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Refinancing risk removed as Micro Focus secures funding
Infrastructure software company Micro Focus (MCRO) has removed its near-term debt funding risk after pushing through a previously delayed refinancing package.
The FTSE 100 company announced the deal on 29 May, securing two tranches of dollar and euro denoted funding worth $650m and €600m respectively.
This was more than the $400m and €400m originally intended, and with around $150m of cash on the firm’s books means Micro Focus has secured its financing needs out to 2024, say analysts.
‘The cost of debt was below the assumed refinancing cost in our model, so we upgrade our full year 2021 earnings per share forecasts by 6% and free cash flow forecasts by 2.5%,’ said Will Wallis of Numis Securities.
‘We continue to model net debt, excluding operating leases, of circa $3.95bn at 31 October 2020, falling below $3bn by October 2022.’
Numis sees arresting revenue declines as the big challenge to management’s restructuring and turnaround of the business.
The broker is not anticipating that happening until beyond 2022, although it does expect earnings to bottom out at $1.49 per share next year before rebounding to $1.52 in 2022.
Micro Focus’ shares rallied more than 4% to 450p in response to the refinancing.