Science Group secures new £15m loan facility

The AIM-traded firm said that following the 2015 acquisitions and the purchase of the additional freehold property at Great Burgh, Epsom, the board has been reviewing the group's capital structure.

“With significant freehold property assets and the unprecedented current low interest rate environment, the board concluded that a potential increase in both the amount and term of the group's debt could benefit long term planning and corporate strategy implementation, particularly if this could be achieved without a material increase in the group's financing risk profile,” it said in a statement.

“Bank negotiations have now been successfully concluded and the board has agreed a new 10-year fixed term loan of £15m.”

Science Group said phased interest rate swaps will fully hedge the loan, resulting in a 10-year fixed effective interest rate of approximately 3.4%, comprising a margin over 3 month LIBOR and the cost of the swap instruments to fix the interest rate over the period.

“This increase in loan value and extended loan term enables the benefit from the current attractive financing climate to be sustained into the future.”

The board said the new term loan has no operating covenants as long as the group net bank debt is less than £10m.

Science Group said the repayment profile of the loan is £1m per annum over the term with the remaining £5m repaid on expiry of the loan.

One-off costs of approximately £0.3m will be incurred arising from cancellation of the prior loan and associated swap, together with arrangement and legal fees associated with the new loan.

“The group's freehold properties provide a far more cost-effective and more flexible business operating model compared to a fully repairing leasehold,” the board explained.

“Securing longer term debt against these freehold property assets provides an attractive capital structure without onerous operating covenants.

“Through this asset-backed financing model, the new 10-year term loan provides a fixed, low cost of capital which should support the group strategy and enable the board to make medium term investment and capital allocation decisions.”