Heiton firm raises $25m in US funds
Heiton Holdings, the builders merchants and Atlantic DIY group, has raised $25 million (£16.6 million) in the US in its first private placing of senior loan notes. The new funds would refinance the group's existing debt portfolio and provide funding for future acquisitions, Heiton said.
The fixed interest rate at 7.14 per cent on the notes was similar to the average rate on the existing loans which were being repaid, but the new funding provided greater flexibility with less onerous covenants, said Mr Peter Byers, group finance director. Also they are for a longer period, six to 10 years, with an average of eight years. The structure of the deal "allows us to lengthen average maturity and provides greater flexibility to meet future business requirements", Mr Byers said. The financing costs fixed at 104 basis points above DIBOR is considered "good value". This "competitive" rate reflects the "strength of the Heiton Group".
The aim is to "obtain returns to our investors in excess of our cost of capital. Clearly that is a two-pronged strategy; involving both the delivery of earnings enhancement and managing the cost of both debt and capital downwards", Mr Byers said. There will not be any currency exchange risk. The dollar funds have been swapped into pounds. And with a debt/equity ratio forecast at 36 per cent for this year, Heiton will be able to undertake a "significant" acquisition, Mr Byers said. The group reckons it will be able to spend up to £15 million on acquisitions from existing resources.
Heiton is continuing to look at builders merchants and related sectors in Britain on a regional basis and said it had begun a detailed examination of "certain European markets". Mr Byers said he did not expect to announce any acquisitions before the end of the year.