Duke Royalty enters into second financing deal with Lynx Equity UK

Duke Royalty announced on Friday that it has entered into its second royalty financing agreement with Lynx Equity UK.

The AIM-traded company said it has committed £7m, with an initial tranche of £4.5m to be drawn down immediately, and the additional £2.5m being drawn down at the completion by Lynx UK of an imminent acquisition, which was expected to be completed in the coming weeks.

It said the financing represented the “beginning of the relationship” with Lynx as a royalty partner, as Duke had become Lynx's preferred European capital provider, with the potential to provide a further £8m of funding equating to £15m over time.

Duke said it was looking to provide Lynx with the capital it requires to allow it to roll out its “proven and successful” North American acquisition strategy across Europe, with the stated potential investment pool to be deployed as further profitable acquisitions meet Duke's royalty investment criteria and subject to Duke's due diligence and Lynx UK maintaining a royalty coverage ratio above 2.0x post-acquisition.

“We were immediately drawn to the structure that Duke presented which will allow us to aggressively expand our European portfolio,” said Lynx Equity president Brad Nathan.

“This permanent capital is a perfect fit for our buy and hold strategy. Most importantly, the Duke team is made up of fantastic individuals and we look forward to a long and successful relationship with them.”

The financing will entitle Duke to monthly distributions beginning in November, which total £0.54m per annum based on the initial drawdown of £4.5m.

Duke said the distributions would be adjusted annually with the first adjustment occurring in August 2018, based on the percentage change in Lynx UK's gross revenues for the fiscal year to July 2017 compared to the prior year.

The annual adjustment in the distributions would be subject to a collar.

“Lynx is an excellent partner for Duke; they are successful operators, their businesses meet our investment criteria and their international operations make them a substantial and profitable partner,” said Duke CEO Neil Johnson.

“Being a Canadian company, Lynx was familiar with the advantages of royalty finance and from the first meeting we felt our businesses were very complementary.

“We are pleased to assist Brad and his team on their expansion in Europe.”