a press conference the same day.
Private Equity Holding regained financial health and the necessary managerial freedom by means of the complete debt redemption and the massive reduction in capital commitments.
I thank you for the confidence you have placed in us.
Marinus W. Keijzer
Chairman and Delegate of the Board of Directors