AA PLC Bond pricing & renegotiation of senior term debt (1253K)

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                 [phone] 
 Media (Headland) 
 Francesca Tuckett                  [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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July 05, 2017 02:00 ET (06:00 GMT)