The owner of two Scottish fabrication yards has entered into a debt refinancing agreement as it seeks to grow the business.
London-listed Harland and Wolff (AIM: HARL) and Astra Asset Management UK have struck a deal for £70 million, with a view to increasing that to £100m.
The cash will allow for the refinancing of the group’s existing debt with asset manager Riverstone Capital Partners (RCP) in full.
It will also finance future spend and cover Harland and Wolff’s working capital requirements.
The new credit facility will run for a period of two years, with three annual extension options.
Once financial close is reached, it is expected that this new agreement will be on better economic terms than the arrangement with RCP.
However, that is contingent on any further movements of the Bank of England’s Base Rate, as well as other market movements prior to rubber stamping.
On top of allowing Harland and Wolff, which owns and operates site in Methil, Fife, and the Isle of Lewis, to restructure its debt, this facility will give it “enhanced financial headroom and flexibility”.
That will allow the company to grow, while also fulfilling its expected current and future contractual obligations.
John Wood, chief executive of Harland and Wolff, said: “We are delighted to be entering into this new facility and partnership with Astra. The enhanced financing will be incredibly useful to meet our capital expenditure and working capital obligations towards some key and large contracts that we have been negotiating over the last 18 months, due to come to fruition in the next couple of quarters.”
As part of the transaction, Astra will be issued 15 million warrants over new ordinary shares in Harland and Wolff at an exercise price of just over 6 pence per share.
Said warrants will expire in 60 months from the date of issue, the date of financial close should the credit facility be extended on an annual basis.
Financial close of the deal is expected within four to six weeks, and the company will make further announcements in due course.
Mr Wood added: “As a UK based private debt lender, Astra are intimately aware of local dynamics of shipbuilding, levelling-up and energy security and we look forward to closing this transaction with Astra within the agreed timescales.”
Harland and Wolff acquired the Methil and Arnish fabrication yards in 2021 after their previous owner, Burntisland Fabrications (BiFab), collapsed.
The company quickly secured a contract with Saipem to manufacture eight wind turbine generator jackets for the Neart na Gaoithe wind farm, offshore Fife.
But it was recently revealed that the pair had agreed to reduce the scope of the deal after they “recognised the difficulties in meeting the project schedules”.
Going forward Harland and Wolff said it would focus on “smaller contracts”.