New banking deal reduces William Hill's finance costs
William Hill PLC (LSE: WMH) (William Hill or the Group) announces that it has signed a new banking deal, entering into a five-year £550m committed revolving credit facility expiring in November 2015.
This new facility immediately replaces the Group's previous forward-start term loans and revolving credit banking facilities, which were due to expire in March 2012. The facility syndicate comprises 11 banks, of which 10 are existing relationship banks and one is a new entrant.
The new facility includes a financial covenant package in line with the previous facility agreement and will complement the Group’s existing £300m bond, giving the Group £850m of committed funds. As at 26 November 2010, drawn debt was £659m and net debt was c£484m on a bank covenant basis.
As a result of this agreement, the Group’s marginal cost of borrowing based on current three-month LIBOR is expected to be circa 3% in 2011. Overall finance costs are expected to reduce as a result of:
- lower amortisation of arrangement fees and associated costs;
- more cost effective cash management through the use of a revolving facility; and
- de-designation of the Group’s remaining effective interest rate hedging arrangements.
The Group expects to pay c£7m of arrangement fees and associated costs, which will be charged to the income statement over the life of the new facility. This delivers a significant year-over-year saving in annual amortisation costs. Commitment fees will also apply at normal commercial rates. With the move away from a term loan banking debt structure towards a revolver, the Group will reduce both its cash deposit levels and, as a result, its drawn levels of debt. This will further benefit the Group’s finance costs, given the current low levels of interest income on cash deposits.
As a result of entering into this new deal, the Group in 2010 will incur £7m of one-off non-cash exceptional costs arising from the accelerated amortisation of the fees related to the replaced deal. It will also incur an estimated £16m of exceptional costs in 2010 arising from the de-designation of the Group’s remaining previously effective hedges on the replaced loan agreements. This will leave the Group with no effective hedges in place, further reducing the Group’s ongoing ordinary income statement finance costs. This is a non-cash cost in 2010 and reflects the bringing forward of the currently expected remaining income statement costs linked to these hedge instruments. The hedges will remain in place on an ineffective basis and this accounting change will not alter the cashflows expected to arise in future periods from these instruments assuming no further valuation movements.
Neil Cooper, Group Finance Director of William Hill, commented:
“We are pleased to have completed this new deal with the support of our relationship banks, which provides the Group with a banking facility of longer duration and with an associated reduction in our ongoing ordinary finance costs. This gives the Group greater certainty and lower costs in regards to its financing arrangements, further strengthening our balance sheet position.”
William Hill PLC
Neil Cooper, Group Finance Director
Lyndsay Wright, Director of IR
Tel: +44 (0) 20 8918 3614
Simon Sporborg / Justine McIlroy
Tel: +44 (0) 20 7404 5959