AJ Lucas Boosts Senior Facility, Cuts Debt Costs with Refinancing Deal
AJ Lucas Group has extended and increased its senior debt facility to $50 million, fully repaid its junior loan, and secured a shareholder loan extension with lower interest rates, positioning the company for reduced financing costs and future growth.
- Senior Syndicated Finance Facility increased to $50 million and extended to April 2027
- Junior Facility fully repaid, reducing ongoing interest expenses
- Shareholder Loan extended to July 2027 with significant interest rate reductions
- New financing terms reflect improved asset backing and capital discipline
- Investment in new drilling rigs supports operational growth strategy
Refinancing Strengthens Balance Sheet
AJ Lucas Group Limited (ASX: AJL) has successfully completed a key refinancing initiative, extending and increasing its Senior Syndicated Finance Facility to $50 million with a maturity date now set for April 2027. This move not only provides the company with greater liquidity but also reflects improved fundamentals and asset backing, signaling enhanced financial stability.
The refinancing allowed AJ Lucas to fully repay its Junior Facility, originally a $50 million loan from HSBC established in 2019, which had been steadily reduced over time. The extinguishment of this higher-cost debt will materially lower the Group’s interest expenses, improving cash flow and reducing financial risk.
Shareholder Loan Terms Improved
In addition to the senior facility amendments, AJ Lucas has extended its Shareholder Loan from Kerogen Capital to July 2027. More importantly, the company negotiated significant reductions in the interest rates on this loan, potentially lowering the cost from an onerous 18% per annum to a range between 8% and 10% on cash-paid interest. This adjustment offers meaningful savings and greater flexibility in managing debt service obligations.
Chief Executive Greg Runge highlighted that these refinements reflect the Group’s disciplined capital management approach. By reducing debt costs and extending maturities, AJ Lucas is positioning itself to accelerate deleveraging while maintaining the flexibility to invest in growth opportunities.
Investment in Operational Capability
The increased senior facility limit aligns with AJ Lucas’s strategy of reinvesting in its asset base. The company is nearing completion of a new multipurpose large diameter rig capable of directional drilling, with two additional multipurpose exploration rigs expected by the end of 2025. These investments are designed to sustain earnings and support future growth in the competitive oil and gas services sector.
While the Group remains subject to financial covenants and liquidity tests, the refinancing deal’s structure, including a nine-month “stretch period” with increased lending advance rates, facilitated the immediate repayment of the junior loan, underscoring lender confidence in AJ Lucas’s improved credit profile.
Overall, this refinancing marks a pivotal step in AJ Lucas’s financial evolution, reducing interest costs and extending debt maturities, which should enhance its capacity to navigate market cycles and capitalise on emerging opportunities.
Bottom Line?
AJ Lucas’s refinancing deal cuts debt costs and extends maturities, setting the stage for accelerated deleveraging and growth investment.
Questions in the middle?
- How will the new drilling rigs impact AJ Lucas’s revenue and margins in the coming years?
- What are the specific financial covenant thresholds and how might they constrain future flexibility?
- Could further debt reductions or refinancing be pursued if market conditions improve?
