Alaris Equity Partners Income Trust (the
“Trust”
and collectively with its subsidiaries
“Alaris”)
(TSX: AD.UN) is pleased to announce the redemption of Alaris’
interest in Kimco Holdings, LLC (
“Kimco”) in
connection with a sale (the
“Kimco Sale”) of Kimco
to a third party. The Kimco Sale closed on April 1, 2022 and
resulted in gross proceeds to Alaris of US$68.2 million (CA$85.9
million) (the
“Kimco Proceeds”), consisting of (i)
US$44.7 million for the redemption of all of Alaris’ preferred
equity, (ii) the payment of US$13.7 million (the
“Previously Deferred Distributions”) owed to
Alaris and (iii) the repayment of US$9.8 million of promissory
notes. In connection with the Kimco Sale, Alaris agreed to fund
US$1.1 million of the Kimco Proceeds into an escrow account to
cover potential indemnification obligations. Alaris further agreed
to fund a portion of any additional indemnification obligations in
connection with the Kimco Sale, up to a maximum amount of US$9.0
million, if such obligations arise in the future.
Alaris’ total return on its Kimco investment was
US$52.1 million or 109% (“Kimco Return”) which
represents an unlevered IRR(3) of over 13% during the eight-year
partnership, excluding the escrowed proceeds. The Kimco Return was
generated by collecting US$37.4 million of distributions (including
the Previously Deferred Distributions) and US$5.3 million in
interest payments, as well as a premium of US$9.4 million on the
redemption of the preferred equity, which had a cost basis of
US$34.2 million. The US$13.7 million of Previously Deferred
Distributions as well as US$7.9 million of the premium have not yet
been recognized.
“This is a very gratifying end result on our
investment in Kimco. Our team did an outstanding job in
rehabilitating this company after a very difficult series of events
hit the company several years ago. To be able to crystalize
significant positive returns after all of that is a tremendous
achievement and bodes well for the future should any of our
partners encounter any significant issues,” said Steve King,
President & CEO, Alaris.
After today’s announcements, Alaris will have
approximately CA$263 million drawn on its senior credit facility
and CA$137 million available for investment purposes while the
total senior debt to EBITDA(2) on a proforma basis is approximately
1.9x. Alaris estimates its Run Rate Payout Ratio(1) to be between
60% and 65% following the Kimco Redemption.
ABOUT ALARIS:
Alaris, through its subsidiaries, provides
alternative financing to private companies
("Partners") in exchange for distributions,
dividends and interest (“Distributions”) with the
principal objective of generating stable and predictable cash flows
for dividend payments to its unitholders. Distributions from the
Partners are adjusted each year based on the percentage change of a
"top line" financial performance measure such as gross margin and
same-store sales and rank in priority to the owners' common equity
position.
NON-GAAP and Other Financial
Measures:
The terms Run Rate Payout Ratio, EBITDA and IRR
(collectively the “Non-GAAP and Other Financial
Measures”) are financial measures used in this news
release that are not standard measures under International
Financial Reporting Standards (“IFRS”). The
Trust’s method of calculating Run Rate Payout Ratio, EBITDA and IRR
may differ than from methods used by other issuers. Therefore, the
Trust’s Run Rate Payout Ratio, EBITDA and IRR amounts may not be
comparable to similar measures used by other issuers.
(1) “Run Rate Payout Ratio” is a Non-GAAP
financial ratio that refers to Alaris’ total distribution per unit
expected to be paid over the next twelve months divided by the free
cash flow per unit. Run Rate Payout Ratio is a useful metric for
Alaris to track and to outline as it provides a summary of the
percentage of the free cash flow that can be used to either repay
senior debt during the next twelve months and/or be used for
additional investment purposes.
(2) “EBITDA” is a Non-GAAP financial measure and
refers to earnings determined in accordance with IFRS, before
depreciation and amortization, interest expense (finance costs) and
income tax expense. EBITDA is used by management and many investors
to determine the ability of an issuer or a Partner to generate cash
from operations. Management believes EBITDA is a useful
supplemental measure from which to determine Partner’s ability to
generate cash available for servicing its loans and borrowings,
income taxes and distributions to unitholders.
(3) “IRR” is a supplementary financial measure
and refers to internal rate of return, which is a metric used to
determine the discount rate that derives a net present value of
cash flows to zero. Management uses IRR to analyze partner returns.
The Trust’s method of calculating this supplementary financial
measure may differ from the methods used by other issuers.
Therefore, it may not be comparable to similar measures by other
issuers.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking
statements, including forward-looking statements within the meaning
of "safe harbor" provisions under applicable securities laws
(“forward-looking statements”). Statements other than statements of
historical fact contained in this news release may be
forward-looking statements, including, without limitation,
management's expectations, intentions and beliefs concerning: Kimco
Redemption and the financial impact on Alaris including the impact
on Run Rate Payout Ratio. Many of these statements can be
identified by words such as "believe", "expects", "will",
"intends", "projects", "anticipates", "estimates", "continues" or
similar words or the negative thereof. Any forward-looking
statements herein which constitute a financial outlook or
future-oriented financial information (including the impact on Run
Rate Payout Ratio) were approved by management as of the date
hereof and have been included to provide an understanding of
Alaris' financial performance and are subject to the same risks and
assumptions disclosed herein. There can be no assurance that the
plans, intentions or expectations upon which these forward-looking
statements are based will occur.
