Auto Trader Group plc (LON:AUTO), the UK’s largest digital automotive marketplace, today announced its intention to conduct a non-pre-emptive placing of up to 46,468,300 new ordinary shares of one pence per share, representing approximately 5% of the current issued share capital of the Company, with institutional investors. The Placing will be conducted through an accelerated bookbuilding process which will be launched immediately following this announcement, in accordance with the terms and conditions of the Placing set out in the Appendix.
Rationale for the Placing and Use of Proceeds
The Group’s balance sheet is strong. At the end of February, the Group had drawings of £289 million from a £400 million revolving credit facility, with a net debt/EBITDA ratio of 1.1x, well below the covenant level of 3.5x. Covenants are tested in March and September and look at a rolling 12 month period. As well as debt cover, the test includes interest cover for which the last 12 months’ EBITDA must be at least 3x the net interest expense. The Group expects to meet the March 2020 test with significant headroom available. Looking forward to the Group’s September 2020 covenant test, the Board expects the Group’s net debt/EBITDA ratio to rise as a function of the free services being provided to the Group’s customers but will remain well below the maximum covenant threshold.
The Board believes it is important to support the Group’s customers and employees through this period of uncertainty. The Board also believes there may be attractive opportunities to strengthen the business in the immediate aftermath of the current crisis. The Board believes it is in the best long-term interests of all stakeholders to strengthen the Group’s balance sheet today and ensure the Group avoids constraints that might otherwise be imposed in the medium term in order to meet debt covenants.
Consequently, the net proceeds of the Placing will be used to strengthen the Group’s balance sheet and liquidity position, support all stakeholders, increase the Group’s flexibility to take advantage of future opportunities, and increase certainty around meeting covenant tests in future years. Furthermore, this equity raise will allow the Group to resume its existing capital return policy at the earliest prudent opportunity.
Update on Current Trading
Auto Trader has separately today provided a trading update in light of the evolving COVID-19 pandemic. This update details action already taken by the Group to support customers, as previously announced on 19 March 2020, as well as further actions to be taken by the Group to reduce costs during this time of uncertainty.
Details of the Placing
BofA Securities is acting as sole bookrunner and corporate broker in connection with the Placing.
The Placing is subject to the terms and conditions set out in the Appendix (which forms part of this announcement, such announcement and the Appendix together being the “Announcement“). BofA Securities will today commence a bookbuilding process in respect of the Placing (the “Bookbuilding Process“). The price per ordinary share in the Company at which the Placing Shares are to be placed (the “Placing Price“) will be decided at the close of the Bookbuilding Process. The book will open with immediate effect following this Announcement. The timing of the closing of the book, pricing and allocations will be at the discretion of BofA Securities and Auto Trader. Details of the Placing Price and the number of Placing Shares will be announced as soon as practicable after the close of the Bookbuilding Process.
The Placing Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing ordinary shares in the Company, including the right to receive all dividends and other distributions declared, made or paid after the date of issue. The number of Placing Shares will not exceed approximately 5.0% of the current issued share capital of the Company.
Applications will be made for the Placing Shares to be admitted to the premium listing segment of the Official List (the “Official List“) of the Financial Conduct Authority (the “FCA“) and to be admitted to trading on the main market for listed securities of London Stock Exchange plc (the “London Stock Exchange“) (together, “Admission“). Settlement for the Placing Shares and Admission is expected to take place on or before 8.00 a.m. on 3 April 2020. The Placing is conditional, among other things, upon Admission becoming effective and the placing agreement between the Company and BofA Securities (as sole bookrunner) (the “Placing Agreement“) not being terminated in accordance with its terms. As part of the Placing, the Company has agreed that it will not issue or sell Ordinary Shares for a period ending 180 days after Admission, without the prior written consent of BofA Securities. The Appendix sets out further information relating to the Bookbuilding Process and the terms and conditions of the Placing.
The Company has consulted with a number of its leading shareholders regarding the rationale for the Placing and its non-pre-emptive nature ahead of this announcement. The Board’s belief that the Placing is in the best interests of shareholders and will promote the success of the Company has been strengthened by these discussions.
The proposed issue and allotment of the Placing Shares is within the existing shareholder authorities granted to the Company at its Annual General Meeting held on 19 September 2019.
This Announcement should be read in its entirety. In particular, you should read and understand the information provided in the “Important Notice” section of this Announcement. Investors will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making an offer to subscribe for Placing Shares on the terms and conditions and providing the representations, warranties, acknowledgements and undertakings contained in the Appendix.