/NOT FOR DISTRIBUTION IN THE UNITED
STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY
CONSTITUTE A VIOLATION OF UNITED
STATES SECURITIES LAW/
CALGARY, AB, Feb. 9, 2021 /CNW/ - (all numbers in this
release are in Canadian ("CDN") unless otherwise noted)
Alaris Equity Partners Income Trust (the "Trust" or
"Alaris") (TSX: AD.UN) is pleased to announce that its
wholly owned subsidiary, Alaris Equity Partners USA, Inc. (collectively with the Trust and its
other subsidiaries, "Alaris") has made an investment of
US$66.0 million (the "B&S
Investment") into Brown & Settle Investments, LLC and a
subsidiary thereof (collectively, "B&S" or "Brown
& Settle"). Alaris is also pleased to announce that
it has entered into an agreement with a syndicate of underwriters
(the "Underwriters") to purchase, on a bought deal basis,
4,687,500 trust units (the "Trust Units") from Alaris at a
price of $16.00 per Trust Unit for
aggregate gross proceeds of $75.0
million (the "Offering"). Lastly, Alaris and its
syndicate of senior lenders (the "Lending Syndicate") have
agreed to an amendment (the "Amendment") to its credit
facility (the "Facility") that will see the Facility
permanently increased from $330.0
million to $373.0 million.
Following the B&S Investment Alaris has deployed approximately
$135 million in 2021. Alaris is also
pleased to announce that it is estimating Q4, 2020 revenue to beat
guidance by approximately $1.0
million increasing from $31.0
million to approximately $32.0
million primarily as a result of dividends declared on
Alaris' common equity investments in Amur Financial Group Inc.
("Amur") and Carey Electric Contracting, LLC
("Carey").
B&S Investment
On February 9, 2021, Alaris made
the B&S Investment of US$66.0
million into Brown & Settle, which consisted of: (i) an
aggregate of US$53.7 million (the
"B&S Preferred Contribution") of combined subordinated
debt and preferred equity, entitling Alaris to an initial
annualized distribution of US$7.5
million (the "B&S Distribution"); and (ii)
US$12.3 million for a minority common
equity ownership in B&S. The B&S Distribution is expected
to be the equivalent to a pre-tax yield of approximately 14%.
Commencing on January 1, 2022, the
B&S Distribution will be adjusted annually based on the
percentage change in gross revenue over the most recently completed
12-month period versus the prior 12-month period (January 1, 2022 adjustment will be based on
fiscal 2021 vs fiscal 2020), subject to a collar of 6%.
Based on Alaris' review of Brown & Settle's internal pro
forma financial results for the most recent trailing twelve-month
period in 2021 and giving effect to the B&S Investment, certain
other changes to Brown & Settle's capital structure and the
B&S Distribution payable to Alaris, management of Alaris
believes that Brown & Settle would have an earnings coverage
ratio between 1.5x and 2.0x. Proceeds were used to provide a
partial liquidity event to founders, management and investors.
Founded in 2003 and headquartered in Northern Virginia, the largest data center
market in the world, Brown & Settle is a full-service
large-parcel site development contractor. B&S'
comprehensive suite of services includes excavation, clearing, rock
blasting, concrete, paving, and utility installation in
Virginia, Maryland, West
Virginia, and the Greater
Washington D.C. area. Brown & Settle has established
itself as one of the top providers of site development services for
data centers, working on projects for blue chip end users.
www.brown-settle.com B&S Corporate Video
Bought Deal
The Underwriters have agreed to purchase, on a bought deal
basis, 4,687,500 Trust Units from Alaris at a price of
$16.00 per Trust Unit for aggregate
gross proceeds of $75.0 million. The
Trust has also granted the Underwriters an option, exercisable for
up to 30 days from of the closing of the Offering, to purchase up
to an additional 703,125 Trust Units upon the same price and terms
as the Offering to cover over-allotments and for market
stabilization purposes (the "Over-Allotment Option"). The
Offering is expected to close on or about March 3, 2021. The Underwriters will sell the
Trust Units in all provinces of Canada, except Quebec, in a public offering by way of short
form prospectus. The aggregate gross proceeds of the Offering and
Over-Allotment Option (if exercised in full) will be $86.3 million (net proceeds of $82.8 million). The Offering is being
co-led by Acumen Capital Finance Partners Limited, Cormark
Securities Inc., CIBC Capital Markets, National Bank Financial Inc.
and RBC Capital Markets.
The Trust will use net proceeds of the Offering (and
Over-Allotment Option, if any) to reduce debt outstanding under the
Facility. Upon closing of the Offering and including the B&S
Investment, the Trust expects to have approximately $300.0 million drawn on the Facility
($289.2 million with the
Over-Allotment Option exercised).
The Offering is subject to customary closing conditions,
including receipt of applicable regulatory and Toronto Stock
Exchange approvals.
