Nursery & Childcare Market News - 01 July 2006
Nord Anglia’s S&L deal to reduce debt
Nord Anglia’s S&L deal to reduce debt
Nord Anglia Education plc has completed a £12.5m sale and leaseback deal with the PINE fund involving seven of its settings.
The UK’s largest nursery group will continue to operate nursery businesses on the five freehold and two long leasehold sites that the PINE fund has acquired. Nord Anglia is to enter into 25-year leases with the fund on the seven properties.
Nord Anglia says the proceeds from the sale will be used primarily to pay down bank debt of £10m six months ahead of schedule. Following these transactions the financial structure of the company will no longer be subject to ‘special conditions’. The balance is to be used for ‘general corporate purposes’.
Chief executive, Andrew Fitzmaurice told NCMN that Nord Anglia chose the nurseries purely on their market value to make up the £12.5m that the company needed to raise. He said that there was ‘nothing about them in particular’ in terms of size or location but, at the time of going to press, Nord Anglia would not disclose the names of which settings are to take part in the deal.
Mr Fitzmaurice said that the decision was ‘very much about how the company was financed and not about the strategic future of the nurseries division’. The company decided to raise finance following a profit warning in March 2005. Its bank wanted Nord Anglia to reduce its level of debt and one way was a bullet payment at the end of this year. When the sale and leaseback opportunity occurred, it decided to carry out the transaction six months early.
Managing partner of Nexus Pine LLP, which managers the PINE fund, Alan Proto, said that this transaction took under a month to complete from original discussions with Nord Anglia to the exchange of contracts. Together with other transactions due to be completed this week, this deal sees £30m of the £50m fund already invested.
Mr Proto told NCMN: ‘I think the fact that we have spent £30m out of £50m, means we are patting ourselves on the back. It is in line with expectations but we had very high expectations. It is part of our plans to expand.’ The fund, which has been operating for one year, will continue to invest and management is very excited by the interest from the market place, particularly as PINE has completed deals with all sizes of operators.
He said that, while last year was tough financially for operators, things in the market are picking up and operators are reviewing their finances as a way to go forward. Market consolidation is back on many providers’ agendas.
Earlier in the year (NCMN February 2006), major provider Busy Bees completed a £2.2m sale and leaseback deal on two medium-size nurseries in Hertfordshire, which it now operates on 30-year leases.
