gategroup refinances existing High Yield Bond, renews SAS contract and enters Kazakhstan

22 Oct 2015  2065 | World Travel News

ZURICH - gategroup Holding AG continues to drive important commercial and financial actions toward a more profitable future. Recent steps include the full refinancing of gategroup’s 6.75% coupon bearing EUR 250 million High Yield Bond leading to more than CHF 10 million annual savings, an expanded partnership with Scandinavian Airlines (SAS), and entering Kazakhstan – a first step into a fast-growing market.

New Facility with improved financial terms: annual savings more than CHF 10 million
gategroup Holding AG has signed a new five-year EUR 250 million unsecured Term Loan B (“Loan”), fully underwritten by ING.

Following the successful refinancing of its Revolving Credit Facility (“RCF”) in March 2015, gategroup has taken the final step in refinancing the remaining EUR 250 million 6.75% coupon bearing High Yield Bond at better terms. At the company’s current leverage level the annual interest cost of the new Loan is at below 3%, allowing savings of more than CHF 10 million per annum.

In conjunction with the bond repayment, an early repayment fee will be expensed in November 2015, with total one-off costs of about CHF 17 million, which are being compensated by total interest cost savings in excess of CHF 50 million over the term of the instrument. The new financing structure of gategroup now consists of a EUR 240 million RCF and the new EUR 250 million term loan, with total annual interest cost of about CHF 10 million at current utilization levels versus previous costs of about CHF 26 million.

This successful refinancing further reinforces gategroup’s ability to access the financial markets, and substantially decreases financial costs. The sizeable annual reduction in interest costs compared to the existing structure will trigger a substantial increase of Cash Flow and Net Earnings.

“Securing this new five-year term loan is an important cornerstone of gategroup’s plans to improve net earnings and cash flow. In conjunction with the successful refinancing of the Revolving Credit Facility in March of this year, this transaction completes the full refinancing of gategroup’s debt resulting in annual interest cost savings of about CHF 16 million,” said Christoph Schmitz, Chief Financial Officer of gategroup.

Commercial developments: Strategic Renewal of SAS
gategroup’s agreement with long-time customer SAS involves a seven-year contract combining a renewal of existing business originally due to expire in April 2016 with new partnership terms mutually focused on efficiency and cost-savings. The total value of the business over the life of the contract is more than CHF 650 million.

gategroup will continue to provide catering and provisioning services for SAS at seven Scandinavian airports – including the carrier’s three main hubs at Copenhagen, Stockholm/Arlanda and Oslo – and is taking on broader responsibility for SAS by covering end-to-end responsibility for the airline’s entire inflight supply chain. This expanded service includes full inventory management, ranging from forecasting and localized order fulfillment to product lifecycle management and invoice matching. gategroup will support worldwide distribution requirements for SAS through a central logistics facility strategically located in southern Sweden.

On an annual basis, gategroup serves 3,500 long-haul SAS flights as well as 130,000 short-haul SAS flights from Scandinavia.

Johan Mägi, SAS Director Onboard Product and Services, said, “gategroup’s track record of high-quality, consistent service throughout the network in Scandinavia was a key factor in the continuation of our partnership with gategroup, in addition to their ability to meet our cost and efficiency targets. SAS is happy to have found a ‘one stop’ solution provided by gategroup, which means having one partnership for the complete supply chain, culinary, assembly and last mile operation.”

Commercial developments: Entering Kazakhstan
gategroup established its presence at Astana International Airport in Kazakhstan through a partnership with the Airport Management Group, the operator of all state-owned airports in Kazakhstan. gategroup now provides inflight catering services at Astana to a broad base of diverse customers. The 3,000 square-meter facility has production capacity of up to 9,000 meals per day.

This cooperation provided gategroup with an immediate foothold in an attractive and growing market and offers airlines operating at Astana access to gategroup’s comprehensive lineup of services.

Conclusion
“The second phase of the refinancing together with the first phase already completed, with annual savings of about CHF 16 million, is another step in our focus on costs and efficiency, creating a stronger basis for growth. Additionally, we value our partnership with SAS and look forward to further extending the scope of the collaboration for another 7 years. Lastly, establishing a foothold in Kazakhstan is a decisive step in our focus to expand our presence in emerging markets,” said Xavier Rossinyol, gategroup Chief Executive Officer.

sourced:traveldailynews.asia 

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