/NOT FOR DISTRIBUTION IN THE UNITED STATES. FAILURE TO
COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF
UNITED STATES SECURITIES
LAW/
CALGARY, AB, Feb. 22, 2021 /CNW/ - (all numbers in this
release are in Canadian dollars (CDN$) unless otherwise
noted) Alaris Equity Partners Income Trust (the
"Trust" or "Alaris") (TSX: AD.UN) is pleased to
announce that its wholly-owned subsidiary, Alaris Equity Partners
USA, Inc. (collectively with the
Trust and its other subsidiaries, "Alaris") has made an
investment of US$30.0 million (the
"3E Investment") into its twentieth Partner, 3E, LLC
("3E") and a US$8.0 million
(the "Accscient Contribution") follow-on investment into an
existing Partner, Accscient, LLC ("Accscient"). This
brings year to date 2021 capital deployment to over $180.0 million with capital deployment over the
last twelve months over $350.0
million, Alaris' most active 12-month period in its
history. Alaris is also pleased to announce that its
subsidiary's credit facility (the "Facility") will be
increased (the "Facility Increase") from $373 million to $400
million with the addition of a seventh bank to the lending
syndicate (the "Lending Syndicate") subject to the
completion of final documents.
3E Investment
On February 22, 2021, Alaris made
the 3E Investment with a contribution of US$22.5 million (the "3E Contribution")
into 3E in exchange for preferred equity, which will entitle Alaris
to an annualized Partner distribution of US$3.15 million (the "3E
Distribution"). In addition, US$7.5 million (the "3E Escrow") was
contributed to an escrow account to be released to 3E in the event
that certain hurdles are met (the "Escrow Hurdles") with in
a 24-month time frame. In the event that those Escrow Hurdles
are met in in part or in full, Alaris will contribute up to
US$7.5 million in exchange for
additional preferred units, entitling Alaris to up to an additional
US$1.05 million of annualized
distributions. The 3E Distribution is equivalent to a pre-tax
yield of 14% in the first full year after the 3E Contribution.
Commencing on January 1, 2022, the
3E Distribution will be adjusted annually based on the percentage
change in gross profit over the most recently completed 12-month
period versus the prior 12-month period (January 1, 2022 adjustment will be based on
fiscal 2021 vs fiscal 2020), subject to a collar of 6%.
Based on Alaris' review of 3E's internal pro forma financial
results for the most recent trailing twelve-month period in 2021
and giving effect to the 3E Investment, certain other changes to
3E's capital structure and the 3E Distribution payable to Alaris,
management of Alaris believes that 3E would have an earnings
coverage ratio between 1.2x and 1.5x. Proceeds of the 3E
Contribution were used to replace an existing capital provider.
3E is a utility service provider that installs, inspects,
maintains and replaces critical infrastructure (primarily natural
gas utilities) for blue-chip, investor-owned utility companies. 3E
operates under two entities: Benton
Georgia and Pipe Strong, with operations across nine States
in the Southeastern and Midwestern United States including Georgia,
Illinois, Texas, Tennessee, Missouri, Kentucky, Louisiana, Arkansas and Mississippi. 3E's business is well positioned
to benefit from maintaining and replacing the aging natural gas
utility network in the United States. 3E's services relate
only to regulated entities. 3E does not provide services for
natural gas exploration, production or mid-stream operations.
Accscient Follow-On
On February 19, 2021, Alaris made
the Accscient Contribution of US$8.0
million in exchange for additional preferred units in
Accscient, which entitle Alaris to an additional annualized
distribution of US$1.14 million (the
"Accscient Distribution"). The Accscient Distribution
is equivalent to a pre-tax yield of 14.3% in the first full year
following the Accscient Contribution. Accscient used the
proceeds of the Accscient Contribution for investment purposes.
