Bigblu Broadb. Regulatory News (BBB)

Bigblu Broadband plc

("BBB" or the "Company" or the "Group")

Refinancing of Existing Debt Facilities

Significant Reduction in Cost of Debt and Net Interest Payments

Increased Value for Shareholders by Enhancing Free Cash Flow and Increasing EPS

Bigblu Broadband plc (AIM: BBB.L), a leading provider of alternative fast broadband services, has agreed a new £30m revolving credit facility with Santander Bank UK plc. This will be used to replace the two tranches of loan notes totalling £12m issued in 2016 by Business Growth Fund ("BGF") (the "Loan Notes") and the Group's £10m revolving credit facility with HSBC plc (the "HSBC Facility") and to provide additional working capital to support the Group.

The Company also announces that HSBC will continue to provide a £4m revolving credit facility and operational banking support to the Group's UK fixed wireless subsidiary QCL Holdings Limited ("QCL").

This provides the Group with combined facilities of £34m with Santander and HSBC.

The facility with Santander is a 3-year loan agreement with an option to extend for up to a further 2 years. Interest terms are on a ratchet to LIBOR according to the Group's net leverage ratio. This replaces, in its entirety, the BGF Loan Notes which bore interest at a fixed coupon, and the HSBC Facility which had an interest charge at a margin related to LIBOR. As a result, there will be a significant reduction in the Group's annual cost of debt and net interest payments. Further details on the BGF Loan Notes and HSBC Facility are included at the end of the announcement.

BGF continues to own 4.5m shares in BBB. As part of BGF's initial subscription for the Loan Notes in 2016, BGF had options over 4.9m ordinary shares at an exercise price of 112.5p, expiring August 2021, and a £2.4m convertible Loan Note convertible at an exercise price of 135p per share. As part of the refinancing, BBB has agreed to extend the 4.9m options to May 2024 and granted BGF an additional 1.8m options at an exercise price of 135p expiring May 2024 to replace the conversion rights within the £2.4m convertible Loan Note which is being redeemed in full. This is beneficial to the Company as the redemption premium would otherwise have been payable immediately on early redemption.

BGF has also agreed to defer the repayment of the £5.5m redemption premium on the Loan Notes from May 2021 to May 2024 to align with the options above.

Impact of Refinance

The Board is pleased to announce a number of key benefits as a result of the agreement with Santander, which effectively enables it to re-finance debt with a coupon of 10% with a more flexible revolving credit facility with a margin of only 3-4%.

As such, the refinancing of existing debt facilities will support the Group for the next stage of its growth strategy and will:

·; reduce the Group's cost of debt;

·; provide additional funding headroom to support accelerated growth;

·; provide a simplified capital and covenant structure;

·; defer amortising principal repayments under the BGF Loan Notes and HSBC Facility which will enhance cash flow; and

·; improve our free cash flow and increase our EPS via reduced finance charges, which the Directors believe will increase value for shareholders.

Andrew Walwyn, CEO of BBB plc, said: "I am delighted an institution such as Santander has recognised the progress BBB has made and the strong position the Company is in. Being able to secure such attractive funding to supplement our increasingly cash generative business immediately following a successful FY19 financial year positions us well to continue our ambitious growth plans in FY20 and shows how robust the business model we are building has already become.

"We are delighted that the increasing maturity of our organic growth model has enabled us to attract such good terms, which puts us on an even stronger footing to execute our strategy while increasing value for shareholders. We wish to thank BGF and HSBC for their ongoing support of the Group and look forward to continuing our strong relationship going forward."

Sean Longsdale, Managing Director, Structured Finance Group, Santander Corporate & Commercial, said: "BBB plc has an excellent track record and is well-placed to benefit from continued improvements in satellite and fixed wireless technology. We are delighted that Santander was chosen as a banking partner and to be supporting such a high growth international business, to realise their continued ambitions."

Previous debt facilities

BGF

BBB entered into funding agreement with BGF in July 2016 pursuant to which BGF provided a total investment of £12.0 million by way of a subscription for unsecured loan notes, comprising £9.6 million ordinary notes and £2.4 million convertible notes (convertible at 135p per ordinary share).

The ordinary notes and convertible notes carry a fixed coupon of 10% per annum, with interest payable quarterly in arrears, and are repayable from May 2021 with bi-annual principal repayments which end on maturity at 31 May 2024.

A redemption premium of £5.5m is also payable on 31 May 2021. 

BBB also agreed to grant BGF an option to subscribe for 4,934,661 new ordinary shares exercisable at 112.5p per share at any time, with proceeds of £5.5m to offset the redemption premium payable. The option lapses on whichever is the earlier of 31 August 2021, redemption of the loan note, or completion of a change of control.

BBB has the ability to repay both sets of Loan Notes early with the prior consent of BGF, but subject to an early redemption payment equivalent to 12 months' interest.

