Marine engineer Harland & Wolff (HARL) said it has obtained permission from the Government to advance negotiations for a £200m loan facility with UK Export Finance (UKEF) under its Export Development Guarantee (EDS) scheme. HARL shares jumped 24% on the news.
In order to ensure that the proposed loan facility is compliant with relevant rules where UKEF is to provide a 100% guarantee to UK commercial lending banks, UKEF will appoint an independent 3rd party to ascertain an appropriate premium over SONIA. This process will commence in January 2024.
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Harland & Wolff has secured government approval to progress negotiations for a £200m guaranteed loan facility with UKEF. The news prompted a strong reaction from markets, sending HARL shares 24% higher in early trade. HARL said its current cash reserves plus expected cashflows from existing contracts in 2024 will be sufficient to cover its working capital requirements until the new loan facility is completed.
Following the government green light, Harland will now firm up the bank syndicate, appoint a lead arranger and commence documentation in relation to the credit and guarantee agreements as well as security package that will be offered. It is likely the security package will entail providing the lending banks with a first charge on all of HARL's assets, similar to what was provided to Riverstone Credit Partners in March 2022.
This transaction will be subject to approval by the Government, final approval of the financing terms, and Investment Committee approvals of the lending banks.
If secured, the £200m credit facility will be key to fulfilling Harland's growing orderbook. In its FY22 results, the marine engineer detailed significant growth with revenues up 51% to £27.96m and a contracted backlog of £900m, compared to £100m in FY21. Late last year, a Harland-led consortium was awarded the massive £1.6bn contract for the Royal Navy's Fleet Solid Support (FSS) Programme, prompting a large jump in share price, which has since consolidated. Later in FY23, Harland was awarded its subcontract for the project, yielding several years of significant revenue visibility.
Investors should Harland & Wolff for further announcements on the proposed credit facility.