“The availability of credit is the major 'known-unknown' for 2008. Whether there are more balance sheet adjustments required within the financial services industry, only time will tell. Credit will continue to be squeezed, regardless of the movement in interest rates, as banks take a more cautious longer term views of risk.
The knock on effect of this for private equity is both good and bad. Asset prices should begin to normalise and capital intensive industries that require debt to fund growth will look at capital outsourcing as an alternative to high cost debt. This in turn will make such industries more efficient and firms like Star Capital will be able to provide the catalyst for this trend.
Investing in a potential downturn is not an activity for the faint hearted – both timing and skill are essential if you are to catch the falling knife by the handle. However, we believe that when it comes to 2012, 2008 and 2009 may well be viewed as vintage years for those with the right investment strategy.” Tony Mallin, chief executive, Star Capital Partners
2007 was a relatively quiet year for Star Capital Partners, the buyout firm which focuses on capital intensive businesses. It started the year with the sale of SMIF, the Secondary Market Infrastructure Fund.
Following three years of significant growth, SMIF had built a portfolio of interests in 80 projects, including the British Embassy in Berlin and the M40 motorway in the UK. In addition, it established an asset management division to monitor and drive value from the underlying portfolio. The business was sold to Land Securities Trillium in February 2007 for £927 million.
Star acquired GECAT and SAS FLight Academy, airline pilot training companies, which it followed with the purchase of Oxford Aviation.
Mallin's second fund is only 15 percent deployed and the firm is biding its time, waiting for inflated asset prices to normalise.