Motoring group the AA today announced plans for a balance sheet shake-up in the hope of cutting some of its hefty interest costs.
Shares in the company jumped over two per cent after it revealed plans to refinance hundreds of millions of pounds of its corporate debt pile, a move the AA said would save the company £8m a year and "improve its credit profile".
Exactly how much it would be able to refinance would depend on investor appetite. But up to £550m of debt is available to be swapped for a new bond with reduced coupon and longer maturity. The group also hopes to reduce £200m of its lower ranked and more expensive junior debt.
Joe Brent, an analyst at Liberum, highlighted the positives of the cheaper debt profile with longer maturity. However, he added that although there would be no exit fees from the refinancing, a whopping £20m of transaction costs would be incurred – two and a half years' worth of the interest savings.
Martin Clarke, the AA's finance chief said that the refinancing was in line with strategic plans to reduce the cost of the group's debt.
"[The refinancing], together with the progress made on our transformation, strengthens the AA as we build on our market- leading brand to serve more of our members' needs," he said.