AA PLC Bond pricing & renegotiation of senior term debt (1253K)
July 05 2017 - 1:00AM
UK Regulatory
TIDMAA.
RNS Number : 1253K
AA PLC
05 July 2017
AA plc and AA Bond Co Limited
5 July 2017
Announcement of pricing of new Class A notes and successful
renegotiation of the AA group's senior term and working capital
facilities
Reduces interest costs and extends maturity on improved
terms
AA Bond Co Limited (the "Issuer"), a subsidiary of the AA plc
("AA") today announces the pricing of a single class of Sub-Class
A6 Fixed Rate Notes to be issued under the Issuer's multicurrency
note programme listed on the Irish Stock Exchange, a redemption of
the remaining Sub-Class A1 and Sub-Class A4 Fixed Rate Notes. At
the same time, the AA group announces a GBP98m reduction to be made
to its senior term debt through the replacement of its existing
senior term facility with a new senior term facility.
The Bond Issue
Further to Issuer's announcement yesterday morning, the Issuer
has priced GBP250m of new Sub-Class A6 Fixed Rate Notes (the
"Sub-Class A6 Notes") with an expected maturity of 31 July 2023 and
a final maturity of 31 July 2043. The coupon is 2.75% payable
semi-annually in arrears. The Sub-Class A6 Notes will be senior
secured Reg S bearer notes and are expected to be rated BBB--(sf)
by S&P. Subject to conditions, the Sub-Class A6 Notes are
expected to be issued on 13 July 2017.
The proceeds from the issuance of the Sub-Class A6 Notes will be
applied to redeem all of the remaining GBP175m 4.7201% Sub-Class A1
Fixed Rate Notes and GBP55m 3.781% Sub-Class A4 Fixed Rate Notes
including any required make-whole payments on the next note
interest payment date. The Issuer is intending to issue notices of
redemption to the Sub-Class A1 Noteholders and the Sub-Class A4
Noteholders on or around the settlement date for the Sub-Class A6
Notes.
New Senior Term Facility
The AA will use GBP98m of its available cash resources along
with the proceeds from a new senior term facility to prepay the
existing senior term facility. The new senior term facility has
been negotiated to extend the maturity of the senior term debt from
31 January 2019 to 31 July 2021 as well as to reduce the
margin.
A new Working Capital Facility of GBP75m, reduced from the
current GBP150m facility, will also be put in place to 31 July 2021
on a reduced margin.
These refinancings are in line with the AA's strategy to reduce
overall Group borrowings as well as the associated interest cost.
The extension in maturity of debt means that the next repayment of
borrowings is due in July 2020. The initial annual interest saving
is expected to be cGBP3m for the years ending 31 January 2018 and
31 January 2019, then will increase to an annual interest saving of
cGBP14m from the year ending 31 January 2020 as a result of the
expiry of the existing hedging arrangements allowing the company to
use more of its free cash flow to pay down debt in line with its
strategy to de-lever over time. In addition, there will be a
GBP0.6m fee saving following the reduction of the Working Capital
Facility.
Martin Clarke, CFO of the AA, said:
"Since the IPO in June 2014 we will have reduced the annual cash
interest cost on our borrowings by almost GBP90m from GBP206m to
GBP118m by FY20. We have also reduced our total gross borrowings
from GBP3.4bn at IPO to today's level of just under GBP2.8bn. The
weighted average cost of that debt has fallen from 6.1% to 4.3% by
FY20. The response of bond investors and our existing banks to the
refinancing demonstrates, once again, the enthusiasm of the debt
market for the AA story.
The latest refinancing means that our next debt maturity is now
three years away in July 2020. As we come to the end of our
transformation programme in FY19, a much greater portion of our
considerable free cashflow will be available for deleveraging, such
that future refinancings will involve a significant element of
direct debt pay down.
Our stated medium-term objective of achieving a net debt/EBITDA
ratio of close to 3x remains on track. In the meantime, we will
continue to explore further ways of improving our debt
profile."
Enquiries
Investors
Jill Sherratt, Head of Investor
Relations, AA plc +442073957301
Media (Headland)
Francesca Tuckett +44 2038054822
This information is provided by RNS
The company news service from the London Stock Exchange
END
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