Village Roadshow Entertainment Group (ASX:VRL) announced it has completed new corporate debt facility totalling US$325 million, refinancing its existing corporate debt facility and providing additional working capital. The Village Roadshow Pictures (VRP) division of Village Roadshow Entertainment Group (VREG) has also launched a renewal of its US$750 million film production facility, which finances VRP’s library of titles co-produced with Warner Bros., Sony, and other major distributors, expected to complete in the next month or so.
Part of the US$325 million VREG corporate debt financing is subordinated debt financing of US$25 million, repayable by September 2021. Village Roadshow Limited (VRL) has contributed US$15 million of subordinated debt. The subordinated debt is entitled to cash interest of 6% p.a., plus non-cash interest of 9.5% p.a. payable upon repayment of the debt. The subordinated debt ranks ahead of all equity. The subordinated debt holders have been issued non-voting shares in VREG which carry entitlements to 9.5 % of all future distributions to VREG shareholders.
Accounting standards for equity accounting, coupled with VREG’s accounting losses, will require VRL to immediately write of its subordinated debt investment in VREG, despite the company’s confidence in the underlying value of this additional net investment. This accounting losses of approximately A$20 million will be disclosed with material items in VRL’s FY15 results.
As part of the VREG refinancing, VRL’s existing non-voting redeemable shares in VREG, with a current redemption value of approximately US$148 have been converted to preferred equity, accruing a 14% p.a. non-cash dividend, with redemption by March 2022.
VREG’s ordinary share capital will not change, and VRL retains its holdings of 47.12% of the ordinary shares.
VRL’s share price has declined marginally over the last 12 months, down 0.85%. The share price lost some ground following disappointing half year results in February, however made up all the losses with strong full year results in August, and is currently the stock is trading $6.96.
Author: Ben Visser
Sep 15, 2015
Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.