The Australian Securities Exchange (ASX) listed SME finance provider also said that it negotiated improved terms, including a 5 per cent reduction in capital support requirements.
The original $40 million facility was fully drawn after CML Group’s $39 million acquisition of Thorn Debtor Finance (TDF).
The group — which provides debtor finance, invoice finance, invoice factoring and equipment finance to SMEs — said that increasing the size of the facility will allow it to repay the $40 million corporate bond to FIIG Securities, which leaves “$40 million of headroom to support continued organic growth”.
As a result of the expansion, CML’s cost of debt has been “substantially” reduced, with its recurring annual pre-tax interest saving in FY2019 expected to exceed $2.5 million.
“This cost saving incorporates lower interest on the replacement of [the FIIG corporate bond] with the facility, interest cost saving on conversion of convertible notes to equity in October 2017, plus a more efficient facility structure requiring less interest-bearing cash to be held in reserve,” CML said in a disclosure to the ASX.
“Incremental business volume, including the recent acquisition of TDF and organic growth, will further leverage the cost-benefit of the facility, with the average cost of debt across the expanded business expected to reduce by 300bps in FY2019 compared to FY2018.”
The early buy-back of the corporate bond will result in a one-off write-down of unamortised costs of $1.07 million in addition to a $1.6 million penalty for early repayment, CML said.
According to its disclosure, CML’s divisions are performing better than expected, with the finance provider reaffirming its guidance of $1.1 billion in invoices purchased and $15.5 million in earnings before interest, taxes, depreciation and amortisation (EBITDA) in FY2018.
These figures are expected to increase to $1.5 billion in invoices purchased and $19.5 million EBITDA in FY2019.
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Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.