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Highlights
- Loan Agreement: £16.7m facilities secured with Shawbrook Bank Limited.
- Debt Restructuring: £6.7m allocated to repay outstanding bonds by November 25, 2024.
- Acquisition Strategy: £10m reserved for future acquisitions, available until May 2027.
Software Circle (LSE:SFT) has announced the establishment of new loan facilities worth £16.7 million with Shawbrook Bank Limited. This strategic move is aimed at optimizing the company's financial structure and supporting its growth through targeted acquisitions.
Breakdown of Facilities and Purpose
- Debt Repayment:
A portion of £6.7m will be utilized to fully repay the company's perpetual bond facility, originally established in July 2020. The repayment, including accrued interest and associated costs, is expected to be completed on or around November 25, 2024. - Growth Fund:
The remaining £10m has been earmarked for acquisitions and is available for utilization until May 22, 2027, underscoring the company’s focus on expanding its portfolio and market presence.
Terms and Covenants
The loan facilities carry a margin spread over SONIA (Sterling Overnight Index Average) of approximately 5%. Key covenants include:
- Gross Leverage Ratio:
- Initially capped at 3.80:1.00, tapering to 2.50:1.00 by December 2027.
- Debt Service Coverage:
- A minimum of 1.10:1.00 maintained throughout the term.
Repayment terms specify:
- 50% of the bond repayment funds to be amortized over 60 equal installments starting December 22, 2024.
- Post-utilization of acquisition funds, 25% to be repaid over 30 installments beginning June 22, 2027.
- Any remaining balance is due in a single payment on November 22, 2029.
Strategic Implications
The loan facilities are structured to provide both financial stability and flexibility. By repaying its perpetual bonds, Software Circle reduces its debt servicing burden while freeing up significant capital to pursue its acquisition strategy.