Amendments to the Facility
The Facility was permanently increased from $330 million to $373
million. Additionally, an additional 0.5x EBITDA was added
to the leverage covenant for the March
2021 and June 2021 measurement
periods bringing the maximum leverage to 3.5x through those two
periods. Covenants return to previous levels from September 30, 2021 forward. The Amendment also
includes a temporary bridge facility (the "Bridge") of
US$30 million to use for potential
new investments prior to the closing of the Offering. Funds
from the proceeds of the Bridge may be used to fund a potential new
investment being reviewed by Alaris in the ordinary course of its
business, which may or may not come to fruition.
This press release is not an offer of Units for sale in
the United States. The Units may
not be offered or sold in the United
States. Alaris has not registered and will not register the
Units under the U.S. Securities Act of 1933, as amended. Alaris
does not intend to engage in a public offering of Units in
the United States. This press
release shall not constitute an offer to sell, nor shall there be
any sale of, the Units in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
ABOUT ALARIS:
The Trust, through its subsidiaries, indirectly provides
alternative financing to private companies ("Partners") in
exchange for distributions with the principal objective of
generating stable and predictable cash flows for payment of
distributions to unitholders of the Trust. Distributions from
the Partners are adjusted each year based on the percentage change
of a "top line" financial performance measure such as gross margin
and same-store sales and rank in priority to the owners' common
equity position.
NON-IFRS MEASURES:
Earnings Coverage Ratio refers to the Normalized EBITDA
of a Partner divided by such Partner's sum of debt servicing
(interest and principal), unfunded capital expenditures and
distributions to Alaris. Management believes the earnings coverage
ratio is a useful metric in assessing our partners continued
ability to make their contracted distributions.
Normalized EBITDA refers to EBITDA excluding items that
are non-recurring in nature and is calculated by adjusting for
non-recurring expenses and gains to EBITDA. Management deems
non-recurring charges to be unusual and/or infrequent charges that
our Partners incur outside of its common day-to-day operations.
EBITDA refers to earnings determined in accordance with
IFRS, before depreciation and amortization, net of gain or loss on
disposal of capital assets, interest expense and income tax
expense. EBITDA is used by management and many investors to
determine the ability of an issuer to generate cash from
operations.
The terms Run Rate Payout Ratio, Earnings Coverage Ratio,
Normalized EBITDA and EBITDA (the "Non-IFRS Measure") are not
standard measures under IFRS. Alaris' calculation of the
Non-IFRS Measure may differ from those of other issuers and,
therefore, should only be used in conjunction with the Trust's (or
its predecessor's) annual audited and unaudited interim financial
statements, which are available under the Trust's (and its
predecessor's) profile on SEDAR at www.sedar.com.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements,
including forward-looking statements within the meaning of "safe
harbor" provisions under applicable securities laws
("forward-looking statements"). Statements other than statements of
historical fact contained in this news release may be
forward-looking statements, including, without limitation,
management's expectations, intentions and beliefs concerning: the
closing date for the Offering, the intended use of proceeds for the
Offering, outstanding amounts under the Facility after closing of
the Offering, the financial impact of the Offering, and the
financial impact of the B&S Investment, including the B&S
Distributions and adjustments thereto and the impact on Alaris'
revenue and net cash from operating activities; Brown and Settle's
Earnings Coverage Ratio; Alaris' Run Rate Payout Ratio and the
impact of the B&S Investment thereon; the potential increase to
the Facility, including the timing thereof; potential new
investments by Alaris; the use of the Bridge to fund the potential
investment and reductions in indebtedness under the Facility and
Alaris' updated guidance estimate for Q4 2020 revenues. Many of
these statements can be identified by words such as "believe",
"expects", "will", "intends", "projects", "anticipates",
"estimates", "continues" or similar words or the negative thereof.
Any forward-looking statements herein which constitute a financial
outlook or future-oriented financial information (including the
impact on revenues, net cash from operating activities and Run Rate
Payout Ratio) were approved by management as of the date hereof and
have been included to provide an understanding of Alaris' financial
performance and are subject to the same risks and assumptions
disclosed herein. There can be no assurance that the plans,
intentions or expectations upon which these forward-looking
statements are based will occur.
