European medium-term note programme (EMTN)
National Express Group plc has established a European medium-term note programme (EMTN) to provide a flexible means of issuing bonds in various currencies and maturities.
To view the prospectus see below:
Prospectus dated 03 October 2016
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The Group maintains a prudent approach to its financing and is committed to an investment grade credit rating. The Board’s policy targets a level of debt that allows for disciplined investment and ample headroom on its covenants, with net debt to EBITDA at a ratio of 2.0x to 2.5x in the medium term. Both Moody’s and Fitch credit ratings have reaffirmed their investment grade rating in 2015.
The Group’s key debt ratios as at 31 December 2015 were as follows:
- Gearing ratio: 2.45 times EBITDA (31 December 2014: 2.25x; bank covenant not to exceed 3.5x)
- Interest cover ratio: EBITDA 6.6 times interest (31 December 2014: 6.3x; bank covenant not less than 3.5x)
The Group has a strong funding platform that underpins the delivery of its strategy. Core funding is provided from non-bank sources, to provide improved certainty and maturity of funding. At the end of 2015, this represented £758.6 million of funding, primarily from two Sterling denominated bonds comprised of a £350 million bond maturing in 2017 and a £225 million bond maturing in 2020, a private placement of €78 million maturing in 2021 and £128 million of finance leases. The residual debt balance is funded from the Group’s £416 million RCF, with a margin of 0.6% over LIBOR and maturing in 2020. At 31 December 2015, the Group had £440 million in cash and undrawn facilities available.
In January 2016, the Group entered into new bank facilities totalling £450 million, comprising a £350 million bridging-to-bond facility in anticipation of the refinancing of the Group’s £350 million bond maturing in January 2017, together with a £100 million general corporate purposes facility, providing the Group with an appropriate level of medium-term liquidity and funding headroom. Both facilities are for an initial period of 18 months and include options to extend the maturity date until January 2019. This bridging facility gives the Group ample flexibility with respect to the timing of the refinancing of the bond, without incurring punitive refinancing charges.
At 31 December 2015, the Group had foreign currency debt and swaps held as net investment hedges. These help mitigate volatility in foreign currency profit translation with corresponding movements in the Sterling value of debt. These corresponded to 2.2 times EBITDA earned in the US, held in US Dollars, and 2.1 times EBITDA earned in Spain and Germany, held in Euros. The Group hedges its exposure to interest rate movements to maintain a balance between fixed and floating interest rates on borrowings. It has therefore entered a series of swaps that have the effect of converting fixed rate debt to floating rate debt. The net effect of these transactions was that, at 31 December 2015, the proportion of Group net debt at floating rates was 34% (2014: 28%)
The Group’s principal defined benefit pension schemes are all in the UK. The combined deficit under IAS 19 at 31 December 2015 was £12.6 million (31 December 2014: deficit of £11.9m). The Group has previously reached agreement with the trustees of its key schemes which have fixed the deficit payments, under most eventualities, to just under £10 million per annum until 2017, calculated on a scheme funding basis. The two principal plans are the UK Group scheme, which closed to new accrual in 2011, and the West Midlands Bus plan, which remains open to accrual for existing active members only.
The IAS19 valuations at 31 December 2015 were as follows:
- UK Bus (under the West Midlands Integrated Transport Authority Pension Fund and the Tayside Transport Superannuation Fund): £60.4 million deficit (2014: £50.6m deficit)
- UK Group scheme: £34.9 million surplus (2014: £30.6m surplus)
- UK Rail/other: £12.9 million surplus (2014: £8.1m surplus). The Group’s rail business participates in the Railways Pension Scheme. This exposure transfers to an incoming operator in the event of a franchise termination