February 28, 2008 / 9:35 PM / 10 years ago

UPDATE 2-Onex sees credit "upheaval" slowing investing pace

(Adds CEO comments, details)

By Wojtek Dabrowski

TORONTO, Feb 28 (Reuters) - Private-equity group Onex Corp OCX.TO said on Thursday its pace of investment will slow this year as the “upheaval” in credit markets makes financing large deals more difficult.

Onex, which has investments in industries as diverse as aerospace, electronics and cosmetics, also posted a loss from continuing operations for the fourth quarter as results suffered in comparison with the year-before quarter, when there was a gain on the sale of shares.

There have been concerns about whether private-equity firms such as Onex will be able to finance buyouts given the turbulent state of the credit markets.

Chief Executive Gerald Schwartz told analysts in a conference call that “we cannot ignore the recent upheaval in the credit markets and the challenges — and certainly the opportunities — that this might present.”

Not only is financing big private-equity deals more difficult in the current credit environment, Schwartz said, but many owners of companies have also become discouraged about selling their businesses

Firms like Onex routinely use leverage, or borrowed money, to finance buyouts. Some investors have worried that debt markets could freeze up in the wake of problems in the U.S. subprime mortgage sector, in turn scuttling private-equity buyouts in other industries.

However, Schwartz said he was confident Onex will still be able to find quality investment opportunities, albeit at a slower pace.

“Although we expect the pace of our private-equity investing to be slower this year than last, we remain certain about our ability to create value for Onex shareholders,” he said.

The company said continuing operations lost C$10 million ($10.2 million), or 8 Canadian cents per share, for the three months ended Dec. 31.

That was a swing from earnings of C$211 million from continuing operations, or C$1.64 Canadian cents a share, in the same 2006 period, which included a C$343 million gain on the sale of shares in Spirit AeroSystems’ (SPR.N) initial public offering.

The company did not provide net income figures in its news release.

Onex said revenue rose C$1 billion to C$6 billion in the quarter. This was slightly short of analysts’ expectations for C$6.1 billion, according to Reuters Estimates.

The company released its results after markets closed. Its shares rose 50 Canadian cents to finish at C$34 on the Toronto Stock Exchange.

$1=$0.97 Canadian Additional reporting by Lynne Olver; Editing by Peter Galloway

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