New Credit Facility
On Monday, November 17th, Loyalist Group announced that it has entered into a new $18.5 million credit facility, replacing the company's current credit facility and adding $18 million of capital to the treasury.
The credit facility now allows Loyalist to manage its capital structure more efficiently, and to continue to grow without diluting existing shareholders. The terms are as follows: the new credit facility expires on November 17, 2019, and comprises a $3.5 million revolving operating facility and a $15 million term loan acquisition facility. The facilities are being provided by the Bank of Montreal. Both facilities bear interest at the Canadian dollar prime rate plus 1.25 per cent to 1.75 per cent, depending on the company's debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio.
Given the low relative risk involved in the industry, with steady revenues and the fact that the company just paid down the majority of its long-term debt, it had a very low debt-to-equity ratio, which made it an attractive candidate to go out and do a debt raise.
Going forward, if capital raises continue to be financed with debt, this will lead to much greater free cash flow and EPS accretion, and limit shareholder dilution, making the value-add even greater.