Aferian in a stronger financial position & confident in the long-term prospects

Aferian plc (LON:AFRN), the B2B video streaming solutions company, has announced that it has secured additional cash funding by way of a shareholder loan facility of up to £3.25 million from its largest shareholder, Kestrel Partners LLP. The securing of this shareholder loan provides additional headroom in respect of the covenants in the Group’s existing bank facility.

Donald McGarva, CEO of Aferian plc, commented:

“This additional cash funding puts the Group in a stronger financial position and gives us adequate headroom over our covenants. The Board remains confident in the longterm prospects of the Group. The management team and I can now continue to focus on delivering value to both shareholders and our customers in the fastgrowing video streaming market, which is rapidly becoming the most popular way to consume video.”

Current trading and outlook

Trading remains broadly in line with the trading and outlook communicated in our full year results announcement on 16 May 2023. Aferian’s position in the fast-growing video streaming market gives the Board confidence in the long-term prospects for the Group.

Demand for 24i’s streaming video solutions remains strong and management expect to report growth in the first half of the current financial year. The management team are focussed on accelerating profitability in the second half of the year.

For the Amino division, as previously announced, the impact of the wider macro-economic situation has continued for longer than expected. Management continues to have confidence in Amino’s strong medium-term sales pipeline. As previously announced, the division’s full year revenue is expected to be significantly lower than the prior year.

Actions previously communicated to deliver significant efficiencies in the Group’s cost base during the first quarter of 2023 have delivered results. To further improve the cash generation of the Group in the second half of the current financial year, management will take additional action to reduce the cost base of the Amino division, whilst preserving its ability to grow when the market for streaming devices normalises. This is anticipated to generate cost-savings in the current financial year of circa $1.3 million and annualised cost-savings of circa $3 million, an element of which will include capitalised research and development costs.

Net debt, covenants and Shareholder Loan

As announced on 16 May 2023, following the investment made in inventory within the Amino business and Amino’s lower than expected sales, the Group is in a net debt position.  

Since March 2023 the Group has remained in active discussions with its senior loan facility providers to seek solutions in order to increase forecast headroom over its senior loan facility covenants. Failure to comply with financial covenants associated with the Group’s existing senior loan facilities could potentially result in the facilities being withdrawn.

Today, Aferian has secured a shareholder loan facility of up to £3.25 million arranged by its largest shareholder, Kestrel Partners LLP (“Kestrel”) (“Shareholder Loan”). This funding will provide additional headroom based on the covenant definitions of the Group’s existing senior loan facilities.

Additionally, the Group has agreed with its existing loan facility providers to:

·      exclude finance charges and debt arising from the Shareholder Loan from the calculation of covenants; and
·      reduce the total available loan facility from $50 million to $25.4 million.

The Group is subject to a monthly minimum liquidity and quarterly Interest Cover, Fixed Charge Cover Ratio and Gross Leverage financial covenants.  The quarterly covenants are tested at the end of May, August, November and February. The Group is also subject to an annual limitation on certain capital expenditure.

Whilst in advance of securing the Shareholder Loan the Group remained in compliance with its senior loan facilities covenants, as stated in the Group’s final results announcement for the year ended 30 November 2022, management’s sensitised forecasts indicated that there was a risk that the Group might breach its covenants at future test dates. The securing of the Shareholder Loan provides additional headroom over the senior loan facilities covenants.

In addition, as part of the discussions with the Group’s senior loan facility providers, the senior loan facility providers had considered that an independent business review (“IBR”) might have been required, the substantial cost of which would have been met by Aferian. The Directors believe this would have been a material distraction for management. Having secured this additional funding, discussions regarding the need for an IBR have now ceased with the Group’s existing loan facility providers, freeing up management time to focus on the actions required to improve business performance.

The Group has today drawn £1.125 million of the Shareholder Loan. The Group has the option, until 31 July 2023, to draw the remaining £2.125 million. Net debt as at 31 May 2023 is expected to be circa $13 million and is expected to reduce over the remainder of the financial year as inventory levels reduce.

It is the Board’s intention to seek alternative funding to replace the un-drawn element of the Shareholder Loan before 31 July 2023.

Terms of the Shareholder Loan

Certain funds managed by Kestrel (together the “Lenders”) have provided an unsecured term loan facility of up to £3.25 million. Amounts drawn under this facility (including accrued interest) are (if not prepaid) repayable on 31 March 2025, unless extended at the Company’s option to 31 March 2026 and 31 March 2027.

The main terms of the Shareholder Loan are as follows:

·      an arrangement fee of 2.0 per cent. of the value of the Shareholder Loan;
·      unsecured and subordinated to all indebtedness with the Group’s existing senior loan facility lenders;
·      10.0 per cent. annual coupon, with interest rolling up on a quarterly basis, paid in kind;
·      pre-payable at the Company’s option at any time, subject to a make-whole payment to the Lenders;
·      further utilisations are subject to limited customary finance facility draw-down conditions precedent (including the ability to issue the related Warrants (as defined below)); and
·      four warrants issued for every £1.00 of Shareholder Loan drawn. Warrants are over new ordinary shares of 1p each (“Ordinary Shares”), are exercisable and transferrable after 18 months, have a 10-year duration and a strike price of 17p per Ordinary Share (the “Warrants”).

The dilutive impact of the Warrants issuable to the Lenders, should the Shareholder Loan be fully drawn, would be to increase Aferian’s issued share capital by 13 million new Ordinary Shares, representing approximately 15 per cent. of Aferian’s current issued share capital. Following today’s drawing of £1.125 million of the Shareholder Loan, Warrants over 4.5 million Ordinary Shares are issuable to the Lenders, representing approximately 5.2 per cent. of Aferian’s issued share capital. Full exercise of the Warrants over 4.5 million Ordinary Shares issuable in connection with today’s drawing of the Shareholder Loan would result in cash proceeds of £765,000 payable to Aferian and full exercise of all Warrants issuable in connection with the Shareholder Loan if it were fully drawn would result in cash proceeds of £2.21 million payable to Aferian.

