Canadian alternative equity firm Alaris Royalty Corp has committed an additional US$13.5 million to Federal Resources Supply Co, a Stevensville, Maryland provider of mission-critical solutions to defense, first-responder, homeland security and maritime end-users. It also committed an additional US$7 million to Sandbox Group LLC, a Chicago marketing and advertising services specialist. The proceeds of the investments will support acquisitions. Alaris also expects to close a US$15 million contribution to a new partner this month. The latest deal will bring the firm’s total deployments in 2017 to a record $195 million.
Alaris Royalty Corp. Announces US$20.5 Million of Contributions to Existing Partners, a Pending Contribution of US$15.0 Million to a New Partner, Increased Credit Facility and a $2.0 Million Increase in Distributions Following Distribution Resets
CALGARY, Alberta, Dec. 18, 2017 (GLOBE NEWSWIRE) — Alaris Royalty Corp. (“Alaris” or the “Corporation”) (TSX:AD) is pleased to announce the following (all numbers presented in Canadian dollars unless otherwise noted): (i) capital deployment of US$35.5 million consisting of US$20.5 million to two existing partners as well as a pending US$15.0 million transaction with a new partner bringing year to date capital deployment to a record of approximately $195 million; (ii) an increase to the base credit facility to $300 million from $200 million pending final syndicate approval, which will provide Alaris with approximately $120 million of undrawn capacity to deploy into new and existing partners; and (iii) expectations for a $2.0 million increase to annual distributions based on expected resets from certain partners effective January 1, 2018. The cumulative impact of today’s announcements are a $0.13 cent (after tax) increase in distributable cash per share as well as a run rate payout ratio below 90%.
Alaris has made a follow-on contribution to Federal Resources Supply Company (“Federal Resources”) in the amount of US$13.5 million (CAD$17.4 million) (the “Additional Federal Resources Contribution”), bringing cumulative total contributions to Federal Resources to US$67 million (CAD$84 million). The Additional Federal Resources Contribution was in exchange for additional annual distributions of US$1.76 million (approximately CAD$2.26 million) (the “Additional Federal Resources Distributions”). Alaris also made a follow-on contribution to Sandbox Acquisitions, LLC (“Sandbox”) in the amount of US$7.0 million (CAD$9.01 million) (the “Additional Sandbox Contribution”), bringing cumulative total contributions to Sandbox to US$35 million (CAD$46 million). Alaris made the Additional Sandbox Contribution in exchange for additional annual distributions of US$1.0 million (approximately CAD$1.29 million). Federal Resources used the proceeds to partially fund an acquisition while Sandbox used the proceeds to fund a performance earn out in connection with a prior acquisition.
Alaris is also expecting to close a US$15.0 million contribution to a new partner before year-end in exchange for an annual distribution of US$2.25 million. This transaction is subject to completion of definitive agreements. Following the closing of this pending transaction, Alaris will have contributed a total of approximately $195 million in 2017, a record for gross capital deployment in a single year.
In addition to the above, Alaris is pleased to also announce the following amendments to, and extension of, its senior credit facility (the “Facility”): (i) an increase in capacity from $200 million to $300 million, with the current additional $50 million accordion facility remaining in place, leaving approximately $120.0 million of additional capacity on the Facility as well as the $50 million accordion feature; (ii) the term of the Facility being extended for another year to December 2021; and (iii) increasing the permanent leverage covenant from 1.75x EBITDA to 2.5x EBITDA, and the bridge covenant (for 90 days following certain approved transactions) from 2.25x EBITDA to 3.0x EBITDA. There continue to be no amortization payments and pricing will also remain the same. The amendments to the Facility are subject to final syndicate approval and completion of definitive agreements. However, the co-leads of the syndicate have received credit committee approval.
Finally, due to the continued strong performance from the majority of Alaris’ partners, Alaris is expecting an increase in annual distributions of over $2.0 million effective January 1, 2018 (subject to final confirmation of audited numbers) as a result of expected net positive distribution resets. After tax, an increase to distributable cash per share of approximately $0.05 is expected for fiscal 2018 from the positive distribution resets and a further approximately $0.08 per share as a result of the Additional Federal Resources Contribution, the Additional Sandbox Contribution and from the pending US$15.0 million transaction announced earlier in this release. Upon completion of the pending US$15 million contribution to a new partner, and all other items disclosed today, Alaris expects to have a run rate payout ratio below 90% and approximately $120 million of undrawn capacity on its Facility.
“We are very pleased to be announcing four very meaningful transactions before year end. The contributions to current partners Sandbox and Federal Resources to support acquisition growth as well as adding another new partner brings our total capital deployment for 2017 to over $195 million. This is the highest level of deployment in the 14 year history of our company. Just as importantly, we are very pleased with the support of our Canadian banking syndicate who have shown their confidence in our business model. Having more than $120 million of capital to deploy on new deals puts us in a very strong position heading into 2018. Finally, the significant upward resets from our partner distributions reflects the strong performance of our portfolio. All of these updates are significant in bringing us to our short term goal of an 80% payout ratio and growing our dividend,” said Steve King, President and CEO, Alaris Royalty Corp.
ABOUT THE CORPORATION:
Alaris provides alternative financing to the Partners in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Distributions from
the Partners are adjusted each year based on the percentage change of a “top line” financial performance measure such as gross margin and same-store sales and rank in priority to the owners’ common equity
For further information please contact:
Vice President, Investments and Investor Relations
Alaris Royalty Corp.
P: (403) 221-7305
Suite 250, 333 24th Avenue S.W.
Calgary, Alberta T2S 3E6
Photo courtesy of Reuters/Carlo Allegri