Citadel Capital to preserve cash for two years

26 July 2011

Egyptian company awaits approval of rights issue to raise capital

Citadel Capital, an Egyptian-based private equity firm is holding onto its investments amid a period of cash preservation.

“We see the next 24 months as a challenging period, now is not the time to sell businesses,” says Stephen Murphy, managing director of Citadel Capital.

The company, which is waiting to raise a rights issue of 210 million shares worth $175m, has been hard hit by the Egyptian revolution. It reported a net loss of $4.5m for the first quarter of 2011, compared to a net profit of $0.25m in the same period last year.

It postponed an initial public offering (IPO) for Taqa Arabia, an electricity and natural gas distributor.

“The Taqa Arabia IPO has been pushed to sometime next year. When you have IPOs you have to make sure the market is ready. Today it is not, there is a potential next year if the political clouds have been lifted,” says Murphy.

The company was looking to float on the Egyptian Exchange at some point this year. Citadel Capital seems to have ruled out other stock exchanges as the business is very Egypt-centric, according to Murphy.

The company is experiencing a gradual overall shift to investments outside of Egypt and further into sub-Saharan Africa.

“There are interesting export opportunities like glass and rock insulation material that we can take advantage of and we may also pursue add-on investment opportunities for existing platform and portfolio companies,” says Murphy.  

An extraordinary general meeting will be held on 3 August to approve the rights issue. Murphy is confident it will gain the approval of its shareholders as the management team owns a third of the company. The process is expected to be completed toward the end of September.

The partners are committing $55m to the rights issue.

The money will be used for debt repayment, investments in equity funds, expansion projects and general working capital.

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