Kestrel (who acts as agent for the Lenders under the Shareholder Loan) has confirmed to the Company that it has no current intention of exercising any of the Warrants in circumstances that would give rise to an obligation to make a mandatory offer for the Company under Rule 9 of the City Code on Takeovers and Mergers (“Takeover Code”).

The Shareholder Loan is not subject to any financial covenants though the Lenders’ consent will be required in the event that during the life of the Shareholder Loan Aferian wishes to:

·      pay any dividends; or
·      make any acquisitions; or
·      dispose of material parts of the Group’s business;
·      enter into any additional loan facilities;
·      undertake any restructuring of the Group that would materially and adversely affect the interests of the Lenders; or
·      enter into a related party transaction to which Rule 13 of the AIM Rules for Companies applies

The Board has not made any decision on dividends payable for the current financial year, although any decision to pay a dividend would require the consent of Kestrel.

Relationship Agreement

Today the Group entered into a relationship agreement with Kestrel. The key terms of this agreement are as follows:

·      Kestrel has the right to nominate one person for appointment as a director of the Company providing that Kestrel (together with its individual partners and their affiliates), indirectly or directly, holds no less than 20 per cent, of the voting rights of the Company;
·      all transactions, agreements or arrangements entered into between a member of the Group and Kestrel and/or any of its associates will be conducted at arm’s length and on arm’s length commercial terms;
·      Kestrel shall exercise its voting rights to procure, so far as it is able to do so by the exercise of such rights, that directors independent of Kestrel shall at all times constitute a majority of the Aferian board;
·      Kestrel and its associates will not propose any resolution or other action to cancel the trading of the Company’s shares from trading on AIM without the Board’s approval; and
·      Kestrel and its associates will not undertake any action to obtain or consolidate control of the Company or seek to do so, otherwise than in accordance with the Takeover Code. 

Related Party Transactions

The Shareholder Loan constitutes a related party transaction under the AIM Rules for Companies by virtue of Kestrel being a substantial shareholder in the Company and Max Royde, Non-Executive Director of the Company, being a managing partner of Kestrel. The Directors (excluding Max Royde) consider, having consulted with Investec, the Company’s nominated adviser, that the terms of the transaction are fair and reasonable in so far as shareholders are concerned.

Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Share on twitter
Share on linkedin

More articles like this


24i & Phenix partner for Prep Super League streaming app

24i and Phenix are partnering to aid in the creation of a video streaming app for the Prep Super League ahead of its first season. The white-label app will be developed via 24i’s Mod Studio, which will be pre-integrated with Phenix’s


24i & Amino deploys TVaaS for Switzerland’s Thurcom

Video streaming expert 24i and media solutions provider Amino has been selected by Technische Betriebe Wil (TBW) to power the video services of its telco provider Thurcom based in Switzerland. The joint TV-as-a-service (TVaaS) solution will enable Thurcom to


Tales from the FAST Frontline

FAST channels have been the biggest noise in the streaming industry in the past couple of years. Analysts estimate FAST revenues will reach $12bn worldwide by 2027. There are already more than 1,500 FAST channels available in the


Aferian plc 24i and Amino to power video services for Thurcom

Aferian plc (LON:AFRN), the B2B video streaming solutions company, has today announced that both 24i and Amino have been selected by Technische Betriebe Wil (TBW) to power the video services of its service subsidiary Thurcom, the largest regional telecom provider in Switzerland.


AV Awards Finalist 2023 – Amino H200 with Amino Orchestrate

Aferian plc (LON:AFRN) is a trusted partner and global provider of innovative, scalable media and entertainment technology solutions. As an IPTV pioneer, working with over 250 operator customers in 100-plus countries, Aferian continuously innovates to help customers deliver


Virgin Media unveils new FAST channels

Virgin Media has launched a new line-up of FAST channels in partnership with Amagi and 24i. An initial selection of 14 have been rolled-out to Virgin Media’s V6, TV 360, and Stream STBs. Using the Appstage application framework


Aferian Directors’ Dealings

Aferian plc (LON:AFRN) has announced that it has received notification on the 01 September 2023 from Kestrel Partners LLP that on the 01 September 2023 it purchased, on behalf of its discretionary client accounts, an aggregate of 100,000 ordinary


Aferian trading remains in line with expectations

Aferian plc (LON:AFRN), the B2B video streaming solutions company, has announced its unaudited results for the six months ended 31 May 2023, which demonstrate a performance in line with the trading update announced on 28 June 2023. –     Improving quality


Aferian appoints Allen Broome as a Non-Executive Director

Aferian plc (LON:AFRN), the B2B video streaming solutions company, has announced the appointment of Allen Broome to the Board as a Non-Executive Director, with immediate effect. Allen is a technical leader with a proven track record of delivering


Aferian’s 24i & Amagi power new Virgin Media FAST channels

Aferian plc (LON:AFRN), the B2B video streaming solutions company, in collaboration with its technology partner Amagi, has announced that UK telecoms, media, and internet company, Virgin Media, has used its 24i integrated solution to launch and monetise a


Amino World of Digital Signage

Aferian plc (LON:AFRN) is a trusted partner and global provider of innovative, scalable media and entertainment technology solutions. As an IPTV pioneer, working with over 250 operator customers in 100-plus countries, Aferian continuously innovates to help customers deliver

No more posts to show