Alaris is estimating a proforma increase of $0.05 per trust unit1 to its net
operating cash flow following the 3E Contribution and Accscient
Contribution. Following the Facility Increase, Alaris will
have approximately $80.0 million
available for future investment opportunities.2
_____________
|
1
|
Assumes the
expected total units outstanding following the anticipated closing
of the previously announced trust unit offering, which is expected
prior to March 3, 2021 (including the exercise in full of the
overallotment option).
|
2
|
Assumes Alaris'
previously announced offering of trust units closes and the
overallotment is exercised in full.
|
ABOUT ALARIS:
The Trust, through its subsidiaries,
indirectly provides alternative financing to private companies
("Partners") in exchange for distributions with the
principal objective of generating stable and predictable cash flows
for payment of distributions to unitholders of the Trust.
Distributions from the Partners are adjusted each year based on the
percentage change of a "top line" financial performance measure
such as gross margin and same-store sales and rank in priority to
the owners' common equity position.
NON-IFRS MEASURES:
Earnings Coverage Ratio refers to the Normalized EBITDA
of a Partner divided by such Partner's sum of debt servicing
(interest and principal), unfunded capital expenditures and
distributions to Alaris. Management believes the earnings coverage
ratio is a useful metric in assessing our partners continued
ability to make their contracted distributions.
Normalized EBITDA refers to EBITDA excluding items
that are non-recurring in nature and is calculated by adjusting for
non-recurring expenses and gains to EBITDA. Management deems
non-recurring charges to be unusual and/or infrequent charges that
our Partners incur outside of its common day-to-day operations.
EBITDA refers to earnings determined in accordance
with IFRS, before depreciation and amortization, net of gain or
loss on disposal of capital assets, interest expense and income tax
expense. EBITDA is used by management and many investors to
determine the ability of an issuer to generate cash from
operations.
The terms Run Rate Payout Ratio, Earnings Coverage Ratio,
Normalized EBITDA and EBITDA (the "Non-IFRS Measure") are not
standard measures under IFRS. Alaris' calculation of the
Non-IFRS Measure may differ from those of other issuers and,
therefore, should only be used in conjunction with the Trust's (or
its predecessor's) annual audited and unaudited interim financial
statements, which are available under the Trust's (and its
predecessor's) profile on SEDAR at www.sedar.com.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements,
including forward-looking statements within the meaning of "safe
harbor" provisions under applicable securities laws
("forward-looking statements"). Statements other than statements of
historical fact contained in this news release may be
forward-looking statements, including, without limitation,
management's expectations, intentions and beliefs concerning: the
financial impact of the 3E Contribution and Accscient Contribution,
including the 3E Distribution and the Accscient Distribution and
adjustments thereto and the impact on Alaris' revenue and net cash
from operating activities; 3E's Earnings Coverage Ratio; Alaris'
Run Rate Payout Ratio and the impact of the 3E Contribution and
Accscient Contribution thereon; the 3E Escrow Hurdles and
additional investment connected thereto; the potential increase to
the Facility, including the timing thereof; availability under the
Facility and use of proceeds under the Facility. Many of these
statements can be identified by words such as "believe", "expects",
"will", "intends", "projects", "anticipates", "estimates",
"continues" or similar words or the negative thereof. Any
forward-looking statements herein which constitute a financial
outlook or future-oriented financial information (including the
impact on revenues, net cash from operating activities and Run Rate
Payout Ratio) were approved by management as of the date hereof and
have been included to provide an understanding of Alaris' financial
performance and are subject to the same risks and assumptions
disclosed herein. There can be no assurance that the plans,
intentions or expectations upon which these forward-looking
statements are based will occur.
By their nature, forward-looking statements require Alaris to
make assumptions and are subject to inherent risks and
uncertainties. Assumptions about the performance of the
Canadian and U.S. economies over the next 24 months and how that
will affect Alaris' business and that of its Partners (including,
without limitation, the ongoing impact of COVID-19) are material
factors considered by Alaris management when setting the outlook
for Alaris. Key assumptions include, but are not limited to,
assumptions that: the Canadian and U.S. economies will begin to
recover from the ongoing economic downturn created by the response
to COVID-19 within the next twelve months; interest rates will not
rise in a material way over the next 12 to 24 months; that those
Alaris Partners detrimentally affected by COVID-19 will recover
from the pandemic's impact and return to their current operating
environments; following a recovery from the COVID-19 impact, the
businesses of the majority of our Partners will continue to grow;
the businesses of new Partners and those of existing partners will
perform in line with Alaris' expectations and diligence; more
private companies will require access to alternative sources of
capital and that Alaris will have the ability to raise required
equity and/or debt financing on acceptable terms. Management
of Alaris has also assumed that the Canadian and U.S. dollar
trading pair will remain in a range of approximately plus or minus
15% of the current rate over the next 6 months. In determining
expectations for economic growth, management of Alaris primarily
considers historical economic data provided by the Canadian and
U.S. governments and their agencies as well as prevailing economic
conditions at the time of such determinations.
