AMA Group to raise at 8.5c per share after locking in Suncorp deal

AMA Group is in search of equity, which was expected to be a condition of gaining future lender support. Picture: iStock.

AMA Group is raising equity at 8.5c per share through Canaccord, with the smash repairs company tipped to be in search of about $60m.

The cash call was first flagged by DataRoom in May. At that time, this column reported that a refinancing of AMA’s debt was expected to spark a raise.

AMA’s share price is 12c, with its market value at $128.7m as the company remained in a trading halt on Thursday.

The company is also expected to announce a maagement change when it resumes trading.

The move comes after the smash repair company finally reached a deal with Suncorp over new pricing for its Capital S.M.A.R.T business.

On August 18, AMA said that the new pricing would apply to all repairs from July 1 and returns the arrangement to annual pricing reviews.

As a result of the agreement, AMA expects Capital S.M.A.R.T to contribute to AMA Group earnings before interest, tax, depreciation and amortisation in the range of $32m to $36m.

The remaining $58m of the goodwill of Capital S.M.A.R.T would be fully impaired, which would leave the unamortised portion of the contract held at about $166m.

As a result, AMA said it expected to deliver between $86m and $96m of EBITDA for the 2024 financial year.

It said that the guidance reflected a more modest outcome for Capital S.M.A.R.T pricing compared to what had originally been forecast and a more conservative outlook for AMA Collision, leading to a $50m impairment in the 2023 financial year accounts.

Hedge funds have been hovering on AMA’s register, expecting some sort of restructuring event.

The company has struggled to pass on prices to customers at a time of labour shortages.

DataRoom reported in April that AMA had hired Grant Samuel to assist with its refinancing plans at a time of higher funding costs.

At December, AMA had $182.7m of net debt, up 11 per cent from June.

Capital S.M.A.R.T was purchased from Suncorp in 2019 for $440m, and it remains a customer.

AMA debt is set to expire in October 2024.

Its offshore lenders are likely to be replaced by non-bank financiers that typically fund private equity deals.

ANZ has syndicated some of the debt to other banks, predominantly offshore. Other lenders include Bendigo Bank and Bank of China, while other top-four Australian banks also provide loans.

Of its gross debt of $215m, 23.3 per cent consists of convertible bonds, 35.5 per cent is senior unhedged debt and 41.2 per cent is senior hedged debt.

AMA posted a $25.75m loss for the six months to December, but that was down from its $46.3m loss a year earlier as demand for repairs began to strengthen after the Covid pandemic.