Duke Royalty enters management buyout funding deal with Fabrikat

(Sharecast News) - Alternative capital provider Duke Royalty has entered into a £6.2m royalty financing agreement with Meteor HoldCo, it announced on Tuesday, which undertakes business as Fabrikat.

The AIM-traded firm said Fabrikat, formed in 1985 and based in Sutton-in-Ashfield, is a fabricator of steel products supplying the UK street lighting and guardrail markets.

It said the deal had an initial cash yield of about 14% per annum via monthly payments, which would begin immediately.

The agreement was for 30-year secured financing, with distributions to be adjusted annually to reflect Fabrikat's consolidated revenue growth, on "typical" Duke terms.

Duke said Fabrikat had a long history of steady turnover and profitability, providing street lighting columns, guardrails and more bespoke products to local councils around the UK via contractors and original equipment manufacturers.

The company's investment would facilitate a management buyout of two shareholders who, in recent years, had handed over the day-to-day running of the business to the current management team, which it said had a combined tenure in the business of more than 60 years and led all aspects of Fabrikat's operations.

As part of the recapitalisation, Duke said it would receive a 30% equity stake in the business.

"Fabrikat is a well-managed business with a long standing track record of profitability, making it an ideal royalty partner for Duke," said chief executive officer Neil Johnson.

"The business' long history of growing market share and its ability to withstand and successfully navigate challenging environments, including the recent turbulence created by the pandemic, makes us confident of the company's short and long-term future prospects."

Johnson said the firm's support of the management buyout reflected its confidence in the management team's ability to continue the success achieved to date.

"Additionally, with Duke's existing credit facility with Pollen Street Capital, we are well-positioned to make more investments in the coming months as we focus on capitalising on the increasing demand for long term, flexible sources of finance."

At 1203 GMT, shares in Duke Royalty were up 4.04% at 29.65p.