supply chain – Jops Web http://www.jopsweb.org/ Wed, 06 Oct 2021 13:15:36 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://www.jopsweb.org/wp-content/uploads/2021/08/icon-10-150x150.png supply chain – Jops Web http://www.jopsweb.org/ 32 32 Student Loan Advice From a Finance Specialist https://www.jopsweb.org/2021/08/16/student-loan-advice-from-a-finance-specialist/ Mon, 16 Aug 2021 07:28:34 +0000 https://www.jopsweb.org/?p=139 Student loan providers are the groups or organizations that finance a student’s education, on the condition that they will be repaid at a later date. Approximately 43 million Americans held student loan debt in 2019. The vast majority of these loans were issued by the Federal government. Private loans can make up the difference when […]]]>


Student loan providers are the groups or organizations that finance a student’s education, on the condition that they will be repaid at a later date. Approximately 43 million Americans held student loan debt in 2019. The vast majority of these loans were issued by the Federal government. Private loans can make up the difference when Federal aid fails to fully cover the cost of tuition; however, these kinds of loans have their own unique requirements and, according to our expert, are best utilized after all non-private options have first been explored.

Investopedia spoke exclusively with Accredited Financial Counselor (AFC®) and associate professor at North Dakota State University Carrie Johnson on the topic of student loans, including the various types, the differences among providers, and some common misconceptions about them. Our edited conversation follows.

How to Apply for a Student Loan

Investopedia: What is the FAFSA and does it matter how early you file for it? What’s the difference between the FAFSA and the CSS Profile?

Johnson: The Free Application for Federal Student Aid (FAFSA) is the form that families complete that makes them eligible for all federal student aid. The FAFSA collects student income and asset information, and if the student is dependent also collects the parents’ income and assets. The information allows for a calculation called the Expected Family Contribution (EFC). The EFC is used by the institution the student will be attending to determine what types (grants, work-study, loans) and amount of federal student aid that student is eligible for.

The FAFSA collects the prior, prior year of income tax information. For example, for the school year 2021–2022, 2019 tax information is used. That way, families do not need to complete the FAFSA by the school’s priority date just to make corrections later. Each institution has a priority date. Some types of aid is awarded based on this date. For example, a school may set a date in which only those who qualify and file the FAFSA prior to that date will receive the Supplemental Education Opportunity Grant (SEOG). This grant is a federal grant, but since each school who offers it can decide how it is awarded, the priority date is usually one of those criteria.

As stated before, the FAFSA is used to determine eligibility for federal student aid. The CSS Profile is used by some institutions to determine a student’s nonfederal student financial aid. While the FAFSA is through the Department of Education, the CSS Profile is not, and it is only required by about 400 institutions. The CSS Profile also costs money to complete each year.

Understanding Student Loans

Investopedia: Student loans are infamous for their high cost over time. Why do you think this industry still remains the primary avenue of financing a higher education for so many people?

Johnson: According to the National Center for Education Statistics, the average cost of attendance for a four-year public institution was $20,598—the cost is even higher at private nonprofit and for-profit institutions. That does include undergraduate tuition, fees, room, and board. However, if you take that times four, you are looking at a total cost of $82,392 to obtain an undergraduate degree (if you finish in four years). Many families do not have that amount of money set aside to pay out of pocket, so student loans are used as a way to fund the education.

Investopedia: How do loans differ for undergraduates and graduate students? Do you need to take out a new loan every year?

Johnson: I will start with the question related to taking out a new loan every year—the answer is yes. If you are using federal student loans, you will need to complete a new Free Application for Federal Student Aid (FAFSA) each year, as well.

For federal loans, undergraduate and graduate student loans do differ in a few ways. First of all, the amount the student is eligible for is different. Each year, students are eligible for a maximum amount of Direct Student Loans based on their grade level. For example, first year, dependent students are eligible for $5,500 total while a graduate student can receive up to $20,500 per year.

Graduate students are only eligible for unsubsidized Direct Loans. This means that interest begins accruing as soon as the loan is disbursed. Undergraduate students are eligible to receive subsidized Direct Loans (0% interest while at least a half-time student) if the information used from their FAFSA determines the student has financial need.

Graduate students also have an added opportunity to borrow federal loans in the form of a Direct PLUS loan for graduate students, called a grad PLUS. Graduate students can fund up to their cost of attendance with federal student loans, while undergraduate students are limited in the amount of federal loans unless their parent takes out a Direct parent PLUS loan.

Investopedia: What will the differences be, if any, should a student take out a loan in their own name or if their parents take out the loan on their behalf?

Johnson: A student loan in a student’s name is their responsibility to pay back. For federal loans, these loans do not require a co-signer. If a student needs additional funding by borrowing a private student loan (a student loan from a bank, credit union, etc.), then they will most likely need a cosigner. If the borrower does not pay back the loan, it is the cosigner’s responsibility to do so. Some lenders do offer a cosigner release after so many on-time payments.

If a parent takes a parent loan, it is 100% their responsibility to pay back the loan. Even if the parent borrows with a federal parent PLUS loan, this loan is in the parent’s name and cannot be transferred to the student.

Investopedia: How does student loan debt differ from other kinds of debt? What does it mean if a student loan is subsidized or unsubsidized?

Johnson: Unlike some other forms of debt like credit cards and unsecured loans, student loan debt is considered “good debt.” Yes, there is good debt and bad debt! Since you are financing an education and building your human capital—which can lead to a better career opportunity and potentially earn a higher income—it is looked at differently by creditors. Student loan debt is more difficult to get discharged in bankruptcy. However, in recent months there have been more cases in which this has not been the case.

Subsidized student loans are loans that do not accrue interest while a borrower is enrolled at least half-time. Interest on unsubsidized student loans starts to accrue as soon as the loan is disbursed (released to the borrower).

Investopedia: What are the differences among student loans, grants, and scholarships?

Johnson: Student loans must be repaid. Sometimes they are called self-help financial aid, while grants and scholarships are considered gift aid because they do not need to be paid back. Grants are typically awarded based on financial need and scholarships are usually merit based (some can be based on other factors such as athletics or hobbies and interests).

Finding the Right Student Loan Provider

Investopedia: What are the differences between federal and private student loan providers? In which circumstances would one be better than the other?

Johnson: Federal student loans are those guaranteed by the Department of Education. The amount and type (unsubsidized vs. subsidized) is based on the borrower’s financial need and grade level. Borrowers are then assigned a student loan servicer, whom they will work with after they leave school or drop below half-time to repay the loan. Interest rates are fixed and set by the federal government annually.

A private student loan is through a financial institution, company, state agency, or school who offers student loans. Fees and interest are set by each institution, so they vary widely. Interest is often variable instead of fixed, which means the rate can change drastically throughout the life of the loan. It is important for borrowers to do their homework and compare fees and rates before deciding which loan to use. Private student loans usually will require a cosigner.

Federal student loans have many repayment benefits. For example, there are forgiveness options for certain occupations or in the event of a disability. If a borrower is struggling to make payments, there are options to suspend payments for a period of time. Private student loans do not offer these benefits and in many cases, if a borrower passes away, their cosigner is then responsible for the remainder of the loan balance.

It is best to exhaust your federal student loan options before applying for a private student loan.

Investopedia: What are some things people should look for when shopping for private student loan providers? Are rates more advantageous in one situation than another?

Johnson: When shopping around for private student loans a few items should be considered. Interest rates and origination fees are the two biggest financial related items to compare. You may also want a loan that offers a cosigner release after so many on-time payments. Or, you may want a loan with a fixed interest rate versus a variable interest rate. The most important thing is to read all of the loan information and make an informed decision.

Investopedia: Are there any circumstances where it might make sense to not take out a student loan?

Johnson: Absolutely, if a student has enough scholarships—and/or grants and money in a savings account of some type—it would not make sense to take out a student loan. Also, if a student is offered a larger amount than needed on their award letter, they can choose to take a portion of the loan and decline the rest.

