AMA Group has launched a $150 million capital raising following the outcome of its capital structure review. The capital raising comprises a $100 million fully underwritten entitlement offer and $50 million fully underwritten senior unsecured convertible notes.
AMA said the entitlement offer price represents a 10.7 per cent discount to the group’s closing price of 42¢ on 3 September and an 8.1 per cent discount to the theoretical ex-rights price of 40.8¢. This is in stark contrast to the 75¢ share price when former CEO and Executive Director Andrew Hopkins resigned from the company and its board in January this year.
AMA said the Entitlement Offer will result in approximately 267 million new ordinary shares being issued, representing approximately 36 per cent of the group’s existing issued capital. All directors have expressed their intention to take up their entitlements.
The group went into a trading halt on Monday 6 September ahead of the capital raising announcement and investor presentation which was lodged to the ASX on Friday 10 September. The convertible notes offer and institutional entitlement offer opened on the same day. The lifting of the trading halt and recommencement of trading of ordinary shares on the ASX occurred this morning.
The capital raising announcement follows a report by the Australian Financial Review’s Street Talk column revealing the group was preparing to do so and had been in talks with its bankers for weeks. The AFR story led to AMA releasing its statement on 3 September saying it was undertaking a capital structure review to manage the short-term disruptions associated with COVID-19 as well as to best position for growth. It added that the group might undertake capital markets initiatives to “enhance balance sheet flexibility, diversify funding sources, and extend duration”.
Street Talk speculated investors would question AMA’s relationship status with its banks and insurer customers, saying both were keen to see the group raise equity to restructure its balance sheet.
AMA said the capital raising is expected to deliver:
- Enhanced balance sheet flexibility, funding diversification, and extended duration, including:
- Reduction in AMA Group’s net senior secured debt pro-forma as at 30 June 2021 to $32 million (from $173 million) and pro-forma leverage ratio to 0.5x (from 2.7x)
- Debt funding mix diversified to ~78 per cent bank debt and ~22 per cent capital markets
- Longer duration of debt, with average maturity increased to April 2025
- Enhanced liquidity to navigate short term disruptions associated with COVID-19:
- Increased cash and liquidity position pro-forma as at 30 June 2021 to $134 million
- A platform for AMA to execute on its growth strategy
According to the group, net proceeds from the capital raising will be used to permanently repay $72.5 million in debt facilities and $69.3 million will be used for working capital, liquidity (including for COVID-19 related disruption) and supporting growth initiatives.
“This capital raising will provide us with funding and flexibility as we face the headwinds presented by COVID-19 and give us the firepower to execute our strategy,” said Carl Bizon, CEO of AMA Group. “AMA Group is uniquely positioned to respond as restrictions lift, and I look forward to us realising the value inherent in the group.”
AMA also said it has successfully agreed with its banking syndicate to restructure its debt facilities to provide further balance sheet flexibility. This includes no debt facility maturing prior to October 2024 (two facilities were due to mature in October 2022) and covenant testing under the bank facilities restarting in the quarter ending June 2022.
After the permanent repayment of the $72.5 million of bank debt, the total bank facility limit will be $182.5 million, comprising a $147.5 million term debt facility, $17.5 million working capital facility, and $17.5 million bank guarantee facility, reduced from the initial $305 million as at 30 June 2021. $165 million of cash will be drawn on completion of the capital raising from the restructured facilities.