Science Group PLC New 10 Year Bank Facilities (0022K)
September 16 2016 - 2:00AM
UK Regulatory
TIDMSAG
RNS Number : 0022K
Science Group PLC
16 September 2016
16 September 2016
Science Group plc
New 10 Year Bank Facilities
Following the 2015 acquisitions and the purchase of the
additional freehold property at Great Burgh, Epsom, the Board of
Science Group plc (the 'Group') has been reviewing the Group's
capital structure. With significant freehold property assets and
the unprecedented current low interest rate environment, the Board
concluded that a potential increase in both the amount and term of
the Group's debt could benefit long term planning and corporate
strategy implementation, particularly if this could be achieved
without a material increase in the Group's financing risk
profile.
Bank negotiations have now been successfully concluded and the
Board has agreed a new 10 year fixed term loan of GBP15 million.
Phased interest rate swaps will fully hedge the loan resulting in a
10-year fixed effective interest rate of approximately 3.4%,
comprising a margin over 3 month LIBOR and the cost of the swap
instruments to fix the interest rate over the period. (For
comparison, the effective interest rate on the 5-year term loan,
which was scheduled to expire in 2018, is approximately 3.9%. This
loan has been repaid.) This increase in loan value and extended
loan term enables the benefit from the current attractive financing
climate to be sustained into the future.
The new term loan has no operating covenants as long as the
Group net bank debt is less than GBP10 million. If this threshold
is crossed, two conditions apply: a financial covenant, measured
half-yearly on a 12 month rolling basis, such that annual EBITDA
must exceed 1.25 times annual debt servicing (capital and
interest); and a security covenant whereby the loan to value
("LTV") ratio of the securitised properties must remain below 75%.
If either of these conditions is breached, a remedy period of 6
months is provided, during which time the EBITDA or LTV condition
can be remedied or the net bank debt can be reduced to less than
GBP10 million.
The repayment profile of the loan is GBP1 million per annum over
the term with the remaining GBP5 million repaid on expiry of the
loan. One-off costs of approximately GBP0.3 million will be
incurred arising from cancellation of the prior loan and associated
swap, together with arrangement and legal fees associated with the
new loan.
In summary, the Group's freehold properties provide a far more
cost-effective and more flexible business operating model compared
to a fully repairing leasehold. Securing longer term debt against
these freehold property assets provides an attractive capital
structure without onerous operating covenants. Through this
asset-backed financing model, the new 10 year term loan provides a
fixed, low cost of capital which should support the Group strategy
and enable the Board to make medium term investment and capital
allocation decisions.
Background
Science Group plc owns freehold property assets with a carrying
value of GBP20.9 million at 31 December 2015. At 30 June 2016, the
Group had gross cash of GBP17.2 million and net funds of GBP9.9
million. The Group's banking facilities were renewed on a 5 year
term in 2013 with GBP7.3 million outstanding at 30 June 2016. Since
that time, as previously announced, the Group has undertaken a
further share buy-back programme and has paid the cash settlement
for waived share options, at a total net cash outflow of GBP2.3
million. At 31 August 2016, the number of shares, excluding
treasury shares, in issue was 39,973,795 and the Group had
approximately 1.8 million share options outstanding, of which 1.2
million are unvested.
Contacts:
Science Group plc
Martyn Ratcliffe, Chairman Tel: +44 (0) 1223
875 200
Rebecca Hemsted, Finance Director
Numis Securities Limited
Nominated Adviser: Simon Willis Tel: +44 (0) 20
/ Paul Gillam 7260 1000
Corporate Broking: Michael
Burke
This information is provided by RNS
The company news service from the London Stock Exchange
END
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