The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods yesterday confirmed Tribune Business’s Monday article by disclosing that its preference share issue had been oversubscribed by $2.5 million, adding that the extra sum would be used to boost cash flow by taking out short-term bank debt.

The BISX-listed food retail and franchise group, confirming that the proceeds from the private placement were to be used to finance its expansion, said “significant interest” from investors had prompted it to increase the offering to $10 million.

It had initially gone to market for $7.5 million on September 22, with the intention of raising capital for its Solomon’s Fresh Market store at Harbour Bay and Carl’s Jr franchise.

But the preference shares, priced with a 7.25 per cent interest coupon, proved especially attractive to investors seeking a higher return than that available on bank deposits following last year’s cut in the Bahamian Prime rate.

The addition of this $10 million tranche will take AML Foods’ total preference share capital/debt to $20 million.

In a statement, Gavin Watchorn, AML Foods’ president and chief executive, said the decision to take the extra capital and pay out the $2.5 million bank financing meant the company was exchanging short-term for long-term debt.

This, in turn, will give AML Foods greater liquidity and cash flow as it executes its expansion plan.

“We currently have a short-term loan with our bankers of $2.5 million,” Mr Watchorn said.

“With the additional interest in our placement, a decision was made to flip the short-term debt to a longer term position, to allow the company to retain greater liquidity during our growth phase.”

To complete the private placement, AML Foods is simply going to issue more shares in its existing Class B category, with the same terms and conditions as those enjoyed by its existing preference shareholders.

The total shares issued, at par value of $1,000, will be 20,000 or $20 million worth, and will earn interest at 7.25 per cent per annum.

The shares will attract payment on an interest-only basis until December 2014, and equal annual repayments of $2.2 million will then start at that time until December 2022.

Mr Watchorn added: “The quick take-up of the offering and the over-subscription of our initial offering is seen as a vote of confidence in the direction and future of our company.” It is set to close on October 31, 2012.

“The successful completion of this placement will provide our company with a solid, long-term financing position,” said AML Foods chairman, Dionisio D’Aguilar, “allowing us to complete the growth opportunities recently presented to us.”

The $5.5-$6 million Solomon’s Fresh Market at Harbour Bay is expected to generate around 90 new jobs, and $20 million in annual sales, once it opens in early December 2012. And plans for the first $1-$1.5 million Carl’s Jr outlet are being submitted to the Ministry of Works.

AML Foods believes that the US west coast-headquartered hamburger chain will likely generate $15-$20 million in annual sales within five-seven years. By that time, there will be five Carl’s Jr locations in the Bahamas, and some 200-250 Bahamians employed there.

The company is looking to generate $150 million in total group sales for its financial year that closes on January 31, 2014.