BBB has given various covenants to BGF regarding the conduct of its business, typical of those required by lenders to growth companies.

Upon completion of the refinancing, the BGF Loan Notes are to be repaid in full.

HSBC - BBB facility

In March 2017, BBB secured a £5.0m HSBC revolving credit facility. This was subsequently extended to £8.25m in April 2018 and again to £10.0m in August 2019, in order to support continued growth.

As at November 2019 the total utilisation on the facility was £8.25m, which has been drawn for both acquisitions and working capital.

Upon refinancing this facility is to be repaid in full, and security over Group subsidiaries will be discharged.

New facility - Santander RCF

A new £30m revolving credit facility (RCF) for an initial 3-year term, extendable by 1 year on up to two occasions (at the option of BBB).

There are no annual clean down payments required.

Interest margin on LIBOR ratchets according to prior quarter's net leverage ratio (Net Debt / LTM EBITDA), and the cost of debt is therefore expected to reduce as net debt decreases over the term of the loan.

The facility includes customary covenants, including:

·; Net Leverage (Net Debt / 12m EBITDA)

·; Interest cover

·; Capex control linked to budgets

The Security on the facility will entail cross-guarantees from material Group companies, although QCL and its subsidiaries are carved out and not regarded as a Borrower or part of the Group for the loan purposes.

Santander will also acquire first ranking security (share pledge) over BBB's shares in QCL.

Refinancing highlights

BGF have granted consent to the refinancing of the £12m in principal Loan Notes on the following terms:

·; Deferral of the £5.5m redemption premium previously due at the earlier of redemption of the notes or May-21, but now deferred until May-24.

·; Preservation and extension of the existing share options over 4.9m shares at 112.5p from current expiry date of Aug-21 to May-24, therefore keeping them aligned to the redemption premium with the expectation of a cashless settlement of the redemption premium in shares.

·; Issuance of new options as replacement for the convertible loan note of £2.4m to be redeemed, on the same terms as the original loan conversion of 1.8m shares at 135p.

The initial refinancing drawdown of c. £22.9m includes repayment of the BGF and HSBC principal, the BGF early redemption charge, fees and working capital.

When compared against the previous BGF Loan Notes and HSBC Facility, over the five-year period to 2024 the refinancing is expected to result in estimated total net cash benefit of c. £14m to the Group arising from:

o c. £2.0m cash savings due to the lower interest margin; and

o £12m arising from deferral of the scheduled BGF principle repayments to May-24.

The current P&L interest charge includes BGF interest rate of 10% on the £12m Loan Notes, the effective interest charge for the of the £5.5m redemption premium over the life of the instrument (July 2016 to May 2024) and the HSBC facility finance charges. The Santander RCF reflects a lower and simpler variable interest margin over LIBOR (which depends on the Group's net leverage ratio). This is expected to result in finance savings of c. £2.0m over the five-year period to FY24.

Group headroom immediately post-refinancing equals c. £13.1m, being c. £7.1m unused Santander RCF and c. £6m cash. This reflects an immediate headroom increase of £5.35m against the current headroom of £1.75m on the HSBC Facility.

Quickline is carved out and will maintain its existing £4m RCF facility with HSBC, which has a separate and distinct security package.

About Bigblu Broadband plc

Bigblu Broadband plc (AIM: BBB), is a leading provider of alternative super-fast satellite and fixed wireless broadband solutions for consumers and businesses unserved or underserved by fibre broadband throughout Europe and Australia.

BBB has a significant target market with 27m customers in Europe with speeds of under 4 Mbps, and a further 1m in Australia who have been identified as only suitable for either satellite or fixed wireless broadband. Acquisitive and organic growth have enabled BBB to grow rapidly since inception in 2008 during which me BBB has completed 20 acquisitions across nine different countries. It is well positioned to continue growing as it targets customers that are trapped in the 'digital divide' with limited or no fibre broadband options.

 BBB's range of solutions includes satellite, next generation fixed wireless and 4G/5G, delivering between 30 Mbps and 300 Mbps for consumers, and up to 1 Gbps for businesses. It provides customers with ongoing services from hardware installation and billing to post-sale customer support, whilst offering various tariffs depending on end user requirements.

Importantly, as core technologies evolve and cheaper capacity is made available, BBB will continue to offer ever increasing speeds and higher data throughputs to satisfy market demands including 'video-on-demand'. BBB's alternative broadband offerings present a customer experience that is similar to that offered by wired broadband and the connection can be shared in the normal way with PCs, tablets and smart-phones via a normal wired or wireless router. High levels of recurring revenue, increasing economies of scale and Government support for the alternative broadband market in many countries provides a solid foundation for BBB as demand for alternative super-fast broadband services increases around the world.