Help for Paying off Your Loans

Investopedia: What resources are available for anyone struggling with repaying their student loans?

Johnson: The first step when struggling to repay any form of debt is to contact the lender or servicer immediately. Don’t ignore the problem, it will not go away. For federal student loans, the borrower can apply for a deferment or forbearance. These allow for monthly payments to be temporarily postponed or reduced.

Investopedia: Should a student consolidate their loans after graduation? Can student loans be forgiven?

Johnson: Student loan consolidation can be a great tool to put all student loans borrowed during college into one loan. However, this needs to be done with some thought as to not jeopardize forgiveness opportunities or repayment benefits. By consolidating your loan, all of your loans will be paid off and one new loan will be created. This means that all of the loan terms will change.

First of all, federal student loans and private student loans should never be consolidated into one loan. A Direct Consolidation Loan does not allow for private loans to be consolidated with it. So, to do this a borrower would need to use a private consolidation student loan, which would turn the federal loan into a private loan with a new lender. If you want to consolidate your private student loans and your federal student loans, you will want to end up with two different consolidation loans.

Federal student loans can be forgiven, cancelled, and discharged in a number of situations (Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, Perkins Loan Cancellation and Discharge, Total and Permanent Disability Discharge, etc.). Each one of these “programs” has different criteria which the borrower must meet. For example, there is Public Service Loan Forgiveness (PSLF). This is only available for Direct Loans (including Direct Consolidation Loans) for borrowers who are on an income-driven repayment plan, work for a qualifying employer, and have made 120 on-time payments while working full-time.

Investopedia: Is there a regulatory agency for student loan providers? Where should students go if they are having problems with their provider?

Johnson: The U.S. Department of Education Ombudsman Group is dedicated to helping resolve disputes related to the federal student aid programs. For private student loans, a complaint can be submitted to the Consumer Financial Protection Bureau Private Education Loan Ombudsman.

Closing Thoughts

Investopedia: What are some of the common misunderstandings people have about student loans?

Johnson: I have heard a lot of misunderstandings about student loans throughout my career. Some of the more common ones are as follows.

“I don’t qualify for financial aid because my parents make too much money” is probably the one I have heard most. That simply is not true. Income will not prevent you from qualifying for federal student loans; eligibility may just be limited to unsubsidized Direct Loans.

“I made a mistake on my FAFSA so I was chosen for verification.” Just because you are chosen for verification, it does not mean you did anything incorrect. However, a certain number of files are chosen for verification each year, and if you are one of the lucky chosen ones, you will need to provide the required documentation to your school or you will not be eligible for federal student aid.

“My parents are not helping me pay for college, so I am independent.” A student is considered dependent unless they meet very specific criteria. In general, if you are an undergraduate student under the age of 24 and are unmarried and do not have children, you will be considered dependent for financial aid purposes. There are a few other situations which would change your dependency status, too.

“My Expected Family Contribution is XXXX, I don’t have that much money to pay for school.” The EFC does not represent an actual dollar amount but is just a number used to calculate how much financial aid you are eligible to receive.

Investopedia: What is your recommendation for anyone thinking about taking out a student loan? What should people know about student loans that we didn’t ask?

Johnson: It is important to know what you are getting into when taking out a student loan. Do as much homework as you possibly can. Ask questions! It is so easy to go through the motions just to make sure you have funding available to pay for college. But being an informed consumer is essential because these loans will affect your future for many years. If you are a parent helping your child through the process, involve them in every step of the way. This is probably the first debt to be incurred in their lives. They need to know the seriousness of taking on debt. It is true that most student loans do not need to be repaid until after a borrower leaves school, but if the borrower is not paying attention to the amount being borrowed every year it can be a complete shock to them when they graduate and see the price tag later.



Source link

]]>
Debt capital raising during Covid-19: practical tips https://www.jopsweb.org/2021/08/16/debt-capital-raising-during-covid-19-practical-tips/ Mon, 16 Aug 2021 07:27:46 +0000 https://www.jopsweb.org/?p=136 1 Minute read Against the backdrop of human tragedy brought about by the Covid-19 pandemic, companies are facing their own battle for survival. Over the past few months, tens of millions of people have been furloughed, made redundant or are working under radically altered circumstances, with the resultant dramatic impact on company revenues and, indeed, […]]]>
1 Minute read
Against the backdrop of human tragedy brought about by the Covid-19 pandemic, companies are facing their own battle for survival. Over the past few months, tens of millions of people have been furloughed, made redundant or are working under radically altered circumstances, with the resultant dramatic impact on company revenues and, indeed, business viability. In this follow-on piece to our June 2020 article Equity capital raising during Covid-19: practical tips and as governments and central banks run out of fiscal stimulus options – Baker McKenzie lawyers consider what debt capital markets can offer companies struggling to prevent their liquidity problems from becoming solvency problems.

In our March 9 article, we considered the immediate impact of the Covid-19 pandemic on capital markets, including contractual implications for securities offerings, ongoing disclosure requirements, practical effects, and the approach of stock exchanges and regulators around the world. That article, published ahead even of the nadir of the current liquidity crisis, focused on resilience: what market participants should be concentrating on to survive the initial impact of the Covid-19 tsunami.

In the ensuing weeks and months, as the world has alternately quivered and rallied in the limbo of lockdown, liquidity in the global debt markets has at times been severely impaired. We have seen rapid and acute widening of bid-offer spreads, a measure of underlying market volatility, and an apparent shrinkage of dealer capacity. On April 14, the IMF warned that Covid-19 would produce “the worst recession since the Great Depression”.

It predicted a three percent decline in GDP for 2020 (revised to 4.9% in its World Economic Outlook Update, released June 24) and a cumulative loss to global GDP over 2020 and 2021 of around $9 trillion (revised to $12 trillion in the June update), greater than the economies of Japan and Germany combined. Reflecting the growing economic impact of the virus, World Bank data released on June 8 deepened these gloomy predictions still further, with its baseline forecast envisioning an even worse contraction – 5.2% – in global GDP in 2020, with “per capita income contracting in the largest fraction of countries globally since 1870”.

Though policymakers are providing unprecedented support, with sovereign debt already set to spike from hefty stimulus packages, governments and central banks are stretched to their limits. Interest rates in the US, the EU, the UK and Japan began the crisis near zero. Though negative interest rates or interest rate cuts remain an option, central banks continue to perceive quantitative easing through asset purchases to be the more effective and efficient tool to place downward pressure on longer-term rates, to stimulate economic activity and provide support for households, firms and essential services. This policy has been a cornerstone of the US Federal Reserve’s Covid-19 response, for instance, which has seen hundreds of billions of newly-created currency used to buy assets.

Against this backdrop, with parts of the world now cautiously lifting lockdown measures – even as others remain locked down trying to contain the virus – we look ahead and consider how the debt capital markets might offer businesses a means through which to repair their balance sheets and aid the recovery.

Q1-2 2019 Commercial Paper Issuances

Source: Refinitiv

Q1-2 2020 Commercial Paper Issuances

Source: Refinitiv

Quick relief using commercial paper

Recognising the need for urgent cash injections to prevent liquidity problems caused by Covid-19 quickly becoming solvency problems for many businesses, central banks around the world acted swiftly to support the liquidity and financial condition of their local economies, implementing substantial asset purchase programmes to provide near-instant relief for those that qualified.

The ECB’s PEPP intervention

On March 18 the European Central Bank (ECB) announced the €750 million ($841.2 million) Pandemic Emergency Purchase Programme (PEPP), under which purchases would be conducted from 26 March. The announcement was key in bringing stability and confidence back to the European secondary corporate bond market.

