FirstGroup signs £300m revolving credit facility

Embattled Aberdeen-based bus and rail giant FirstGroup plc said on Tuesday it has signed a new £300 million sustainability-linked revolving credit facility (RCF) with a group of its relationship banks.

FirstGroup also gave notice to the holders of its £325 million 5.25% bonds due November 2022 that it will exercise its right to repay them early.

The company’s CEO Matthew Gregory will step down at the company’s AGM on September 13, 2021.

FirstGroup’s biggest shareholder, New York-based hedge fund Coast Capital LLC, had called for Gregory’s departure following the recent £3.3 billion sale of the group’s North American businesses First Student and First Transit to Stockholm-based investment firm EQT Infrastructure.

Coast Capital had opposed the sale, arguing the price was too low.

“The RCF has an initial maturity of four years, with the option to extend by a further year subject to bank consent,” said FirstGroup.

“The covenants have been structured to reflect the future shape of the group and to give substantial headroom against them.

“The initial interest rate will be the Bank of England’s Sterling Overnight Index Average (‘SONIA’) interest rate plus 1%, and will thereafter vary according to two measures.

“The first of these is the group’s leverage; and the second is its performance against two sustainability KPIs, being the level of Scope 1, 2 and 3 emissions per £m of revenue from its First Bus and First Rail operations, and the relative growth of its zero-emission bus fleet in the UK.

“The new RCF replaces all the group’s former committed syndicated and bilateral banking facilities, which have recently been repaid and cancelled.

“The group has recently also repaid the UK Government’s Covid Corporate Financing Facility (‘CCFF’) commercial paper as well as all of its private placement debt, and will shortly give notice to the holders of its £325m 5.25% bonds due November 2022 that it will exercise its right to repay them early.

“The group’s £200m 6.875% bonds due September 2024 are not affected and remain outstanding.

“As previously outlined, the group expects to have pro forma adjusted pre IFRS16 net debt of c.£100m following all of the funds flows related to the First Student and First Transit transaction and the use of proceeds as set out in the circular and the announcement of completing the sale.”

FirstGroup CFO Ryan Mangold said: “The new sustainability-linked RCF and repayment of our CCFF commercial paper, 2022 bonds, and private placement notes completes the reorganisation of our debt arrangements following the recent sale of our North American contract businesses.

“This has been an important step that complements the rationalisation of the group and ensures that our debt arrangements are fit-for-purpose for our future development.

“We are pleased with the support shown by our relationship banks for our new facility, which has a clear link to our decarbonisation plans, including our commitment to operating a zero emission First Bus fleet by 2035.”

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