The Venture Capital Partnership

1
The Venture Capital Partnership In The New
Economy Hong Kong Convention and Exhibition
Centre October 26, 2000
2
Enhancing Venture Capital Investment Through
Leverage by Johannes Schöter Managing
Partner Victoria Capital Limited
3

• Importance of leverage in private equity
  transactions in the US and Europe

4

• Lack of long term debt available in Asia
• because

- cashflow based lending at early stage - bond
markets undeveloped - difficult country risks
5

• What is possible in Asia?

- Long term debt available for companies with
strong and sustainable cashflows - Tenor 5 - 12
years - Local security plus guarantee of holding
company - No guarantee of financial investor
6

• Difficult country risks accepted, e.g.

China Thailand Philippines Indonesia Banglade
sh
7

• Senior loans
• Mezzanine
• Combination

8
Examples

• USD 20 mio senior loan for industrial tree
  plantations in China

- Final maturity 10 years - 5 years grace period
- LIBOR 350 bps
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Examples

• USD 18 mio senior loan for light industrial
  manufacturer
• - financing expansion in China, Bangladesh
• and Sri Lanka

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Examples

• USD 5 mio convertible loan for refinancing short
  term liabilities of a manufacturer

- conversion price 100 step up over financial
investors entry price
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Advantages

• Leverage IRR

• Tap additional financial resources