CML Group expands funding facility to $120m

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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