Industrial and electronic products and solutions provider RS Group had a three-year £300m RCF that had been negotiated in November 2020 with eight banks when the markets had partially recovered, following the initial pandemic. The deal was subsequently converted to a sustainability-linked loan (SLL), but a decision was required during summer 2022 to trigger the expensive lender option extension that was available if desired.
The business had announced the acquisition of Risoul, a Mexican business. With this in mind, and although the facility was undrawn, it was felt that the previous facility was insufficient to match the ambitions of the business. Indicative pricing from the banks was very wide, reflecting volatility in the markets, but seemed to have yet to catch up with the explosion in bond pricing.
After consulting with existing banks and new potential lenders during the summer it was decided to seize the window of opportunity and launch an ‘amend and restatement’ RCF. A Term Sheet was agreed with pricing the same as the previous deal apart from reduced extension fees and the benefit of the arrangement fee spread over a longer period.
Credit approval was obtained for a total of £400m spread evenly across 11 banks. The new banks – Citibank, BBVA and Bank of China – would neatly cover ancillary gaps, notably in Mexico.
The RCF remained an SLL, plus RS Group was able to refresh metrics to reflect overachieving on carbon emissions in its first two years. The SLL has three metrics relating to carbon emissions, packaging intensity and gender diversity.
The treasury team worked closely with RS Group’s ESG team to align financing with its ESG strategy. One of RS Group’s five strategic priorities is “reinvestment to accelerate growth”. M&A is an important part of its strategy – it has significantly strengthened its M&A team over recent years and now has a strong pipeline of targets. Having access to further committed undrawn funding puts it in an excellent position to move quickly should opportunities arise.
“A key driver of the deal was to make sure the company had flexibility in its capital structure. They successfully brought in three new banks at a time of increasing headwinds, while finding stretching ESG metrics.”
Capital & Counties Properties plc
As part of the proposed all-share merger between Capital & Counties Properties plc and Shaftesbury plc announced in June 2022 and approved by shareholders in July 2022, Capital & Counties put in place a £576m backstop unsecured loan facility, provided by three banking partners, to support the redemption of all or part of the Shaftesbury Mortgage Bonds that may be put as a result of a change-of-control trigger. The backstop loan facility was particularly notable, given the flexibility achieved in the structure and the competitive pricing terms off the back of COVID and ahead of the UK recessionary environment.
