Convenience specialist McColl’s has secured a £100m refinancing package to enable it to increase the rate of its post-IPO expansion.
The bank refinancing comprises an amended £85m revolving credit facility and a £15m “accordion” - an option that allows it to increase its line of credit. The new facility will be in place until July 2020 - a further two years from its existing arrangement until 2018 - and is understood to have lowered the ongoing cost of the package.
Independent retail analyst Nick Bubb questioned why the company needed to talk to its banks as the existing £100m facilities still had three years to run, and given the capital raised by its February 2014 IPO. Bubb also noted McColl’s would have had to pay break fees to secure the new facility.
The Grocer understands that McColl’s views the new arrangement as good financial housekeeping rather than necessarily needing to renegotiate with its banks and was reacting to improvement in the credit market to lower its ongoing interest payments.
McColl’s declined to disclose the cost of any break fees and the new rate of interest.
Chief financial officer Jonathan Miller said the refinancing would help McColl’s reach its target of 1,000 c-stores “towards the end” of 2016 through acquisitions at a rate of 60 annually, and by converting 45 of its existing newsagents each year. This compares with 25-30 acquisitions a year before its IPO, and 45 annual conversions.
The Grocer wrote at the end of last month that McColl’s had added a focused range of alcohol in 100 of its 496 newsagents, which it was assessing.
“In the remaining 296 newsagents, we do have stores that we are converting to our food and wine format and we will be doing 45 of those this year and another 45 those next year,” Miller said.
Miller said the group’s Tamworth store would trial a Subway format, with the group serving as the franchisee, in October with about 250 sq ft given over to the “front-of house” side and “back of house, a bit bigger than that”.
McColl’s only had firm plans to do the one, but he said “clearly, depending on the success, we would hope that it is capable of being installed in other of our convenience stores….We’ve done some desktop analysis of how we think it’s going to do but obviously until we start operating it, we don’t know whether that’s going to come to pass.”
The company would be in a better position to know in “a few months’ time,” he added.
McColl’s shares hit an all-time low of 145p on Thursday (20 August) - well below the 191p float price. However, McColl’s noted its share price had outperformed its food retail peer group by 5% since its IPO.
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