administrator says abc learning owes $1.6bn, page-3

US and UK sale used to pay down debt as per following article.

ABC Learning confirms assets sale in US
Email Print Normal font Large font March 5, 2008 - 5:47PM

ABC Learning Centres Ltd has confirmed it will sell 60 per cent of its US childcare business to a private equity firm and use the expected $750 million of cash proceeds to pay down debt.

ABC on Wednesday entered into a memorandum of understanding with Morgan Stanley Private Equity for the sale of the stake, in a deal that puts a value of $US775 million ($A836.57 million) on the entire US business.

The transaction will result in proceeds of about $750 million, plus an additional $US30 million ($A32.38 million) payable shortly after 30 June 2009.

At a multiple of 14.1 times earnings before interest, tax and depreciation for calender 2007, the sale will allow ABC to realise significant value, retain a material presence in an important market and strengthen its capital structure, chief executive Eddy Groves said.

"We continue to believe that the US represents a significant growth and return opportunity for ABC," he added.

"I am delighted that Morgan Stanley Private Equity will become our strategic partner in the US," Mr Groves said.

"Morgan Stanley Private Equity shares our vision for the business and supports the existing management team to deliver it."

ABC and Morgan Stanley Private Equity expect to finalise the documentation by March 24 and complete the transaction by the end of April.

As a condition of the sale, Morgan Stanley Private Equity has agreed to subscribe for ABC notes convertible at its option into about 11 per cent of ABC's undiluted share capital.

ABC said it required the consent of the majority of its lending banks to go ahead with the deal.

It said net proceeds from the sale, and the issue of convertible notes, will be used to partially repay its senior debt under its syndicated bank facility.

"The company's existing syndicated bank debt is expected to reduce by approximately $750 million," it said.

"At no point has the company been in breach of its banking covenants, nor are these initiatives in response to any pressure or suggestion from its banks.

"If the sale transaction and/or convertible notes issue do not proceed, the company will continue to be able to meet its financial covenants under its existing banking facilities."

Mr Groves said after the transactions, ABC will be in a strong financial position.

"We will be readily able to fund our growth path and, at the same time, maintain a low-risk capital structure," he said.

Morgan Stanley Private Equity co-head Steve Trevor said the US business was poised to growth.

"We are excited to partner with ABC, a leading player in the early education and childcare space, to facilitate the Learning Care Groups continued growth and profitability," he said.

"The Learning Care Group is well positioned."

ABC noted that it does expect to have to seek shareholder approval for the stake sale to go ahead.

ABC is also proposing to sell its UK vouchers business through a tender.

"Whilst not material transactions the sale of the UK vouchers business, together with the previously announced intended sale of the company's property assets, will provide ABC with further flexibility to reduce its syndicated bank debt if this is considered appropriate at the time," it said.

Mr Groves said the US transaction and the proposed sale of the UK vouchers business will have no impact on ABC's Australian and New Zealand business, which continue to perform well.