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Adding Value

Kartesia's fast response to Covid

At the start of this year, no one could have predicted the onset of COVID-19 and the unprecedented impact it would have by shutting down European economies practically overnight. Like many, Kartesia acted quickly once it became apparent what necessary societal action would be needed to protect the health and lives of the most vulnerable, as well as to provide required continuity of production and service by ourselves, and many of our portfolio companies, some of which became instrumental in providing resource to fight the pandemic.

 

Preserving our employees & minimizing disruptions

In the early stages of the outbreak, we immediately reviewed our ability to preserve our employees’ health while ensuring full business continuity for our investors and stakeholders. Business travel was suspended and teleworking capabilities for all employees were enabled. We’re now beyond the worse and there is now a 50%/50% split between home and office working across most locations, although we have implemented strict rules on social distancing, mask wearing and cleanliness to continue to protect colleagues from the virus.

We believe the way Kartesia is organised minimizes potential disruptions in daily activities. Our local footprint of seven European offices does not require business travel to maintain regular interactions with management teams and intermediaries. Likewise, our insourced organisation for support activities (IR, Finance, Legal, etc.) means that we are not dependent on the business continuity capabilities of third-party providers. Moreover, in the context of the Kartesia Going Green initiative, all our seven offices were already fully equipped with video conference systems before the crisis.

 

Comprehensive reviews and support to portfolio companies

With regards to our investments, we initiated a comprehensive review of all portfolio companies to assess the potential short- and longer- term impacts of the virus. We also conducted a deeper analysis of companies’ potential liquidity needs and the expected level of support from their shareholders. Finally, we ensured that all our portfolio companies were ready to implement work from home as much as possible and that such solutions had been tested. We also discussed any other actions taken by the management to protect employees and avoid contamination (travel bans, etc.). All these topics were discussed during extraordinary weekly portfolio reviews, meetings that we usually hold on a quarterly basis.

We are pleased to report that we expect our portfolio companies to show strong resilience overall, with less than 20% of our companies across all portfolios, delaying their cash interests payment and also less than 20% that required or are expected to require new money injection.

Today we continue to proactively communicate with the management teams of our portfolio companies to closely monitor critical areas, including cost structures and cash management.

We hold director or observer positions in over 78% of our portfolio companies, and our loan documentations include comprehensive covenant sets and strong security packages. This will help us maintain continuous communication with management teams.

Finally, should the situation of some companies require it, the team will leverage its proven restructuring expertise to ensure maximum capital preservation and recoveries for our investors.

 

Moving Forward

We will conclude on a decidedly positive tone.

We believe Kartesia is ideally positioned to benefit from the current environment. Recent interactions with our networks across Europe reveal a growing number of companies in need of liquidity solutions in the short term, with some of them already in “pre-restructuring” situations.

Our flexible investment mandate, available dry powder, and decade-long experience in providing highly customised financing in complex situations should allow us to seize highly attractive opportunities both on the primary and secondary markets.

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