7:59 cut – RGD

Note

Although there have been very few announcements for companies I cover over the last couple of weeks, there has been a lot going on behind the scenes. Expect some larger articles as well as 7:59 cut articles covering updates from FUL, WEY, VTU, UPGS and SOM over the next 2 weeks.

Real Good Foods (RGD) – Debt refinancing

Following on from the maturity extension of various shareholder loans earlier in the week, RGD announce that some shareholder debt has been converted to more normal bank facilities, and existing facilities replaced. The annual interest savings of £0.25m are immaterial compared to ongoing interest costs of around £4m. The new facilities replace existing ones as follows [edit: this section significantly expanded at 9:15am]:

• The £8m invoice discounting facility at 1.5% above base with Lloyds Bank and a “minimum term of 12 months” at 31st March secured on debtors of the Cake Decoration side only has been replaced with a £5.5 facility. They vaguely describe this as a “receivables facility” which does leave open the possibility that management of debtors moves from the company to the lender.
• Various secured loan facilities totalling £6.3 with Lloyds Bank and ABN Amro at rates of 3.5-4% are replaced with a £2.1m facility.
• Unspecified shareholder loans with a principle of £3.6m and likely to be at rates in excess of 10%, are replaced with a £1.3m term loan, and some unspecified mixture of increased drawings on the above facilities and cash.

The interest rates of the new loans are not given and they are with a lower tier lender than the facilities they replace. Covenant cover is not specified, but in my opinion is likely to be 1.8x EBITDA applying across the latter two loans only. Based on last year’s EBITDA they would be at this limit with facilities fully drawn, although I expect next year’s EBITDA will be significantly in excess of last year’s.

It is by no means clear that today’s announcement is a step forward, however nor does it seem particularly material.

I will continue to monitor and cover RGD.