REG - Water Intelligence - Refinancing and Expansion of Credit Facilities

Water IntelligenceAnnouncement

13/08/2024 07:00

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RNS Number : 1642A  Water Intelligence PLC  13 August 2024

 

 

Refinancing and Expansion of Credit Facilities for Growth Plan; Shareholder
Meeting

Water Intelligence plc (AIM: WATR.L) ("Water Intelligence" or "Group"), a
leading multinational provider of precision, minimally-invasive leak detection
and remediation solutions for both potable and non-potable water is pleased to
announce the refinancing of its existing debt ("Refinancing") and expansion of
its credit facilities ("Expansion") with M&T Bank, a leading US bank.
The transaction provides the Group with additional non-dilutive resources and
significantly increases the Group's capacity to execute its strategic growth
plan.

Key terms of the Refinancing and Expansion of Credit Facilities

The Refinancing spreads the amortization of approximately $21 million of total
liabilities (bank debt and deferred payments from franchise acquisitions)
through 2029 at a fixed rate of 6.35%. The debt service for the next five
years requires between 5 and 10% of principal to be repaid each year freeing
additional cash for available accretive growth opportunities. The Refinancing
prudently leverages the Group's current strong balance sheet and track record
of growing cash from operations to put it in a position to be opportunistic.

Moreover, as part of the Refinancing, M&T Bank and the Group have agreed
on an Expansion of its credit capacity with a $3 million acquisition line of
credit with a floating market rate capped at 8% and a $2 million working
capital line of credit at a floating market rate.  Following the Refinancing
and Expansion, the Group will have more than $20 million in resources from
which to execute its growth strategy for any of the four layers of its capital
allocation plan discussed below.

Strategic Rationale for Refinancing

In the Chairman's Statement as part of the Group's recently released Annual
Report, Water Intelligence reaffirmed its "Build and Buy" growth plan for its
water infrastructure services platform and the decision-making principles that
underpin the Group's approach to capital allocation.

The Chairman's Statement identifies four groups of investments that would form
a "layer cake" of growth. The foundational two layers focus on investments to
feed organic growth: both organic growth from the Group's current water leak
detection and repair offerings and organic growth from new proprietary
technology-based solutions for "hard-to-find" leaks in swimming pools, rapid
detection of sewer blockages and efficient, open channel water conveyance.

The third layer focuses on acquisitions whether converting franchise locations
into corporate-run operations or acquisitions of third-party companies that
would add products or geographic scale.  For example, as part of this third
layer, in July the Group concluded the acquisition of a profitable and growing
Irish plumbing company on favourable terms for the Group's shareholders. This
acquisition extends Water Intelligence International's operating footprint and
enables further execution in the EU.

Finally, the fourth layer includes the use of capital to respond to
shareholder interest in dividends or share repurchases, especially given the
Group's consistent growth in EPS.  The Chairman's Statement indicates that
the Group would seek regulatory approval as part of its Shareholder Meeting in
order to create an increased set of options for shareholders.

As noted in the Annual Report, the Group has resources available to execute
its growth plan even in the absence of today's transaction.  We noted in the
Chairman's Statement that for 2023, the Group's Adjusted EBITDA grew 9% to
$13.4 million and the Group had a strong balance sheet at year-end 2023 with
$15.8 million in cash and significant untapped credit capability.

Now, given (i) current cash of approximately $12 million, reflecting
acquisitions and deferred payments from prior acquisitions; (ii) anticipated
generation of additional cash from operations during 2H in-line with prior
years and (iii) the expansion of credit facilities outlined above, the Group
will have more than $20 million in resources from which to execute its growth
strategy for any of the four layers of its capital allocation plan. Moreover,
the Group believes that even with today's transaction that it still remains
under-levered, with net debt to adjusted EBITDA of less than 1.0x, leaving the
Group with the ability to increase available resources further should the
opportunity arise. As part of the transaction, Plainsight Group will continue
to guarantee the bank debt while the Chairman's guarantee will no longer be
needed.

Shareholder Meeting

Water Intelligence will be sending out shortly its Notice of Annual General
Meeting, including seeking permission from independent shareholders to
authorise a repurchase of shares as part of the Group's wider capital
allocation strategy, and accompanying resolutions.

Executive Chairman, Dr. Patrick DeSouza commented: "We are excited by the
growth opportunities available to the Group in the marketplace. The demand for
water and wastewater solutions remains strong, especially given aging
infrastructure.

We remain both confident and prudent as stewards of our shareholders' capital.
In the Chairman's Statement, we set forth our decision-making principles for
allocating capital while factoring-in investment and execution risk.

Today's transaction supports our growth plan in a non-dilutive way. We
appreciate the support of our shareholders and look to grow EPS while building
a world-class multinational platform that provides solutions for aging water
infrastructure."

Michael Moulton, Relationship Manager, M&T Bank added: "We are happy to
support a long standing client of the bank, with this refinancing of their
capital stack."

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

Enquiries:

Water Intelligence plc

Laura Bass, Director, Strategic Finance
                                Tel: +1 203 584-8240

Grant Thornton UK LLP - Nominated
Adviser
   Tel: +44 (0) 20 7383 5100

Philip Secrett

Harrison Clarke

Ciara Donnelly

RBC Capital Markets - Joint Broker
 
Tel: +44 (0)20 7653 4000

Jill Li

Elizabeth Evans

Daniel Saveski

Dowgate Capital Ltd - Joint Broker
 
Tel: +44 (0)20 3903 7715

Stephen Norcross

 

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