Centric Wealth outlines debt strategy
Centric Wealth appears to have solved its immediate debt problems by securing a three-and-half-year extension on its $45 million debt with Westpac Bank.
The chief executive of Centric, Michael Pillemer, told Money Management that $15 million of that debt was originally due to be paid in December 2008. However, the bank agreed to put off the repayment of the debt until March 2009, before Centric nutted out a deal with Westpac to replace the money with the same amount from a long-term debt facility, which will be due in approximately September 2012.
“With our bank debt, we’re going to be taking the $45 million from the long-term [debt] facility that we’re going to be establishing, and we’ll be using that to pay off the $45 million dollars under the existing facility.
“So we’re keeping $45 million of debt in the business. We feel that is an appropriate level of debt for a business that’s got EBITDA [earnings before interest, taxes, depreciation and amortisation] of $20 million,” Pillemer said.
Centric is also holding approximately $70 million of interest bearing securities, as well as approximately $15 million worth of debt to its advisers.
Pillemer said Centric would use the $80 million of the share placement funds to pay off holders of the interest bearing securities, who agreed to take a reduced payment of $60 million.
The remainder of the funds, as well as part of Centric’s EBITDA, will be used to pay off the debt to its advisers, which is due in the next 12 months.
A failed public listing in the first half of 2008, which was designed to pay off the interest bearing securities, led Centric to seek $100 million in assistance from CHAMP Private Equity. That deal also collapsed in late 2008 due to uncertainty in the market.
It was at the very end of 2008 that Centric pulled off a replacement deal in the form of an $80 million share placement with CHAMP, with the company taking a controlling stake in the dealer group.
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