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AML to enjoy $1.15m cash flow boost

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods’ $10 million private placement will free up a total $1.152 million in cash flows over the next two years, its chief executive yesterday confirming the issue will double the company’s preference share investors to six.

Gavin Watchorn, who is also the BISX-listed food retail and franchise group’s president, told Tribune Business that part-using the preference share issue proceeds to repay its $2.5 million bank debt would free-up $48,000 in monthly cash flows.

He added that the move was designed to match the group’s growth strategy with long-term financing, given that the returns from its second Solomon’s Fresh Market store and Carl’s Jr franchise would accrue over time.

“The bank debt is $2.5 million repayable over five, and it gets pushed out to the long-term,” Mr Watchorn said, confirming that AML Foods needed no additional financing for its planned expansion.

Disclosing that the only debt carried on the group’s balance sheet going forward would be the $20 million in preference shares, he added: “We’ve performed an exchange that will provide a long-term platform for the company, our growth strategy.

“It’s difficult to put in a long-term growth plan on a short-term financing basis. These projects are relatively capital intensive, and the returns are over a period of time.

“We needed to put in place a financial strategy that matches the returns we get, and feel by what we’ve done it allows us to achieve that. ”

Mr Watchorn told Tribune Business that it expected to receive the $10 million preference share capital “if not the end of this week, the beginning of next week.

“I expect all the ‘i’s’ to be dotted and ‘t’s’ to be crossed by the end of this week,” he added.

Prior to this private placement, AML Foods had three preference shareholders, including the hotel industry pension funds, that collectively held $10 million of these fixed income securities.

Tribune Business understands that the existing preference share investors have taken up the majority of this latest issue, and Mr Watchorn confirmed they would hold the largest portion when it closed.

“We’ve had three preference shareholders for quite some time,” the AML Foods chief executive said. “We will end up with this process with six.

“It’s a mixture of new and existing shareholders taking up more, and the existing shareholders will hold the majority of the $20 million.”

Even with $20 million in preference share debt on the balance sheet, Mr Watchorn said this was “50 per cent of what” the company’s leverage was 10 years ago, when it peaked at around $38-$40 million.

He added that removing the bank financing would “boost liquidity in a 24-month period when we’re working to bring all these things together.

“All these growth initiatives are going to be bedded in over time, and we’ll be ramping up sales, bringing all the synergies from a cost and buying perspective together.”

While acknowledging that the 7.25 per cent interest coupon payable on AML Foods’ preference shares was relatively attractive compared to the low returns/yields available on bank deposits, Mr Watchorn said investors would not have handed over their capital without confidence in the company’s ability to repay it.

“There’s a lot of liquidity, and people need yield, but at the same time they’re not going to invest in a company for yield without confidence that they will see and get a return on their capital,” he added.

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.

AML 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.

Comments

BillGates 12 years, 1 month ago

Thats a really big cash boost. With that amount of money, you need money http://www.inkjetsuperstore.com/Office-…">cash boxes trays to support it. I wish I can have that money and if I do Im out in here.

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