GVC to save 43m per year in new financing deal
Operator to clear existing loan high-rate loan with Cerebus as it reports a 26% increase in early Q3 revenues
GVC Holdings has struck a new financing deal which will enable the firm to save approximately 43m (£36m) a year by clearing its existing high-rate 400m loan with Cerberus Business Finance.
The firm has agreed a 250m financing arrangement with Nomura International at an interest rate of 2% – substantially lower than the 12.5% rate currently being applied to the Cerebus loan.
The new financing agreement will be signed on 31 October 2016 with GVC to pay off the remainder of its Cerebus loan, which currently stands at 386.5m, from existing cash resources.
In the 12 months following drawdown of the Nomura loan, GVC’s annual cash interest savings are expected to amount to approximately 43.3m, a saving of around 0.15c per share before tax.
The initial 400m loan had been secured last year in order to finance part of its £1.2bn takeover of bwin.party.
GVC chief executive Kenny Alexander said securing a more favourable financing deal was a “key objective” for 2016 and doing so reflected confidence held in the business.
“The quality of our lending partner and competitive rate we have secured is a result of the progress already made by the enlarged GVC,” Alexander said.
“Not only does the refinancing significantly reduce our financing costs but it enables us to drive further shareholder value through investment and paves the way for a return to dividend payments in 2017,” he added.
Analyst Jane Anscombe of Edison Investment Research described the new financing deal was as a “very positive surprise”.
“Normura’s 2% interest rate compares with 12.5% being paid on the Cerberus loan, [which is] a big vote of confidence in GVC’s progress integrating its transformational bwin acquisition,” she added.
The firm also used the announcement to offer a short trading update, reporting a 26% increase in like-for-like revenues for the first 16 days of Q3 following a “successful” Euro 2016.
Today’s news follows yesterday’s announcement that GVC had moved to the premium segment of the main market which will automatically ensure its inclusion in the FTSE 250 at the next review in September.
GVC’s share price was up 16p to 656p after early morning trading.