Completion of debt restructuring
6 Aug 2020
Travelex Financing Plc
Completion of debt restructuring
Travelex Financing Plc
6 August 2020
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014 ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Travelex Financing Plc (“Travelex” or the “Company”)
Travelex debt restructuring scheduled to complete today
Further to its announcement on 7 July, Travelex is delighted to confirm that, following the filing of notices of intention to appoint administrators, the completion of its debt restructuring in accordance with the Lock Up Agreement (the “Restructuring”) is scheduled to occur later today.
Under the terms of the transaction, the new Travelex group will be significantly delevered with financial indebtedness being reduced from over £385 million to just £160 million. It will also benefit from £84 million of new liquidity which will allow the new Travelex Group to emerge successfully from the challenges posed by the Covid-19 pandemic and to continue with its proven track record as a market leader. This comprehensive balance sheet restructuring of the Travelex group will result in a sustainable capital structure that will allow the new Travelex group to capitalise on Travelex’s current, strong market position and brand.
The new Travelex group will continue to partner with its existing relationship banks and will have new, institutional investors which will provide significant stability as the Travelex group moves forward in its next phase.
Key terms of the restructuring
- Holders of Senior Secured Notes (“SSNs”) who have taken up the invitation to participate in the new money (“New Money Noteholders”) have agreed to acquire a restructured Travelex business (“New Travelex”), the initial completion of which began today, and will receive £99.2 million of new money notes (“New Senior Secured Notes”) in exchange for £84 million of new money cash funding
- New Travelex comprises the wholesale and outsourcing business and certain international businesses of Travelex (Brazil, Middle East & Turkey, Nigeria and Asia Pacific)
- Certain of Travelex's retail businesses in Europe and North America will remain within the old Travelex corporate structure and will not transfer to New Travelex unless it is determined at a later date that they may transfer to New Travelex as break-even or profitable entities. These businesses are listed at Schedule 1 – Part B as Optional Fundco entities and Optional Fundco JV entities. If an Optional FundCo entity ultimately does not transfer to New Travelex, it will need to depend on its own liquidity resources or those of the Company
- Travelex’s retail business in the UK will also remain within the old Travelex corporate structure, and will be operated out of Travelex Foreign Coin Services Limited. Funding will be provided to the relevant entity in order to preserve optionality in relation to the UK retail business
- New Travelex is owned by Travelex Topco Limited (“TopCo”), via its wholly-owned subsidiary Travelex Acquisitionco Limited (“TACO”)
- Holders of the New Senior Secured Notes will own 100% of the equity in TopCo
- New Travelex is fully reinstating the existing £50 million RCF in the form of a Reinstated Term Loan and c.£10 million guarantees in the form of reinstated guarantees and a reinstated guarantee facility (together, the “New RCF”)
- Bridge Funding of £17.6m million will be repaid as planned from the proceeds of the New Senior Secured Notes. Bridge Funding providers will also receive warrants exercisable for ordinary shares in the capital of TopCo representing (in aggregate) 2.5% of the fully diluted share capital of TopCo
- SSN holders will be entitled to receive warrants representing (in aggregate) 17.5% of the fully diluted share capital of TopCo. SSN claims will be reduced by the value of the warrants, which have been independently valued at £1,736. The residual SSNs will retain a claim against the old Travelex corporate structure – there will be no claim into New Travelex. Any existing SSN guarantees and security given by members of the Travelex Group which transfer to New Travelex will be released upon such transfer
- The terms of the SSNs have been amended to remove substantially all restrictive covenants and certain events of default
- Amendments made to the existing Intercreditor Agreement as part of the Restructuring mean that if there are any future recoveries in respect of existing SSNs from the old Travelex corporate structure, these recoveries will be applied in accordance with the terms of the New Intercreditor Agreement. In broad terms, this means that any such recoveries will be applied first in repayment of the New RCF and second in repayment of the New Senior Secured Notes
- There are limited exceptions to this, for example relating to recoveries attributable to certain insurance proceeds received after completion of the Restructuring which will be available to New Travelex to use for general working capital purposes rather than be applied in repayment of the Reinstated Term Loan or New Senior Secured Notes
- Given the amount of the Reinstated Term Loan and the New Senior Secured Notes, and the limited recoveries expected to be made in respect of the assets not transferring to New Travelex, there are limited prospects of additional recoveries on the SSNs. It is expected that the SSNs will nevertheless remain outstanding until such time as the Company is wound up
The transaction is being delivered through a pre-packaged administration sale of certain UK Travelex entities. Mark James Tobias Banfield, David James Kelly and Edward John Macnamara of PwC have consented to act as joint administrators of the entities below:
- Travelex Holdings Limited (“THL”)
- Travelex Limited (“TL”)
- Travelex UK Limited (“TUK”)
- Travelex Group Investments Limited (“TGI”)
- The Company
Travelex Banknotes Limited (“TBL”) previously entered administration on 21 July 2020.
The transaction will be executed in accordance with the Lock Up Agreement, inter alia to effect the sale of New Travelex to TACO.
As previously announced, many of the New Travelex businesses will be transferred by way of share sale on the date of completion (“Day 1 Entities”), while certain of these share sales require regulatory approvals which are expected to be obtained in the coming months (“Day Z Entities”). Schedule 1 - Part A contains a list of all Day 1 and Day Z Entities.
New senior management and governance
Following completion of the transaction, Tony D’Souza will step down as CEO of Travelex. Turnaround specialist Donald Muir, who has been working within the business for several months, will be appointed CEO of New Travelex. Tony has agreed to remain available during the coming weeks, in order to ensure a managed transfer and handover of Day 1 and Day Z Entities to New Travelex.
The board of TopCo will comprise seven directors, including Donald Muir and James Birch in an executive capacity, alongside two New Senior Secured Notes' representatives, a chairman (to be appointed by the majority shareholders of Topco) and two non-executive directors. Active searches are progressing for the latter three positions.
The new board of TopCo will therefore be exceptionally well-placed to lead the New Travelex group in the coming months and years. James Birch has worked at Travelex for over 18 years and has a deep understanding of the Travelex business. Donald Muir is a highly respected turnaround specialist who will help the New Travelex group navigate the immediate post-restructuring transition period and ensure that the group is well-positioned for future success.
Commenting on the transaction, Travelex’s departing CEO Tony D’Souza said:
“I am very pleased to announce this transaction which provides New Travelex with a stable platform to rebuild revenues under the stewardship of its new shareholders. I feel that on completion it will be the appropriate moment for me to step down as CEO as New Travelex moves into the next phase of its development. I wish Donald and the group’s new shareholders the very best for the future and will work to ensure a smooth transition of my role. I also want to thank all of Travelex’s employees whose commitment to the business has been exceptional throughout this difficult period.”
Incoming CEO for New Travelex, Donald Muir, added:
“I would like to thank Tony for his considerable efforts in leading Travelex through a complex debt restructuring. New Travelex will have a substantially delevered capital structure, £84 million of new liquidity and supportive institutional shareholders. While there is much to do, my experience in recent weeks has given me confidence that there is a strong team that is passionate about achieving a successful turnaround. I share their commitment, and look forward to leading them in the delivery of our plan to ensure that we are well placed to capture the expected growth in revenues as global travel volumes return.”
Dylan Berthier – External Affairs