In addition to covering certain public sector bonds, asset-backed securities and covered bonds, the PEPP expanded the range of eligible assets under the Corporate Sector Purchase Programme (CSPP); a programme through which the ECB buys corporate bonds of eligible issuers on the secondary market. Most notably for eurozone corporate issuers, the scope of the CSPP was expanded to include eligible non-financial commercial paper (CP) with a remaining maturity of at least 28 days (previously a minimum of six months to maturity being required), thereby giving more issuers access to the programmes. The expansion serves several purposes: it helps companies to manage their short-term funding needs, by supporting the provision of greater liquidity through capital markets and thus providing additional incentives for companies to access capital markets.


Several major stock exchanges have now agreed to waive listing fees for social and sustainable debt instruments that are issued to address Covid-19


In order to be eligible, the CP must fulfil the CSPP eligibility requirements, including (a) as to currency: the CP must be denominated in euro, and (b) credit rating: the first-best rating must have a minimum credit assessment of credit quality step 3 under the Eurosystem credit assessment framework, corresponding to an external credit assessment institution rating of BBB-/Baa3/BBBL.

The equivalent short-term ratings are A-2/P-2/F2/R2-L. The CP must also be issued by a CSPP-eligible entity (i.e. a non-bank corporation established in the euro area) and have either (i) an initial maturity of 365/366 days or less and a minimum remaining maturity of 28 days at the time of purchase, or (ii) an initial maturity of 367 days or more, a minimum remaining maturity of six months, and a maximum remaining maturity of less than 31 years at the time of purchase.

New issuances had all but dried up in the first half of March, yet the PEPP brought the market back from the brink. This resulted in a flood of issues that made March a record month for 2020, with $88.9 billion raised from 610 issues, an increase in proceeds of over 60% compared to March 2019, when $54.1 billion was raised from 341 issues. This flood continued through April, seeing a further $110.2 billion raised from 666 issues, and into May, which saw year-on-year issuances more than double to $55.8 billion.

In the first two months of operation, to end of May, the ECB reported that €35.4 billion of CP had been purchased under the PEPP. Even more strikingly, CP purchases amounted to 76% of the €46 billion private sector debt bought by the ECB during the period, and within that, some 81% – a total of €28.7 billion – was primary issuance.

With total Eurosystem holdings of all securities purchased under the PEPP (including public sector securities, corporate bonds and covered bonds) already reaching €234.7 billion by the end of May, the ECB recognised that the initial €750 billion envelope set aside for the PEPP to the end of 2020 would likely be insufficient. On June 4 the ECB exceeded the market’s expectation with the announcement that it would be injecting a further €600 billion into the PEPP, taking its overall investment in the programme to €1.35 trillion and extending the horizon for net purchases under the PEPP to at least the end of June 2021.

The Bank of England’s Covid-19 Corporate Finance Facility

Similar in intent to the PEPP extension of the CSPP in Europe, on March 23 the Bank of England (BoE) made a CP purchase programme available to non-financial UK-incorporated companies, ostensibly to help them to pay short-term liabilities, such as wages and suppliers, while they are suffering from cashflow disruption brought about by the turbulence resulting from Covid-19. The programme is open to companies who make a “material contribution to the UK economy” and had, prior to March 1 2020, a short term rating of investment grade, or financial health equivalent to an investment grade rating.


Predictions that the Covid-19 bond market could top $100 billion by the end of 2020 do not seem so farfetched


CPs issued under the CCFF must be: in sterling; with a maturity of between one week and 12 months; issued directly into Euroclear and/or Clearstream; and not be complex (no non-standard features). However, in contrast to the PEPP and indeed the BoE’s own £200 million ($248 million) asset purchase programme – which operate predominantly in the secondary market to increase liquidity and support pricing – the Covid-19 Corporate Finance Facility (CCFF) provides direct support to firms by purchasing their securities in the primary market upon issuance via a dealer. Additionally, the BoE has confirmed that CP may be issued using International Capital Market Association (ICMA) euro CP templates, now available also to non-members through the ICMA Primary Market Handbook. In practice, this means that CP programmes can be quickly established to participate in the CCFF in as little as two to three weeks.

On June 4, the BoE released the first of its new weekly updates detailing drawings under the CCFF. In the latest of these, reporting to close 1 July, 188 businesses were approved as eligible to access the CCFF, the facility was supporting £17.6 billion (less redemptions) of lending to 62 businesses, and had approved for CCFF issuance a nominal sum of £79.1 billion. A further 82 businesses had been approved as eligible in principle but were still awaiting full approval for CCFF issuance.

US Federal Reserve’s Commercial Paper Funding Facility

Like the UK’s CCFF, the Commercial Paper Funding Facility (CPFF) provides a liquidity backstop to US issuers of commercial paper, including municipalities, by purchasing CP directly from eligible issuers (defined for purposes of the CFPP as US issuers of commercial paper, including US issuers with a non-US parent company). As already touched upon, the CP market is typically used for the financing of short-term liabilities and so is a critical source of funding for some of the largest companies in the world.


There is a separate group of issuers that are using the convertible bond market opportunistically to fund growth


In mid-March, the US CP market was effectively frozen as, due to the adverse effect of Covid-19 on global financial markets, investors had become reluctant to purchase CP. As a result, mirroring what was happening in other jurisdictions, interest rates on longer-term CP (such as with a maturity of three months) surged to levels not seen since the financial crisis of 2008, with a 90-day A2/P2 non-financial rate peak of 3.87% reached on March 19 (Source: Federal Reserve Board 2020). Many firms consequently reported being unable to issue CP with a term of longer than a week, thus increasing their rollover risk and reducing the ability of the CP market to support their operations.

In response, the US Federal Reserve Board established the $10 billion CPFF to cover three-month unsecured and asset-backed US dollar-denominated CP from issuers rated at least A1/P1/F1 as at March 17 (with one-time sales permitted to issuers who were subsequently downgraded no lower than A2/P2/F2). The introduction of the facility brought much-needed relief. The Federal Reserve reported that in its first month of operation, to May 14, the CPFF purchased more than $4.2 billion of eligible US dollar-denominated commercial paper. It also stimulated the market such that borrowing costs dropped (for example, the 90-day A2/P2 non-financial rate had fallen to 0.85% by May 14 from its 3.87% peak on March 19 – Source: Federal Reserve Board 2020) and issuers of CP were able to avail themselves of debt of longer maturities; up to 270 days.

Social bonds softening the blow

In the whole of 2019, only $13 billion of social bonds were issued globally, according to Sustainalytics (compared to $257 billion of green bonds). Even when sustainability bonds, which include a mix of social and green use of proceeds, are included in this figure, they still only account for 20% of all green, social and sustainability (GSS) bond issuances in 2019. However, as it becomes clear that more funding is needed for economic recovery than even the strongest national efforts can provide, investors have a key role to play, and social bonds could provide them with the perfect excuse to get involved.

The ICMA Quarterly Report for Q2 2020 identified social bonds as “a readily actionable response for the market to contribute to the response to the economic consequences of the Covid-19 crisis” and it is this widely-held opinion that is seeing social bonds growing in stature. They are being increasingly viewed as essential to contain the economic fallout of Covid-19 and to build resilience against future shocks by supporting healthcare, employment and housing. Indeed, looking to encourage not just the raft of usual social bond issuers to market (international financial institutions and development banks), the International Finance Corporation (IFC) – itself a key player in the social bond market – has published case studies that highlight how issuers from various industries may also use social bonds to raise financing that will go towards addressing social issues that have emerged as a consequence of the Covid-19 pandemic.

Further, several major stock exchanges have now agreed to waive listing fees for social and sustainable debt instruments that are issued to address Covid-19, including the London and Luxembourg Stock Exchanges, and exchanges run by Nasdaq in Copenhagen, Helsinki and Stockholm. In addition, though up until now the Green and Social Bond Principles have strongly encouraged issuers to publish a framework document before, or at least at the same time as, issuing bonds, they are now considering allowing issuers to publish this framework up to a year after issuance. This – which will be familiar to investors involved with green bonds – could prove a useful innovation, enabling issuers to come to market quicker, utilising a miniature framework in their use of proceeds disclosure instead of the usual few lines referring investors back to a presale framework for this information.

