TSX:AD.DB.A - Post by User
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retiredcfon Oct 04, 2022 9:40am
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Post# 35003669
RBC
RBC October 3, 2022
Alaris Equity Partners Income Trust
Announces redemption of its investment in FNC Title Services for US$58.3MM
TSX: AD-U | CAD 14.84 | Sector Perform | Price Target CAD 20.00
Sentiment: Positive
Summary: Alaris announced the redemption of its investment in FNC Title Services, which closed on October 1, 2022 and generated gross proceeds of US$58.3MM comprised of: (1) US$48.6MM for the redemption of all of Alaris’ preferred equity (including US $5.2MM make-whole distributions that were owed up to the 3rd anniversary date of Alaris’ initial investment); and (2) US$9.7MM for the purchase of Alaris’ common equity in FNC, which includes US$1.4MM of the FNC proceeds that Alaris agreed to escrow in connection with the FNC redemption to cover potential indemnification obligations.
The cost basis of the preferred equity was U$32.15MM and US$7.85MM for the common equity. Alaris’ total return on the FNC investment (common and preferred shares) is US$29.9MM or 75%, generating an unlevered IRR of ~42% (~43% IRR for the preferreds and ~38% IRR for the common equity).
Following the FNC redemption, Alaris will have ~C$217MM drawn on its senior credit facility and C$233MM available for investments based on a recently amended and extended credit agreement providing up to $450MM. Senior Debt to EBITDA on a pro forma basis is ~1.5x and Alaris estimates its run-rate payout ratio is between 65% to 70%.
Our take: The FNC redemption is an example of another successful investment for Alaris and further demonstrates a positive investment track record. We view the units as fairly valued and that the current economic uncertainty could constrain the unit price in the near term. We see the stock as appealing for investors looking for a small-cap stock offering an attractive distribution yield (8.7%) with exposure to a diversified portfolio of SMEs in North America (primarily the U.S.) and the private equity industry.