By their nature, forward-looking statements
require Alaris to make assumptions and are subject to inherent
risks and uncertainties. Assumptions about the performance of the
Canadian and U.S. economies over the next 24 months and how that
will affect Alaris’ business and that of its Partners (including,
without limitation, the ongoing impact of COVID-19) are material
factors considered by Alaris management when setting the outlook
for Alaris. Key assumptions include, but are not limited to,
assumptions that: the Canadian and U.S. economies will continue to
stabilize from the economic downturn created by COVID-19 and will
not be detrimentally impacted over the next 12 months; interest
rates will not rise in a material way over the next 12 months; that
those Alaris Partners previously affected by COVID-19 will not see
a detrimental impact from COVID-19 over the next 12 months;
following a recovery from the COVID-19 impact, the businesses of
the majority of our Partners will continue to grow; the businesses
of new Partners and those of existing partners will perform in line
with Alaris’ expectations and diligence; more private companies
will require access to alternative sources of capital and that
Alaris will have the ability to raise required equity and/or debt
financing on acceptable terms. Management of Alaris has also
assumed that the Canadian and U.S. dollar trading pair will remain
in a range of approximately plus or minus 15% of the current rate
over the next 6 months. In determining expectations for economic
growth, management of Alaris primarily considers historical
economic data provided by the Canadian and U.S. governments and
their agencies as well as prevailing economic conditions at the
time of such determinations.
Forward-looking statements are subject to risks,
uncertainties and assumptions and should not be read as guarantees
or assurances of future performance. The actual results of the
Trust and the Partners could materially differ from those
anticipated in the forward-looking statements contained herein as a
result of certain risk factors, including, but not limited to: the
ongoing impact of COVID-19 on the Trust and its Partners (including
which, if any, Partners may experience a slowdown or closure of its
business); the ability of our Partners and, correspondingly, Alaris
to meet performance expectations for 2022 and beyond as a result of
COVID-19 or otherwise; any change in the senior lenders under the
Facility’s outlook for Alaris’ business; management's ability to
assess and mitigate the ongoing impacts of COVID-19; the dependence
of Alaris on the Partners; reliance on key personnel; general
economic conditions, including the ongoing impact of COVID-19 on
the Canadian, U.S. and global economies; failure to complete or
realize the anticipated benefit of Alaris’ financing arrangements
with the Partners; a failure of the Trust or any Partners to obtain
required regulatory approvals on a timely basis or at all; changes
in legislation and regulations and the interpretations thereof;
risks relating to the Partners and their businesses, including,
without limitation, a material change in the operations of a
Partner or the industries they operate in; inability to close
additional Partner contributions in a timely fashion, or at all; a
change in the ability of the Partners to continue to pay Alaris’
Distributions; a change in the unaudited information provided to
the Trust; a failure of a Partner (or Partners) to realize on their
anticipated growth strategies; a failure to achieve resolutions for
outstanding issues, including payment of any deferred
Distributions, with Partners on terms materially in line with
management’s expectations or at all; and a failure to realize the
benefits of any concessions or relief measures provided by Alaris
to any Partner or to successfully execute an exit strategy for a
Partner where desired. Additional risks that may cause actual
results to vary from those indicated are discussed under the
heading "Risk Factors" and "Forward Looking Statements" in the
Trust’s Management Discussion and Analysis and Annual Information
Form for the year ended December 31, 2021, which are filed under
the Trust’s profile at www.sedar.com and on its website at
www.alarisequitypartners.com.
This news release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about increases to the Trust's net operating
cash per flow per unit and liquidity, each of which are subject to
the same assumptions, risk factors, limitations, and qualifications
as set forth above. Readers are cautioned that the assumptions used
in the preparation of such information, although considered
reasonable at the time of preparation, may prove to be imprecise
and, as such, undue reliance should not be placed on FOFI and
forward-looking statements. Alaris' actual results, performance or
achievement could differ materially from those expressed in, or
implied by, these forward-looking statements and FOFI, or if any of
them do so, what benefits the Trust will derive therefrom. The
Trust has included the forward-looking statements and FOFI in order
to provide readers with a more complete perspective on Alaris’
future operations and such information may not be appropriate for
other purposes. Alaris disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law.
Readers are cautioned not to place undue
reliance on any forward-looking information contained in this news
release as a number of factors could cause actual future results,
conditions, actions or events to differ materially from the
targets, expectations, estimates or intentions expressed in the
forward-looking statements. Statements containing forward-looking
information reflect management’s current beliefs and assumptions
based on information in its possession on the date of this news
release. Although management believes that the assumptions
reflected in the forward-looking statements contained herein are
reasonable, there can be no assurance that such expectations will
prove to be correct.
The forward-looking statements contained herein
are expressly qualified in their entirety by this cautionary
statement. The forward-looking statements included in this news
release are made as of the date of this news release and Alaris
does not undertake or assume any obligation to update or revise
such statements to reflect new events or circumstances except as
expressly required by applicable securities legislation.
Neither the TSX nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX) accepts responsibility for the adequacy or accuracy of this
release.
For further information please
contact:
Investor Relations
ir@alarisequity.comP: (403) 260-1457Alaris
Equity Partners Income TrustSuite 250, 333 24th Avenue S.W.Calgary,
Alberta T2S 3E6www.alarisequitypartners.com
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