The AA today (Aug 4) confirmed it was holding talks with other companies over a possible offer for the company to reduce its multi-billion-pound debt.
In an announcement made via the London Stock Exchange at 7am, the motoring association group said it had about £2.65bn of total net debt, of which £913m was due to be repaid within the next two years.
Responding to speculation about possible refinancing of its debt and that an offer might be made for the company as a result, it confirmed that it was currently discussing a range of possible refinancing options with others, and that as part of this, three parties – Centerbridge Partners Europe acting with TowerBrook Capital Partners (UK), Platinum Equity Advisors, and Warburg Pincus International – had all approached it with possible cash offers for its entire share capital and any ordinary share capital to be issued.
The AA said that they had indicated it would involve a significant amount of money being injected into the group to reduce its debt following completion
However, the AA added that it couldn’t be certain any offer would be made for the company, or what the terms would be. It also said the group was still well within its financial covenants and that the board would continue assessing other possible refinancing options, including raising new equity.
The statement added: ‘The group has demonstrated resilient trading performance through Covid-19, while providing an essential service to the community, and we continue to expect our financial performance this year to be only slightly below that of FY20.
‘However, whilst the group is now beginning to reap the benefits of its strategy and operational improvement, the business remains constrained by a significant debt burden and the board believes this may prove to be an impediment to the group’s future progress and longer-term success.
‘The board of AA believes that in order for the business to achieve its full potential it needs to have greater financial flexibility to make longer-term investment decisions that are in the best interests of the group’s shareholders and its wider stakeholders.
‘To achieve this, the group needs a more stable and sustainable capital structure and this requires a significant amount of additional new capital in order to reduce the group’s indebtedness and to fund future growth.’
AA chairman John Leach said: ‘Following a significant improvement in the underlying performance of the business over the course of the last few years under Simon’s leadership [chief executive Simon Breakwell], the board has been proactively considering a range of potential refinancing options from a position of relative strength and ahead of its upcoming debt maturities in 2022.
‘The AA is a high-quality and robust business, with an iconic brand, a resilient business model and a highly committed and loyal workforce. However, in order for us to be able to achieve our full potential, the board believes that it must now prioritise reducing the group’s indebtedness to provide the business with the right long-term capital structure – which we hope the current refinancing process will achieve.’
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