Division sell off and debt refinancing deal agreed at engineering group
Specialist engineering group, Pressure Technologies, says it will go ahead with the sale of its Precision Machined Components (PMC) division and has also reached an agreement in principle for debt refinancing.
The Sheffield-headquartered firm currently operates across two divisions – Chesterfield Special Cylinders (CSC) and Precision Machined Components.
It says it has appointed advisors to handle the sale process of PMC, which it expects to launch in November 2023. The process is expected to run for about six months.
For the refinancing, the business has reached agreement with Rockwood Strategic plc and Peter Gyllenhammar AB, both major shareholders in Pressure Technologies, for provision of a new Term Loan Facility of £1.5m.
It will be used to refinance the existing debt facilities of the group and provide additional working capital headroom.
Chris Walters, chief executive, said: “We appreciate the strong support from two of our major shareholders, demonstrated through this funding solution, confirming their confidence in the group’s prospects whilst we realise value from the sale of the PMC division in improving oil and gas market conditions.”
The business says the sale of PMC is expected to deliver material cash proceeds in the third quarter of FY24, which will underpin a strong and stable financial position from which to transition Chesterfield Special Cylinders into new UK defence, global defence and hydrogen programmes.
However, during the intervening period the business warns its cash position is expected to tighten as a result of a final repayment commitment to Lloyds Banking Group of £900,000 in December 2023 and reduced activity levels around the Christmas shutdown.
It has therefore identified a short-term funding requirement of up to £1.5m.
During 2023, the group explains it explored refinancing the Lloyds loan with several mainstream lenders and challenger banks by way of raising new asset-backed lending facilities secured against its property assets, plant and debtors.
But it notes: “Challenging trading conditions experienced across 2022 and during the early part of 2023 subdued the financial performance of the group in that period.
“Whilst profitability for the financial year ended 30 September 2023 reflected materially improved trading on the prior year, as updated in the company announcement of 3 October 2023, it is expected to remain at this level in the next 12 months.
“As a result, and alongside tightening lending standards and credit availability, the debt capacity of the group has been restricted and a suitable mainstream lending facility has not been made available.”
Instead, Pressure Technologies has been able to arranged its proposed new Facility with Harwood Capital LLP, as investment adviser to Rockwood Strategic plc (who hold a 20% shareholding in the company), and Peter Gyllenhammar AB (who hold a 16.8% shareholding in the company).
The £1.5m Facility is committed for a five-year period and is secured against the assets of the group. Upon a successful sale of the PMC division, the Facility will be repaid in full.
