G8 Education Limited Finalized its Debt Refinancing Process

On 22 October 2018, G8 Education Limited (ASX: GEM) announced regarding the finalization of the company’s debt refinancing process. Following the release of this news, the share price of the company decreased by 0.922 percent as on 22 October 2018.

As per the release, the execution of Syndicated Facility Agreements includes AUD$450 million senior secured syndicated bank facility which received strong support during syndication and led to the oversubscription of the transaction. The syndicate of lenders includes mandated Lead Arrangers, Underwriters and Bookrunners Commonwealth Bank of Australia, Royal Bank of Canada and Westpac Banking Corporation. The Syndicated Facility Agreements also include AUD$100 million subordinated secured syndicated debt facility with commonwealth bank Australia serving as Mandated Lead Arranger and Sole Bookrunner. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

The facility A of Senior facilities is a Term Loan of $200 million maturing after a five-year period. The facility B is a revolving credit of $200 million, maturing after 3 years period. The facility C is a Bank Guarantee of $50 million, maturing after three years period. The tranche 1 of a junior facility is $47.2 million, maturing after 5.5 years and tranche 2 of 52.8 million, maturing after 7 years.

It is expected that the financial close of the Junior Facility will occur in early December 2018. And it is subject to the satisfaction of standard conditions precedent, it will be utilized in combination with the Senior Facilities, to repay the SGD$270 million of Singapore Notes due to mature in May 2019.  As per CEO Mr. Garry Carroll, in combination with the existing cash balances, these new facilities will provide more than sufficient liquidity to enable the Group to meet its medium?term strategic growth and capital management plans. Moreover, the refinance will also provide improved covenants which provide significant headroom, an extended lending maturity profile and improved comparable pricing.

In the first half of FY 2018, the total revenue of the company increased by 7.6 percent to $396.4 million compared to the first-half result of last year. The wage costs of the company increased by $7.2 million due to regulatory changes to staff ratios. The underlying NPAT of the company decreased by 23.9 percent to $25.6 million in the first half of FY 2018 as compared to last year. The company’s cash flow generation continued to be strong, with cash conversion of 99% in H1 of FY2018. The Net cash flows from operating activities increased by 23 percent to $30 million as compared to the H1 of FY 2017. The company paid $17million in Property, Plant, Equipment which reflects investment in center upgrades and resources, the new Child Care Management System and improved IT infrastructure. The company paid $29 million in purchase of businesses which reflects the acquisition of 7 centers and deposits for centers to be delivered in CY 2018 and CY 2019.

In the last six months, the share price of the company decreased by 12.85 percent from $2.490 to $2.170 as on 19 October 2018, traded at a PE level of 13.040. GEM’s share traded at $ 2.150 with a market capitalization of circa $988.17 million as on 22 October 2018 (AEST 3:08 PM).

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