By their nature, forward-looking statements require Alaris to
make assumptions and are subject to inherent risks and
uncertainties. Assumptions about the performance of the
Canadian and U.S. economies over the next 24 months and how that
will affect Alaris' business and that of its Partners (including,
without limitation, the ongoing impact of COVID-19) are material
factors considered by Alaris management when setting the outlook
for Alaris. Key assumptions include, but are not limited to,
assumptions that: the Offering will close as expected and that
Alaris will obtain regulatory and third party approvals for the
Offering; the conditions to closing the Offering, including, if
required, the consent of the Toronto Stock Exchange and, if
required, the consent of Alaris' lenders under the Facility, will
be satisfied; the Canadian and U.S. economies will begin to recover
from the ongoing economic downturn created by the response to
COVID-19 within the next twelve months, interest rates will not
rise in a material way over the next 12 to 24 months, that those
Alaris Partners detrimentally affected by COVID-19 will recover
from the pandemic's impact and return to their current operating
environments, following a recovery from the COVID-19 impact, the
businesses of the majority of our Partners will continue to grow,
more private companies will require access to alternative sources
of capital and that Alaris will have the ability to raise required
equity and/or debt financing on acceptable terms. Management
of Alaris has also assumed that the Canadian and U.S. dollar
trading pair will remain in a range of approximately plus or minus
15% of the current rate over the next 6 months. In determining
expectations for economic growth, management of Alaris primarily
considers historical economic data provided by the Canadian and
U.S. governments and their agencies as well as prevailing economic
conditions at the time of such determinations.
Forward-looking statements are subject to risks,
uncertainties and assumptions and should not be read as guarantees
or assurances of future performance. The actual results of the
Trust and the Partners could materially differ from those
anticipated in the forward-looking statements contained herein as a
result of certain risk factors, including, but not limited to: that
the Offering may not close when planned (or at all); or on the
terms and conditions set forth herein; the failure of Alaris to
secure, if required, the consent of its lenders under its credit
facility to proceed with the Offering; the use of proceeds from the
Offering as described herein may change; how many Partners will be
impacted by the COVID-19 and the extent of such impact; the ability
of our Partners and, correspondingly, Alaris to meet performance
expectations for 2021 and beyond as a result of COVID-19 or
otherwise; any change in the senior lenders under the
Facility's outlook for Alaris' business; management's ability
to assess and mitigate the impacts of COVID-19; the dependence of
Alaris on the Partners; reliance on key personnel; general economic
conditions, including the ongoing impact of COVID-19 on the
Canadian, U.S. and global economies; failure to complete or realize
the anticipated benefit of Alaris' financing arrangements with the
Partners; a failure of the Trust or any Partners to obtain required
regulatory approvals on a timely basis or at all; changes in
legislation and regulations and the interpretations thereof; risks
relating to the Partners and their businesses, including, without
limitation, a material change in the operations of a Partner or the
industries they operate in; inability to close additional Partner
contributions in a timely fashion, or at all; a change in the
ability of the Partners to continue to pay Alaris' distributions; a
change in the unaudited information provided to the Trust; a
failure of a Partner (or Partners) to realize on their
anticipated growth strategies; a failure to achieve resolutions for
outstanding issues with Partners on terms materially in line with
management's expectations or at all; and a failure to realize the
benefits of any concessions or relief measures provided by Alaris
to any Partner or to successfully execute an exit strategy for a
Partner where desired. Additional risks that may cause actual
results to vary from those indicated are discussed under the
heading "Risk Factors" and "Forward Looking Statements" in the
Trust's Management Discussion and Analysis for the year ended
December 31, 2019, which is filed
under the Trust's profile at www.sedar.com and on its website at
www.alarisroyalty.com.
The preliminary results for Alaris' revenues for Q4 2020 set
forth herein are based on an initial review of Alaris' applicable
operating and financial results for the fourth quarter
2020 and are subject to change. Final reported results could
differ from these preliminary results following the completion of
year-end accounting procedures, final adjustments and other
developments arising between now and the time that Alaris'
financial results are finalized, and such changes could be
material. Alaris' independent auditor has not audited, reviewed or
performed any procedures with respect to the accompanying
preliminary financial results and other data, and accordingly does
not express an opinion or any other form of assurance with respect
thereto. Alaris has included information on its expected Q4
2020 revenues in order to provide readers with a more complete
perspective on its financial position and such information may not
be appropriate for other purposes.
Readers are cautioned not to place undue reliance on any
forward-looking information contained in this news release as a
number of factors could cause actual future results, conditions,
actions or events to differ materially from the targets,
expectations, estimates or intentions expressed in the
forward-looking statements. Statements containing forward-looking
information reflect management's current beliefs and assumptions
based on information in its possession on the date of this news
release. Although management believes that the assumptions
reflected in the forward-looking statements contained herein are
reasonable, there can be no assurance that such expectations will
prove to be correct.
The forward-looking statements contained herein are expressly
qualified in their entirety by this cautionary statement. The
forward-looking statements included in this news release are made
as of the date of this news release and Alaris does not undertake
or assume any obligation to update or revise such statements to
reflect new events or circumstances except as expressly required by
applicable securities legislation.
Neither the TSX nor its Regulation Services Provider (as
that term is defined in the policies of the TSX) accepts
responsibility for the adequacy or accuracy of this
release.
SOURCE Alaris Equity Partners Income Trust