The effects of these measures and the fact that issuance of social bonds broadens the options for investors with ESG investment mandates while simultaneously addressing socioeconomic issues that other capital market mechanisms do not, means that social bonds provide the perfect fit to our present niche problems.

Recent, big-ticket issuances certainly support this. In the first four months of 2020, Ecuador became the first country to issue a sovereign social bond, backed by a guarantee from the InterAmerican Development Bank, to support affordable housing; the IFC raised $1 billion through its three-year social bond; Bank of China issued a dual currency social bond raising HKD4 billion ($516 million) and MOP1 billion ($125.3 million), respectively; the African Development Bank launched a $3 billion Fight Covid-19 social bond in April, the world’s largest dollar-denominated social bond transaction, as well as an SEK2.5 billion ($268.2 million) domestic social bond. In Europe, the Council of Europe Development Bank, the Nordic Investment Bank, and Italy’s Cassa Depositi e Prestiti each announced Covid-19 social bonds focused on healthcare and direct lending for small businesses.

Perhaps more tellingly, though, corporates have also jumped onto the bandwagon. The first Covid-19 social bond issued by a corporate bank was issued by the Macau SAR branch of Bank of China in late February, raising more than $600 million to support Macau’s small and medium enterprises. In the US, Bank of America came to market in early May with a $1 billion four-year Covid-19 bond to fund lending to hospitals, nursing facilities and healthcare manufacturers, among others, as they try to tackle the pandemic.

In Europe, French public-sector lender Caffil issued a €1 billion, five-year social bond to finance public hospitals affected by the pandemic in April that was more than four times oversubscribed – the highest rate of any bond issue since 2013 – and had the lowest coupon (0.01%) ever paid on a transaction of similar size, while Spain’s Banco Bilbao Vizcaya Argentaria became the first European corporate bank to launch a social bond in May, an inaugural €1 billion with proceeds to mitigate “the economic and social impact caused by the Covid-19 pandemic”. In the face of such demand, predictions that the Covid-19 bond market could top $100 billion by the end of 2020 do not seem so farfetched. Likewise, we can certainly expect that social bond issuances will account for a much larger slice of the GSS pie in 2020 than the meagre five percent they enjoyed in 2019.

Q1-2 2019 Hybrid Issuances

Source: Refinitiv

Q1-2 2020 Hybrid Issuances

Source: Refinitiv

2019 Regional Breakdown

Source: Refinitiv

2020 Regional Breakdown

Source: Refinitiv

The re-emergence of hybrid securities

The first convertible bonds were issued in the late 19th century by US railroad companies. A somewhat pioneering spirit in the face of adversity still underpins the hybrid security market today, as volatility in the markets, rising interest rates and an uncertain economic climate are often key drivers in the popularity of hybrid bonds.

For example, as the impact of the Covid-19 pandemic started to be felt across financial markets and global business during the latter portion of Q1 2020, both the total proceeds and the number of hybrid bond offerings increased significantly, almost doubling from proceeds of $13.6 billion from 117 issues in January 2020 to proceeds of $26.3 billion from 210 issues in March 2020. Similar to the trend we have seen for follow-on offerings, as the economic fallout has started to show, companies have looked to the capital markets’ willingness to fund larger hybrid deal sizes. Iberdrola, for example, attracted such demand for its initially €150 million tap in late May that it increased the issue amount by two-thirds to €249 million. As a result, in contrast to the deal flow in 2019, where numbers and value dropped away in Q2, Q2 2020 started very strongly, with $34.3 billion raised in April 2020, a 97% year-on-year increase. It showed no signs of stopping through May either, with $39.9 billion raised: an incredible 308% year-on-year increase.

Hybrid securities, such as convertible and exchangeable bonds, combine features of both equity and debt by providing a right to convert the bond into equity. This conversion right enables investors to benefit from an equity upside if share prices rise, while enjoying the downside protection of coupon payments and repayment of principal at maturity if the bond is not redeemed, converted or sold.

In the current climate, where share prices of many companies have plunged precipitously just as a few have risen sharply, we are seeing two distinct kinds of issuer coming to market. Companies in sectors presently heavily affected by Covid-19, like oil, retail, travel and leisure, which have stretched credit profiles due to the effects of the pandemic yet are desperate to raise cash, are joining the group more traditionally comprised of lower-rated, high-growth issuers. These issuers are able to offer hybrid security issuances with generally lower interest rates than would be expected were they offering traditional non-convertible bonds. In Europe, many of the companies that have issued recently fall into this first group, such as cruise line operator Carnival, Spanish and British oil majors Repsol and BP, Spanish IT supplier Amadeus, and Swiss duty free operator Dufry.

In addition, there is a separate group of issuers that are using the convertible bond market opportunistically to fund growth and opportunities because the terms are very attractive and/or their businesses are positioned to do well out of the crisis. Nexi, the Italian payments company, falls squarely in this latter category even though it is itself a high yield issuer. Others companies that have tapped the markets after benefitting from the pandemic include New York Stock Exchange-listed Sea, the Singaporean online gaming company, whose share price surged after it reported strong first-quarter earnings. Similarly, Slack Technologies, the enterprise messaging and collaboration platform, which added 9,000 new paid customers in the first two months of Q1 2020 – compared to 5,000 new customers in each of the prior two full quarters – upsized its $600 million convertible offering to $750 million based on demand in April.

Whether the current market dislocation we are experiencing is short-lived or, as most expect, the start of a more prolonged downturn, the wave of issuance that we are seeing across the regions is expected to continue, with the US leading the way. April, for instance, was the strongest month for US convertible bonds since March 2007, with issuances of $13.5 billion buoyed by the likes of Southwest Airlines and Carnival coming to market with the second and third biggest deals of the year. May numbers then blew this out of the water by presenting the highest monthly volume of hybrid debt issuances on record: $20.6 billion.

Recovery and renewal

Companies and individuals have had to become more resilient in response to Covid-19, adapting to the changing landscape. While government intervention schemes have unarguably thrown a lifeline to the global economy, as we move into the phases of recovery and renewal, the capital markets present an efficient and viable solution to mitigate the uncertainties and pave a way forward. However, though the debt capital markets are very attractive to corporates, providing quick and effective sources of liquidity, if used in isolation, there is a very real risk that heightened debt could have a negative impact on companies’ credit ratings and on their ability to obtain new funding going forward.

As such, if companies are to start planning now for a future without the burden of too much leverage, the ideal solution would see a proper balance, drawing funding from both the debt and equity markets.

Please stay up to date with further developments at Baker McKenzie’s Beyond COVID-19 Resource Center.

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Source link

]]>
Alaris Equity Partners Income Trust Releases Q4 2020 Financial Results https://www.jopsweb.org/2021/08/16/alaris-equity-partners-income-trust-releases-q4-2020-financial-results/ Mon, 16 Aug 2021 07:25:12 +0000 https://www.jopsweb.org/?p=118 /NOT FOR DISTRIBUTION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW./ TSX-AD.UN  CALGARY, AB, March 9, 2021 /CNW/ – Alaris Equity Partners Income Trust. (together, as applicable, with its subsidiaries, “Alaris” or the “Trust“) is pleased to announce its results for the three months and […]]]>


/NOT FOR DISTRIBUTION IN THE UNITED STATES. 
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW./

TSX-AD.UN 

CALGARY, AB, March 9, 2021 /CNW/ – Alaris Equity Partners Income Trust. (together, as applicable, with its subsidiaries, “Alaris” or the “Trust“) is pleased to announce its results for the three months and year ended December 31, 2020. The results are prepared under International Financial Reporting Standards (“IFRS“) as issued by the International Accounting Standards Board (“IASB“). All amounts below are in Canadian dollars unless otherwise noted.

