Claret Capital refocuses business strategy after €3.42m loss

DUBLIN-BASED private equity group Claret Capital made a loss of €3.42 million in 2008 as the global economic downturn scuppered an aggressive expansion of the business.

This compared with a profit of €476,150 in 2007.

There was a deficit in shareholders’ funds of €1.9 million at the end of 2008 compared with a surplus of €1.6 million a year earlier.

Claret founder and lead partner Dómhnal Slattery told The Irish Times that Claret’s business would now focus on managing its existing assets and developing new business opportunities in the aviation sector, in debt financing and aircraft leasing.

Accounts just filed and seen by The Irish Times show that Claret’s revenues declined to €4.4 million last year from €4.7 million in 2007.

While its personnel expenses fell by 14.6 per cent to €2.85 million its administrative costs rose almost fivefold to €3.47 million.

Its “other” operating expenses more than doubled to €1.06 million.

Claret has closed its operations in the United States and reduced its headcount from a peak of 35 to 13 staff currently. The expansion strategy had been funded by borrowings of €3.8 million from Claret’s senior management.

In the first quarter of this year, Senator Feargal Quinn and his family injected €2.5 million into the business for a 25 per cent equity share.

The Quinns have participated in many of Claret’s 27 investments to date.

Mr Slattery said Claret will now focus on managing its existing portfolio while branching out into aviation. Its portfolio includes stakes in JetBird, Hertz, hospital operator HCA, and maritime communications group Blue Ocean Wireless.

The Clare financier was previously a senior figure in the global aircraft leasing business and now plans to re-enter this arena.

“I’m going back to what I know to build out of where we find ourselves currently,” Mr Slattery said. “Our current business model is comatose, gone, and is unlikely to return anytime soon because it is so correlated to the Irish economy.

“This is the moment to launch a business of this nature ,” he said. “We are in a down cycle in values . . . it will last for another couple of years and that’s when you acquire assets.”

Where will the company get its leverage? “There are still banks active in the world market who want to lend money. It’s a good lending proposition.”

On the debt advisory side, Claret is working on a $200 million mandate to finance new aircraft that will be delivered in 2010.

“At this point, we are confident we will succeed and have that debt committed by the end of the year,” Mr Slattery said.

Claret’s partners have taken pay cuts ranging from 50 to 75 per cent this year and no bonuses will be paid. “We didn’t get any bonuses in 2008,” he added.

Claret’s directors’ remuneration, including pension contributions, amounted to €1.02 million last year, down from €1.53 million in 2007.