The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods “has no concerns” about its ability to service an increased $25 million debt load resulting from the acquisition of its western New Providence Fresh Market store, and believes the deal will boost shareholder value.

Gavin Watchorn, the BISX-listed food and franchise group’s chief executive, told Tribune Business that its financial strength and performance were much improved compared to its struggles of just over a decade ago.

He emphasised that AML Foods’ current debt paled in comparison to the $40 million burden it was struggling with in 2003, when ultimately successful efforts to turn the group around began.

Responding to Tribune Business suggestions that the Solomon’s Fresh Market store purchase would revive memories of that time, when AML also owned much of its own real estate, Mr Watchorn said: “That is going back about 12 years ago.

“The company was much more highly indebted at that point, at around $40 million I believe. Our debt levels, when this transaction was done, peaked at $25 million.”

Apart from making “a couple of payments” on the $7.25 million Royal Bank of Canada (RBC) loan used to finance the Fresh Market store purchase, AML Foods also repaid $439,000 of principal owed to its preference shareholders during the quarter to end-October 2015.

Mr Watchorn also revealed that AML Foods has a “VAT refund to get back”, which will be used to further pay down debt, once received from the Government, although he declined to say how much this was worth.

“We have no concerns that we’re able to service this debt,’ Mr Watchorn told Tribune Business.

“AML’s debt compared to where it was 12 years ago is substantially different. It’s all long-term, interest rates are more attractive and the company is generating substantially greater cash flow.”

AML Foods’ balance sheet contained just over $24.5 million worth of debt at end-October 2015, with some $2.708 million of that figure - $933,000 of bank debt, and $1.775 million in preference share debt - deemed current.

The majority, some $21.808 million, is classified as long-term liabilities, broken down into $15.536 million worth of preference shares and $6.272 million in bank debt.

The RBC loan is due to mature in 10 years, but Mr Watchorn said the purchase of the Solomon’s Fresh Market store at Old Fort Bay Town Centre did not represent a strategy where the company will look to acquire all its real estate.

The move follows closely behind the announcement of AML Foods’ 45 per cent joint venture equity stake in southeastern New Providence development with Arawak Homes, but Mr Watchorn said the company was only focusing on opportunities that delivered the desired shareholder returns.

“It’s a real estate deal for us,” he said of the Old Fort Bay transaction, which cost a total $8.3 million. “New Providence Development Company have been a strong partner with us, and we’ve been with them from the beginning of the development of that centre.

“It [the deal] allows us to control our own destiny, the interest rates were attractive and we think there’ll be appreciation on the building.

“We think it’s a good deal for strengthening the balance sheet and, long-term, it’ll create value for our shareholders,” Mr Watchorn continued.

“Over the last five years, we’ve used our capital to grow the business and open up new stores. If we think it creates value for our shareholders, we’ll purchase the real estate. If the returns aren’t there, it may be better to rent it. Whenever it makes sense and we can do it, we’ll look at it.”