Forward-looking statements are subject to risks,
uncertainties and assumptions and should not be read as guarantees
or assurances of future performance. The actual results of the
Trust and the Partners could materially differ from those
anticipated in the forward-looking statements contained herein as a
result of certain risk factors, including, but not limited to: how
many Partners will be impacted by the COVID-19 and the extent of
such impact; the ability of our Partners and, correspondingly,
Alaris to meet performance expectations for 2021 and beyond as a
result of COVID-19 or otherwise; any change in the senior
lenders under the Facility's outlook for Alaris' business;
management's ability to assess and mitigate the impacts of
COVID-19; the dependence of Alaris on the Partners; reliance on key
personnel; general economic conditions, including the ongoing
impact of COVID-19 on the Canadian, U.S. and global economies;
failure to complete or realize the anticipated benefit of Alaris'
financing arrangements with the Partners; a failure of the Trust or
any Partners to obtain required regulatory approvals on a timely
basis or at all; changes in legislation and regulations and the
interpretations thereof; risks relating to the Partners and their
businesses, including, without limitation, a material change in the
operations of a Partner or the industries they operate in;
inability to close additional Partner contributions in a timely
fashion, or at all; a change in the ability of the Partners to
continue to pay Alaris' distributions; a change in the unaudited
information provided to the Trust; a failure of a Partner (or
Partners) to realize on their anticipated growth strategies;
a failure to achieve resolutions for outstanding issues with
Partners on terms materially in line with management's expectations
or at all; and a failure to realize the benefits of any concessions
or relief measures provided by Alaris to any Partner or to
successfully execute an exit strategy for a Partner where desired.
Additional risks that may cause actual results to vary from those
indicated are discussed under the heading "Risk Factors" and
"Forward Looking Statements" in the Trust's Management Discussion
and Analysis for the year ended December 31,
2019, which is filed under the Trust's profile at
www.sedar.com and on its website at
www.alarisequitypartners.com.
This news release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about increases to the Trust's net operating cash per flow
per unit and liquidity, each of which are subject to the same
assumptions, risk factors, limitations, and qualifications as set
forth above. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at
the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on FOFI and forward-looking
statements. Alaris' actual results, performance or achievement
could differ materially from those expressed in, or implied by,
these forward-looking statements and FOFI, or if any of them do so,
what benefits the Trust will derive therefrom. The Trust has
included the forward-looking statements and FOFI in order to
provide readers with a more complete perspective on Alaris' future
operations and such information may not be appropriate for other
purposes. Alaris disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
Readers are cautioned not to place undue reliance on any
forward-looking information contained in this news release as a
number of factors could cause actual future results, conditions,
actions or events to differ materially from the targets,
expectations, estimates or intentions expressed in the
forward-looking statements. Statements containing forward-looking
information reflect management's current beliefs and assumptions
based on information in its possession on the date of this news
release. Although management believes that the assumptions
reflected in the forward-looking statements contained herein are
reasonable, there can be no assurance that such expectations will
prove to be correct.
The forward-looking statements contained herein are expressly
qualified in their entirety by this cautionary statement. The
forward-looking statements included in this news release are made
as of the date of this news release and Alaris does not undertake
or assume any obligation to update or revise such statements to
reflect new events or circumstances except as expressly required by
applicable securities legislation.
Neither the TSX nor its Regulation Services Provider (as
that term is defined in the policies of the TSX) accepts
responsibility for the adequacy or accuracy of this
release.
SOURCE Alaris Equity Partners Income Trust