2020 Highlights:

  • Capital deployment in 2020 of approximately $170.0 million, consistent with Alaris’ five-year average. Subsequent to December 31, 2020, Alaris invested an incremental $180.0 million into three new Partners and one current Partner increasing the total capital deployed in the twelve months up to the date of this release to over $350.0 million. This was by far a record amount of deployment for Alaris in a twelve-month period. This deployment will generate, at a minimum, additional annualized distributions of approximately $42.0 million, or $0.93 per unit. These capital deployments in 2020 and up to the date of this release in 2021 include:
    • New Partner contribution in June 2020 of US$17.0 million to Carey Electric Contracting, LLC (“Carey Electric“), (US$16.1 million of preferred equity and a US$0.9 million minority common equity investment). Common distributions received by Alaris in 2020 were US$0.4 million;
    • Follow-on contribution in October 2020 of US$55.0 million to GWM Holdings Inc. and a subsidiary thereof (collectively “GWM“);
    • Follow-on contribution in December 2020 of US$20.0 million to Body Contour Centers (“BCC“);
    • New Partner contribution in late December 2020 of US$34.0 million to Edgewater Technical Associates, LLC (“Edgewater“), (US$30.6 million of preferred equity and a US$3.4 million minority common equity investment)

Subsequent to December 31, 2020

    • New Partner contribution of US$40.0 million to Falcon Master Holdings LLC (“FNC“), (US$32.2 million of preferred equity and a US$7.8 million minority common equity investment). Based on FNC’s past practice of declaring and paying distributions, Alaris expects to receive its pro-rata portion of common equity distributions in 2021 as cashflows permit, with US$0.1 million already haven been received up to the date of this release based on FNC’s 2021 results to date;
    • New Partner contribution of US$66.0 million to Brown & Settle Investments, LLC and a subsidiary thereof (collectively, “Brown & Settle“), (US$53.7 million of a combination of subordinated debt and preferred equity and a US$12.3 minority common equity investment). Common equity distributions in the near term are not expected as Brown & Settle will be re-investing excess cash flows into their business; however, in the longer-term period Alaris will be entitled to their ownership percentage of any common equity distributions declared;
    • Follow-on contribution to Accscient, LLC (“Accscient“) of US$8.0 million; and
    • New Partner contribution of US$30.0 million to 3E, LLC (“3E“), US$22.5 million of preferred equity and US$7.5 million placed into escrow account to fund up to two additional preferred unit tranches, once escrow targets are met by 3E. Alaris’ interest expense on the escrowed funds will be paid by 3E until the funds are released.
  • Alaris generated revenue of $32.0 million in Q4 2020 and $109.6 million for the year ended December 31, 2020, along with Normalized EBITDA of $27.0 million and $85.7 million in each period, respectively. Compared to Q3 2020, revenue increased 32% on a per unit basis and Normalized EBITDA increased 30% per unit, as a result of:
    • Kimco Holdings, LLC (“Kimco“) paid $4.5 million of distributions during the quarter (US$3.5 million) inclusive of previously deferred distributions after achieving certain performance targets and their previously agreed upon Q4 2020 distribution payments. As a result, Kimco paid all contracted distributions in 2020 (US$4.4 million);
    • BCC paid an incremental US$1.7 million of previously deferred distributions during Q4 2020. These distributions were deferred in Q2 2020 had not been accrued and were therefore included in revenue in the current quarter;
    • Additional revenue of US$1.5 million from GWM following their follow-on contribution in October 2020; and
    • Amur Financial Group Inc. (“Amur“) and Carey paid common distributions totalling $0.8 million in Q4.
  • Increases to the fair value of Alaris’ investments totalled $23.2 million for the quarter or approximately $0.64 per unit, while the total net reduction to the fair value of Alaris’ investments in 2020 was $41.5 million or $1.15 per unit;
  • During Q4 2020 Alaris continued to defer distributions from PFGP due to the impact of COVID-19; however, subsequent to December 31, 2020, PFGP, Alaris and PFGP’s senior lending syndicate came to an agreed upon amendment, wherein PFGP began to pay partial distributions of US$0.33 million per month (US$4.0 million per annum) in January 2021 and will continue to do so until June 2021. Beginning in July 2021 distributions would return to full contracted amounts, as long as PFGP is onside with all bank covenants at that time;
  • Based on unaudited results from each of its Partners, Alaris estimates the weighted average performance metric reset of the annual distributions to be approximately 1% effective January 2021 resulting in approximately $1.0 million of new distribution revenue;
  • After an overall positive Q4 2020 for Alaris’ Partners, the weighted average combined Earnings Coverage Ratio (“ECR“) has increased to greater than 1.7x, compared to 1.5x in early 2020 before any impacts of COVID-19. Of note, currently Alaris has 15/20 partners (75%) with an ECR over 1.5x (including six over 2x), compared to 9/16 (56%) over 1.5x (including three over 2x) at the same time one year ago;
  • During Q4 2020, Alaris completed a bought deal short-form prospectus offering of 3,346,500 trust units at a price of $13.75 per unit, for aggregate gross proceeds of $46.0 million. Subsequent to December 31, 2020, in March 2021 Alaris completed an additional bought deal short-form prospectus offering of 5,909,375 trust units at a price of $16.00 per unit, for aggregate gross proceeds of $94.6 million; and
  • Both Federal Resources Supply Company (“FED“) and Kimco are actively evaluating the possibility of a full or partial redemption of Alaris’ investment. Nothing is imminent, nor can any redemption be assured, but the redemption value of FED is approximately US$86.0 million and Kimco’s is based upon a revised formula factoring in several valuation factors and is estimated to be between US$53.0 million and US$75.0 million.

President’s Message

“While nobody could have foreseen the kind of year 2020 would become, looking back on the outcome for Alaris almost exactly one year after the world was essentially shut down by the virus, we are incredibly proud of how Alaris was able to perform.  The stock market sold our stock heavily during the panic of the shutdown, believing that we were a proxy to the overall economy which was expected to be hit hard by the forced closures of so many businesses.  What people understand better now is that we are actually a proxy to North America’s required services and that our Partners were resilient and performed much better than expected, with an overall net positive reset.  We move into 2021 with the best underlying fundamentals within our portfolio that we’ve had in our 17-year history.  Based on our weighted average ECR, we have the largest average cashflow buffer at 70%, the lowest debt levels within our partner companies, eleventh straight year of net positive distribution resets, our best portfolio diversification ever with 20 partners – none more than 12% of our revenue and finally the company had its highest level of capital deployment in its history.  I can’t thank our staff enough for the incredible effort that has gone into this kind of performance, especially under less than ideal conditions.

With a Run Rate Payout Ratio now below 70%, there are a couple of factors that we expect will push that number even lower in the coming months.  The first one is the continued improvements from PFGP who are showing improved performance indicators on a weekly basis.  Getting PFGP back to 100% distributions and also making up the distributions that were missed is a large swing factor for Alaris. 

The second factor is the growing contributions from the common equity portfolio that we have been building over the last two years.  This facet of Alaris is one of the most exciting things that has transpired in our recent history.  The addition of common equity along with our preferred equity on transactions has provided our unitholders with three benefits: 1) It is better aligning our risk profile on investments, allowing us to participate in all of the upside on companies during good times, helping to balance out the times where companies may struggle;  2) We believe that the common equity will provide a higher overall return than the preferred equity alone, which is based on a look back analysis on our prior investments over the last 17 years.  Early returns on our common equity have also shown this as Carey Electric, as one example, just paid us a common distribution equal to more than a 35% yield on our initial investment; and  3) The addition of common equity has allowed us to ramp up our capital deployment substantially by allowing us to be a larger portion of the capital structure to compete on deals where that’s required, by removing the optics of being a debt provider as opposed to the equity investor that we are and by better aligning ourselves with the founders of our Partner companies by owning the same class of shares that they own.

