Viva Leisure Expands Banking Facilities to Unlock Significant Free Cash Flow
VVA (VVA) Share Update August 2024 Sunday 11th
Viva Leisure Secures Expanded Banking Facilities to Boost Free Cash Flow
Viva Leisure Limited (ASX: VVA) has announced a major expansion of its banking facilities, which is set to significantly boost the company's free cash flow and support its strategic growth initiatives.
Instant Summary:
- New banking facilities increased from $118 million to $165 million.
- Additional $50 million accordion facility available.
- Free cash flow expected to improve significantly.
- Facilities to be used for acquisitions, equipment finance, and greenfield site funding.
- New terms include reduced fees and extended facility term.
New Banking Facilities
Viva Leisure Limited has secured new banking facilities from the Commonwealth Bank of Australia, increasing its total available financing from $118 million to $165 million. Additionally, a $50 million accordion facility is available, subject to certain conditions, bringing the total potential financing to $215 million.
The new facilities include a $130 million Revolving Interest Only Cash Advance Facility (Facility A) for funding permitted acquisitions, greenfield sites, and capital expenditure. There is also a $35 million Bank Guarantee facility (Facility B). The expanded facilities are expected to release significant additional free cash flows through more favorable repayment terms.
Key Facility Terms
The facilities are to be syndicated, with Facility A providing approximately $70 million of headroom based on existing balances as of 30 June 2024. Facility A is interest-only, with principal reductions removed, alleviating a significant burden on cash resources. The new terms also include a margin reduction of approximately 74 basis points for Facility A and a slight increase of approximately 44 basis points for Facility B, with a new 3-year term.
Strategic Growth and Expansion
The enhanced facilities align perfectly with Viva Leisure's growth strategy, allowing the company to pursue acquisitions, equipment finance, and greenfield site funding. The facilities are also available in New Zealand Dollars, opening up new opportunities for potential expansion into the New Zealand market.
CEO and Managing Director Harry Konstantinou commented, 'The support and validation from Commonwealth Bank is a major milestone for Viva Leisure, particularly with the significant increase in free cash flow, which will be instrumental in driving our strategic growth. The improved terms and expanded facilities position us exceptionally well to capitalize on future opportunities, including potential expansion into New Zealand.'
Next Steps
The company has signed off its 'Credit Approved Term Sheet' and will now proceed to finalizing the long-form loan agreements. Further details will be provided at the Full year results release on 14 August 2024.
The expanded banking facilities are expected to have a positive impact on Viva Leisure's stock, as the increased financial flexibility and improved cash flow will support the company's growth initiatives. The removal of principal reductions and reduced fees will further enhance the company's financial position, making it more attractive to investors.
Investor Reaction:
Analysts are likely to react positively to the announcement, as the expanded facilities and improved terms demonstrate strong support from the Commonwealth Bank of Australia. The potential for increased free cash flow and strategic growth opportunities, including expansion into New Zealand, will be seen as favorable developments for the company.
Conclusion:
Investors should keep an eye on Viva Leisure's upcoming Full year results release on 14 August 2024 for further details on the new banking facilities and their impact on the company's financial performance. The expanded facilities and improved terms position Viva Leisure well for future growth and strategic initiatives.