Group will sell divisions Caterham and Alton to ASG Risk Management
Broking group Cobra intends to use the £8.2m proceeds from the sale of two of its broking operations to pay down the interest-bearing portion of its debt.
Cobra has agreed to sell its divisions in Caterham and Alton to ASG Risk Management, a subsidiary of Aston Scott Group. ASG will pay Cobra £5m in cash on completion, plus £490,000 for the units’ freehold property and a cash earn-out of £2.7m over two years.
“We are working on reducing our debt by a significant amount, but that amount is undecided at the moment,” Cobra chief executive Stephen Burrows said. “But we aren’t touching either the interest-free debt or internal shareholder debt.”
He added: “We’ve been pedalling fairly hard over the last few years just to pay interest and capital back. This gives us the opportunity to pedal hard and actually expand the company.”
As of 31 March 2010, Cobra’s total borrowings were £16.1m. However, this figure included around £3.4m of interest-free borrowings. Some £1.3m of this is loan notes issued to former owners of Cobra subsidiaries.
The bulk of Cobra’s interest-bearing debt is £6.6m of convertible debt, carrying a coupon rate of 12.5%. The company also had a £4.6m fixed-term loan with a major insurer, which was originally to be paid off in April 2011. The interest on this loan was 2.5% over the London Interbank Offered Rate.
As of the half-year stage in September 2010, Cobra’s total borrowings stood at £15.5m.