Deploying over $350 million over the last twelve months during a pandemic has been a massive achievement for our team and will have a measurable affect on all of our performance measures for years to come.  2021 will see higher than average growth in revenue and earnings per unit because of the work done over these last six months.  We also believe that we are extremely well positioned to keep that growth rate going as opportunities to deploy our capital keep coming in.  Between our excess free cash flow that we generate, our expanded credit facility and the expected sale of a couple of our assets, we have the balance sheet capabilities to capitalize on those opportunities.”

Per Unit Results

Three months ended

Year ended 

Period ending December 31

2020

2019

% Change

2020

2019

% Change

Revenue

$ 0.87

$ 0.84

+3.6%

$ 3.03

$ 3.17

-4.4%

Earnings

$ 0.85

$ (0.49)

n.a

$ 0.56

$ 0.99

-43.4%

Normalized EBITDA

$ 0.74

$ 0.71

+4.2%

$ 2.37

$ 2.76

-14.1%

Net cash from operating activities

$ 0.59

$ 0.48

+22.9%

$ 1.99

$ 2.04

-2.5%

Distributions declared

$ 0.31

$ 0.41

-24.8%

$ 1.32

$ 1.65

-19.8%

Basic earnings / (loss)

$ 0.85

$ (0.49) 

+273.8%

$ 0.56

$ 0.99

-43.4%

Fully diluted earnings / (loss)

$ 0.84

$ (0.49)

+272.1%

$ 0.56

$ 0.98

-42.9%

Weighted average basic units (000’s)

36,472

36,688


36,121

36,597


For the three months ended December 31, 2020, revenue per unit increased by 3.6% due to receiving $4.7 million of distributions during the period from BCC, which included previously deferred distributions from Q2 2020 which were not recorded as revenue until received. There were also $4.5 million of distributions received from Kimco (including catch-up payments from earlier in 2020), distributions from Alaris’ new investment in Carey Electric, including a $0.5 million common distribution, and additional distributions from GWM as a result of the follow-on contribution in October 2020. These were partially offset by distributions deferred during the quarter by PFGP as well as the redemption of Sales Benchmark Index LLC (“SBI“) and sale of Sandbox Acquisitions, LLC and Sandbox Advertising LP (collectively, “Sandbox“) in Q1 2020. For the year ended December 31, 2020, revenue per unit decreased by 4.4% due to the deferral of nine months of distributions from PFGP and redemptions of two Partners early in the year offset by the Kimco distributions noted above as well as new revenues from capital deployment in the last half of the year.

Earnings of $0.85 per unit in the quarter improved significantly due to the comparable 2019 period including a one-time loss on assets held for sale of $45.9 million related to the redemption of Sandbox in February 2020. Earnings for the full year were lower due to the net fair value reductions (most of which was in Q1 2020) as a result of the impact COVID-19 on certain Partners.

Normalized EBITDA of $0.74 per unit increased by 4.2% in the quarter primarily due to the increase in revenue during the period as discussed above. Additionally, the unit-based compensation expense related to the amortization of RTUs was lower in the current quarter compared to Q4 2019, due to the fact that the units that were issued in 2020 have a lower weighted average expense per unit than those that were collectively being amortized in Q4 2019, which is due to the change in the trust unit prices at the time of issuances. This was partially offset by the increase in legal expenses in Q4 2020 compared to Q4 2019. Normalized EBITDA for the full year was 14.1% less than the prior year due to the deferred revenues from PFGP and additional legal fees incurred for the conversion to an income trust.

Net cash from operating activities of $0.59 per unit increased by 22.9% in the quarter as a result of the increase in distributions during the period as well as the reduction in finance costs. This reduction in finance costs was due to lower weighted average debt outstanding as well as lower average interest rates compared to the prior year. Net cash from operating activities for the year was consistent with the prior year (a reduction of only 2.5%).

Outlook

In the last twelve months as of the date of this release, the Trust has invested over $350 million into a combination of new Partners (Carey Electric, Edgewater, FNC, Brown & Settle and 3E) as well as follow-on contributions into current Partners (GWM, BCC and Accscient). This productive period of capital deployment for Alaris, along with consistently positive results amongst the majority of the current portfolio, is contributing to Run Rate Revenue of approximately $136.7 million over the next twelve months. At this rate, Run Rate Revenue would exceed the 2020 actual revenue by $27.1 million, an approximate increase of 25%. Run Rate Revenue of $136.7 million includes current contracted amounts, agreed upon partial distributions of US$0.33 million per month from PFGP and no distributions from ccComm. Alaris has agreed with PFGP to receive monthly distributions of US$0.33 million between January 2021 and June 2021, which equates to approximately 40% of the contracted distributions. Commencing in July 2021, PFGP may resume full distributions to Alaris in the event they are compliant with bank covenants. This would add $6.9 million to Run Rate Revenue and reduce the Run Rate Payout Ratio by approximately 5%. Alaris expects total revenue from Partners in Q1 2021 of approximately $32.2 million.

Annual general and administrative expenses are currently estimated at $12.5 million and include all public company costs. The Trust’s Run Rate Payout Ratio is expected to be within a range of 65% to 70% when including run rate distributions, overhead expenses and its existing capital structure. The table below sets out our estimated Run Rate Payout Ratio alongside the after-tax impact of additional PFGP distributions as well as positive net deployment.

Run Rate Cash Flow ($ thousands except per unit)

Amount ($)

$ / Unit

Revenue


$ 136,700

$ 3.04

General & Admin.


(12,500)

(0.28)

Interest & Taxes


(43,200)

(0.96)

Free cash flow 


$ 81,000

$ 1.80

Annual Distribution


55,700

1.24

Excess Cash Flow


$ 25,300

$ 0.56

Run Rate Payout Ratio (excluding PFGP distributions)










Other Considerations (after taxes and interest):



PFGP

Full distributions of $12.0 million per year

+5,172

+0.12

Common Dividends

Every additional $1.0 million of common dividends

+1,000

+0.02

New Investments

Every $50 million deployed @ 14%

+3,188

+0.07

The senior debt facility was drawn to $231.4 million at December 31, 2020. Subsequent to December 31, 2020, Alaris drew an additional US$40.0 million for its investment in FNC, US$66.0 million for its investment in Brown and Settle and US$30.0 million for its investment in 3E. The Trust also repaid US$71.0 million of outstanding USD debt following the completion of a bought deal short-form prospectus offering of 5,909,375 trust units at a price of $16.00 per unit, for aggregate gross proceeds of $94.6 million.

Also subsequent to December 31, 2020, Alaris entered into amendments with the syndicate of senior lenders increasing the base of its credit facility from $330 million to $400 million, which included the addition of a seventh bank to the syndicate of lenders. Following this amendment and the transactions noted above, the senior debt facility was drawn to $320.0 million, with the capacity to draw up to another $80.0 million based on covenants and credit terms. The leverage covenant is approximately 2.6x with a maximum of 3.5x through the next two reporting periods March 31st and June 30th.

The annual interest rate on that debt, inclusive of the standby charges on available capacity, was approximately 5.1% for the year ended December 31, 2020. During Q4 2020, Alaris closed a two-year extension of its credit facility with its syndicate of senior lenders. The maturity of the credit facility is now extended to November 2023. Alaris also closed an amendment subsequent to December 31, 2020, that increased the base of its credit facility as noted, but additionally the amendment increased the Senior Debt to EBITDA leverage covenant by 0.5x EBITDA for the March 2021 and June 2021 measurement periods, bringing the maximum leverage to 3.5x through those two periods. Covenants return to previous levels from September 30, 2021 onwards.

