STATEMENT TO AUSTRALIAN SECURITIES EXCHANGE – December 12, 2012
FLIGHT CENTRE READY TO SLASH DEBT BY REPAYING US LOAN
FLIGHT Centre Limited (FLT) will strengthen its business foundations by paying down more than half its debt.
The company has moved to capitalise on the Australian dollar’s current strength by electing to repay a $USD60million loan that was used to partly fund the Liberty Travel acquisition in the United States in 2008.
Company cash will be used to repay the loan, which represents the bulk of FLT’s debt ($107million at June 30, 2012 balance).
“With the Australian dollar trading at near record levels and Australia-USA interest rate differentials narrowing, this is an opportune time to capitalise on our strong cash position by repaying our US loan,” FLT managing director Graham Turner said.
“In addition to decreasing overall interest expense and leaving FLT with minimal debt, this will translate to a significant saving if the dollar reverts to traditional levels in the future.
“Importantly, we will also retain healthy cash reserves in excess of $300million, which means we are well placed to:
- Fund future growth initiatives
- Weather any storms; and
- Capitalise on opportunities that may arise, without needing to maintain extensive debt facilities
“Our strong balance sheet is a rarity for a travel company and a key point of difference.”
FLT expects to formally pay the loan out before the end of this month.
By removing the US loan, FLT will lower its total debt to less than $50million.
The remaining debt includes about $30million in overdrafts and loans in Asia and about $15million in funds (net) that are repayable to staff members who participate in the company’s Business Ownership Scheme (BOS).
FLT initially announced that it would consider paying down the US loan in July 2012. The company also said it would consider removing or reducing the Asia loans and overdrafts during the year.
Mr Turner said the decision to repay the US loan would not affect FLT’s goal of returning 50 to 60 per cent of net profit after tax to shareholders each year as fully franked dividends, subject to business requirements at the time.
ENDS Media and investor enquiries to Haydn Long 0418 750454