Morning Equity Briefing
United Drug
(UDG ID)
Re-financing through new banking facility and US dollar private placement
Jack Gorman
| Closing Price: | 229c | Rating: | Outperform | 30/06/09 |
FACTS: UDG has announced, as anticipated, the re-financing of its bank and other funding facilities.
ANALYSIS: The company's new financing structure is broadly similar to that which obtained prior to this. A $130m private placement has been completed in seven and ten-year tranches ($65m each), replacing the $102m of notes currently in issue. We understand that the new notes carry interest rates of up to c.4.5%. UDG's existing bi-lateral bank facilities have also been reorganised into a four-bank syndicate, for a €135m facility with a duration of four years.
DAVY VIEW: Some of UDG's banking facilities, and the first tranche of its original private placement, were to mature next year, so the re-financing is not surprising. It allows the company to extend out its debt maturities and provides access, via private placement, to additional cash for investment purposes.
We understand that the incremental private placement notes and higher rates mean that blended interest costs will rise by approximately €4m. However, this will be offset partly by the contribution from the recent InforMed acquisition and over time, from acquisition activity delivering a return in excess of the cost of funds. We will review our 2011 forecasts, but at first glance there may be some modest (c.3%) downside to PBT. UDG will report FY results on November 17th.