Since converting to an income trust, the tax profile of distributions changed from 100% eligible dividends to a combination of eligible dividends, trust income, capital gains and return of capital. For 2020, the split of the distributions was as follows:







Tax Profile of Distributions





For the year ended December 31, 2020











Per unit

Q1

Q2

Q3

Q4

TOTAL

Dividends

$

0.41250

$

0.29000

$

0.02154

$

0.02154

$

0.74558

Trust Income

$

$

$

0.21677

$

0.21677

$

0.43354

Taxable Capital Gains

$

$

$

0.00336

$

0.00336

$

0.00672

Return of Capital

$

$

$

0.06833

$

0.06833

$

0.13666







Total paid

$    0.41250

$    0.29000

$    0.31000

$    0.31000

$    1.32250







As a percentage of total

Q1

Q2

Q3

Q4

 TOTAL 

Dividends

100.0%

100.0%

6.9%

6.9%

56.4%

Trust Income

0.0%

0.0%

69.9%

69.9%

32.8%

Taxable Cap Gains

0.0%

0.0%

1.1%

1.1%

0.5%

Return of Capital

0.0%

0.0%

22.0%

22.0%

10.3%







Total

100.0%

100.0%

100.0%

100.0%

100.0%

Environmental, Social and Governance (“ESG”) Update

Alaris recognizes that integrating ESG factors into its investment decisions can help to mitigate risk and identify strong investment opportunities. Its due diligence procedures already include a review of the ESG policies and practices of potential Private Company Partners.  Alaris has taken significant steps to develop a more comprehensive approach to ESG. It has engaged external advisors to assist it in developing an ESG policy. The ESG policy will detail Alaris’ approach to integrating ESG factors into its investment due diligence and its ongoing monitoring of its Private Company Partners. Alaris’ approach will be focused on ensuring that it considers all financially material ESG factors for itself and its Partners. Alaris will be disclosing its ESG policy in April 2021 and will eventually publish an annual ESG report, which will provide its investors with more information on how that policy is being implemented. Alaris expects to release its first ESG report within the next twelve months.

The Consolidated Statement of Financial Position, Statement of Comprehensive Income, and Statement of Cash Flows are attached to this news release. Alaris’ financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisequitypartners.com.

Earnings Release Date and Conference Call Details

Alaris management will host a conference call at 9am MT (11am ET), Wednesday, March 10, 2021 to discuss the financial results and outlook for the Trust.

Participants can access the conference call by dialing toll free 1-888-390-0546. Alternatively, to listen to this event online, please click the webcast link and follow the prompts given: Q4 Webcast.  Please connect to the call or log into the webcast at least 10 minutes prior to the beginning of the event.

For those unable to participate in the conference call at the scheduled time, it will be archived for instant replay for a week. You can access the replay by dialing toll free 1-888-390-0541 and entering the passcode 415842#.  The webcast will be archived and is available for replay by using the same link as above or by finding the link we’ll have stored under the “Investor” section – “Presentation and Events”, on our website at www.alarisequitypartners.com.  

An updated corporate presentation will be posted to the Trust’s website within 24 hours at www.alarisequitypartners.com.

About the Trust:

Alaris, through its subsidiaries, provides alternative financing to private companies (“Partners”) in exchange for distributions, dividends or interest (collectively, “Distributions”) with the principal objective of generating stable and predictable cash flows for distribution payments to its unitholders.  Distributions from the Partners are adjusted annually based on the percentage change of a “top-line” financial performance measure such as gross margin or same store sales and rank in priority to the owner’s common equity position.

Non-IFRS Measures
The terms EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Earnings Coverage Ratio, Per Unit and IRR are financial measures used in this news release that are not standard measures under International Financial Reporting Standards (“IFRS“). The Trust’s method of calculating EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Earnings Coverage Ratio, Per Unit and IRR may differ from the methods used by other issuers. Therefore, the Trust’s EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Earnings Coverage Ratio, Per Unit and IRR may not be comparable to similar measures presented by other issuers.

Run Rate Payout Ratio refers to Alaris’ total distribution per unit expected to be paid over the next twelve months divided by the estimated net cash from operating activities per unit that Alaris expects to generate over the same twelve month period (after giving effect to the impact of all information disclosed as of the date of this report).

Actual Payout Ratio refers to Alaris’ total cash distributions paid during the period (annually or quarterly) divided by the actual net cash from operating activities Alaris generated for the period.

Run Rate Revenue refers to Alaris’ total revenue expected to be generated over the next twelve months.

EBITDA refers to earnings determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Trust’s ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature and is calculated by adjusting for non-recurring expenses and gains to EBITDA. Management deems non-recurring items to be unusual and/or infrequent items that Alaris incurs outside of its common day-to-day operations. For the year ended December 31, 2020, these include the distributions received upon redemption of SBI, the non-recurring legal expenses related to the income trust conversion, the non-cash impact of trust conversion and the unit-based compensation expense related to the quarterly re-valuation of the outstanding unit-based compensation. For the year ended December 31, 2019, these include a bad debt recovery related to Phoenix and the loss on assets held for sale relating to Sandbox. Transaction diligence costs are recurring but are considered an investing activity. Foreign exchange realized and unrealized gains and losses are recurring but not considered part of operating results and excluded from normalized EBITDA on an ongoing basis. Changes in investments at fair value are non-cash and although recurring are also removed from normalized EBITDA. Adjusting for these non-recurring items allows management to assess cash flow from ongoing operations.

Earnings Coverage Ratio refers to the Normalized EBITDA of a Partner divided by such Partner’s sum of debt servicing (interest and principal), unfunded capital expenditures and distributions to Alaris. Management believes the earnings coverage ratio is a useful metric in assessing our partners continued ability to make their contracted distributions.

Per Unit values, other than earnings per unit, refer to the related financial statement caption as defined under IFRS or related term as defined herein, divided by the weighted average basic units outstanding for the period.

IRR refers to internal rate of return, which is a metric used to determine the discount rate that derives a net present value of cash flows to zero. Management uses IRR to analyze partner returns.

The terms EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Earnings Coverage Ratio, Per Unit and IRR should only be used in conjunction with the Trust’s annual audited financial statements, excerpts of which are available below, while complete versions are available on SEDAR at www.sedar.com.

Forward-Looking Statements

This news release contains forward-looking information and forward-looking statements (collectively, “forward-looking statements”) under applicable securities laws, including any applicable “safe harbor” provisions. Statements other than statements of historical fact contained in this news release are forward–looking statements, including, without limitation, management’s expectations, intentions and beliefs concerning the growth, results of operations, performance of the Trust and the Partners, the future financial position or results of the Trust, business strategy and plans and objectives of or involving the Trust or the Partners.  Many of these statements can be identified by looking for words such as “believe”, “expects”, “will”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words or the negative thereof. In particular, this news release contains forward–looking statements regarding: the anticipated financial and operating performance of the Partners; the impact of COVID-19 on the operations of the Trust and those of the Partners; the timing and impact of restarting or increasing Distributions from Partners not currently paying the full amount or at all; the Trust’s Run Rate Payout Ratio and Run Rate Revenue; the continued deferral of PFGP’s Distributions and the timing to restart full distributions; the impact of the new investments in Carey Electric, FNC, Edgewater, Brown & Settle, 3E as well as the follow-on investments in GWM, BCC and Accscient, including, without limitation, the expected yield therefrom and the impact on the Trust’s net cash from operating activities, Run Rate Revenue and Run Rate Payout Ratio; expected resets of Distributions in 2021; the Trust’s consolidated expenses; expectations regarding receipt (and amount of) any common equity distributions from Partners in which Alaris holds common equity, including the impact on the Trust’s net cash from operating activities, Run Rate Revenue and Run Rate Payout Ratio; the impact of investing in common equity on Alaris’ ability to deploy more capital, overall return and Run Rate Payout Ratio; the amount of the Trust’s distributions to unitholders (both quarterly and on an annualized basis); the use of proceeds from the senior credit facility; the Trust’s ability to deploy capital; potential Partner redemptions, including the timing, if at all, thereof and the amounts to be received by the Trust; Alaris’ new ESG policy and future reporting of ESG matters; and impact of new deployment and restarting Distributions from Partners not paying full contractual amounts. To the extent any forward-looking statements herein constitute a financial outlook or future oriented financial information (collectively, “FOFI“), including estimates regarding revenues. Distributions from Partners (including expected resets, restarting full or partial Distributions and common equity distributions), Run Rate Payout Ratio, net cash from operating activities, expenses and impact of capital deployment, they were approved by management as of the date hereof and have been included to provide an understanding with respect to Alaris’ financial performance and are subject to the same risks and assumptions disclosed herein. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur.

