(Sharecast News) - Alternative capital provider Duke Royalty has entered into a £5m royalty financing agreement with New Path Fire and Security, it announced on Friday, further diversifying its revenue base.
The AIM-traded firm said New Path was executing a buy-and-build strategy of "synergistic companies" within the fire and security services sector in the UK, having completed seven acquisitions across southern England
It said New Path's underlying businesses had good visibility of revenue, with a "significant" recurring portion and "highly predictable" maintenance income across a "very broad" customer base.
Duke said its initial £5m royalty financing would be used to acquire two complementary businesses under exclusivity, and refinance the existing senior debt in the business, with "attractive" pro forma credit metrics.
The company agreed a total funding commitment of up to £20m to support New Path's buy-and-build strategy.
It added that the agreement was on its "typical" terms, with 30-year secured financing, monthly cash payments starting in the typical range, and the distributions starting immediately with annual adjustments to reflect New Path's consolidated revenue growth.
Duke would also become a 15% equity shareholder in New Path, to build a "strong alignment" with the royalty partner.
"Duke is excited to be partnering with New Path Fire and Security to support their buy-and-build strategy," said chief executive officer Neil Johnson.
"The fire and security sector is both admirable in its principal cause to protect assets and lives, as well as highly attractive with regards to its anti-recessionary attributes.
"New Path has acquired a group of quality operating businesses and we look forward to helping them to continue consolidating a mission-critical sector."
At 1253 GMT, shares in Duke Royalty were up 1.49% at 34p.
Reporting by Josh White for Sharecast.com.
Duke Capital (DUKE)