By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties.  Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect Alaris’ business and that of its Partners (including, without limitation, the ongoing impact of COVID-19) are material factors considered by Alaris management when setting the outlook for Alaris.  Key assumptions include, but are not limited to, assumptions that: the Canadian and U.S. economies will continue to recover from the ongoing economic downturn created by the response to COVID-19 within the next twelve months, interest rates will not rise in a material way over the next 12 to 24 months, that those Alaris Partners detrimentally affected by COVID-19 will recover from the pandemic’s impact and return to their pre-COVID-19 operating environments; following a recovery from the COVID-19 impact, the businesses of the majority of our Partners will continue to grow; more private companies will require access to alternative sources of capital; the businesses of new Partners and those of existing Partners will perform in line with Alaris’ expectations and diligence; and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms.  Management of Alaris has also assumed that the Canadian and U.S. dollar trading pair will remain in a range of approximately plus or minus 15% of the current rate over the next 6 months. In determining expectations for economic growth, management of Alaris primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies as well as prevailing economic conditions at the time of such determinations.

There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward–looking statements are based will occur.  Forward–looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Trust and the Partners could materially differ from those anticipated in the forward–looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the ongoing impact of the COVID-19 pandemic on the Trust and the Partners (including how many Partners will experience a slowdown or closure of their business and the length of time of such slowdown or closure); management’s ability to assess and mitigate the impacts of COVID-19; the dependence of Alaris on the Partners; leverage and restrictive covenants under credit facilities; reliance on key personnel; general economic conditions, including the ongoing impact of COVID-19 on the Canadian, U.S. and global economies; failure to complete or realize the anticipated benefit of Alaris’ financing arrangements with the Partners; a failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; risks relating to the Partners and their businesses, including, without limitation, a material change in the operations of a Partner or the industries they operate in; inability to close additional Partner contributions or collect proceeds from any redemptions in a timely fashion on anticipated terms, or at all; a change in the ability of the Partners to continue to pay Alaris at expected Distribution levels or restart distributions (in full or in part); a failure to collect material deferred Distributions; a change in the unaudited information provided to the Trust; and a failure to realize the benefits of any concessions or relief measures provided by Alaris to any Partner or to successfully execute an exit strategy for a Partner where desired. Additional risks that may cause actual results to vary from those indicated are discussed under the heading “Risk Factors” and “Forward Looking Statements” in Alaris’ Management Discussion and Analysis for the year ended December 31, 2020, which is filed under Alaris’ profile at www.sedar.com and on its website at www.alarisequitypartners.com.

Readers are cautioned that the assumptions used in the preparation of forward-looking statements, including FOFI, although considered reasonable at the time of preparation, based on information in Alaris’ possession as of the date hereof, may prove to be imprecise. In addition, there are a number of factors that could cause Alaris’ actual results, performance or achievement to differ materially from those expressed in, or implied by, forward looking statements and FOFI, or if any of them do so occur, what benefits the Trust will derive therefrom. As such, undue reliance should not be placed on any forward-looking statements, including FOFI.

The Trust has included the forward-looking statements and FOFI in order to provide readers with a more complete perspective on Alaris’ future operations and such information may not be appropriate for other purposes. The forward-looking statements, including FOFI, contained herein are expressly qualified in their entirety by this cautionary statement. Alaris disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 

Alaris Equity Partners Income Trust
Consolidated statements of financial position


31-Dec

31-Dec

$ thousands

2020

2019

Assets



Cash and cash equivalents

$

16,498

$

17,104

Prepayments

177

1,509

Derivative contracts

1,489

555

Accounts receivables

804

1,226

Income taxes receivable

12,669

4,205

Investment tax credit receivable

1,032

Assets acquired held for sale

97,173

Promissory notes receivable

4,000

6,580

Current Assets

$

35,637

$

129,384

Promissory notes and other receivables

19,233

19,663

Deposits

20,206

20,206

Property and equipment

846

1,053

Investments

880,512

881,037

Investment tax credit receivable

2,243

Deferred income taxes

986

Non-current assets

$

920,797

$

925,188

Total Assets

$

956,434

$

1,054,572




Liabilities



Accounts payable and accrued liabilities

$

5,351

$

2,713

Distributions payable

12,089

5,047

Liabilities acquired held for sale

60,297

Office Lease

659

837

Income tax payable

723

384

Current Liabilities

$

18,822

$

69,278

Deferred income taxes

16,112

4,715

Loans and borrowings

229,477

285,193

Convertible debenture

86,029

90,939

Other long-term liabilities

980

Non-current liabilities

$

332,598

$

380,847

Total Liabilities

$

351,420

$

450,125




Equity



Unitholders’ capital

$

659,988

$

625,313

Equity component of convertible debenture

4,059

Equity reserve

17,621

14,763

Translation reserve

12,431

17,076

Retained earnings / (deficit)

(85,026)

(56,764)

Total Equity

$

605,014

$

604,447




Total Liabilities and Equity

$

956,434

$

1,054,572

Alaris Equity Partners Income Trust
Condensed consolidated statements of comprehensive income / (loss)


Year ended
December 31

 $ thousands except per unit amounts

2020

2019




Revenues, net of realized foreign exchange gain or loss

$

109,568

$

114,956

Net realized gain / (loss) from investments

(26,863)

11,724

Net unrealized loss of investments at fair value 

(14,623)

(11,304)

Loss on assets held for sale

(45,883)

Total revenue and other operating income

$

68,082

$

69,493




General and administrative

14,519

10,718

Transaction diligence costs

5,532

2,754

Unit-based compensation

2,708

4,315

Bad debt expense / (recovery)

(183)

(2,018)

Depreciation and amortization

222

384

Total operating expenses

22,798

16,153

Earnings from operations

$

45,284

$

53,340

Finance costs

18,103

19,294

Unrealized (gain) / loss on foreign exchange

(729)

6,069

Non-cash impact of trust conversion

(7,138)

Earnings before taxes

$

35,048

$

27,977

Current income tax expense / (recovery)

(875)

5,347

Deferred income tax expense / (recovery)

15,632

(13,628)

Total income tax expense / (recovery)

14,757

(8,281)

Earnings

$

20,291

$

36,258




Other comprehensive income



Foreign currency translation differences

(4,645)

(15,649)

Total comprehensive income

$

15,646

$

20,609




Earnings per unit



Basic

$ 0.56

$ 0.99

Fully diluted 

$ 0.56

$ 0.98

Weighted average units outstanding



Basic 

36,121

36,597

Fully Diluted 

36,482

36,889

Alaris Equity Partners Income Trust
Condensed consolidated statements of cash flows


Year ended December 31

 $ thousands

2020

2019

Cash flows from operating activities



Earnings for the period

$

20,291

$

36,258

Adjustments for:



Finance costs

18,103

19,294

Deferred income tax expense / (recovery)

15,632

(13,628)

Depreciation and amortization

222

384

Loss on assets held for sale

45,883

Net realized gain / (loss) from investments

26,863

(11,724)

Net unrealized loss of investments at fair value 

14,623

11,304

Unrealized (gain) / loss on foreign exchange

(729)

6,069

Non-cash impact of trust conversion

(7,138)

Transaction diligence costs

5,532

2,754

Unit-based compensation

2,708

4,315

Changes in working capital (operating):



– accounts receivables

422

(4,428)

– income tax receivable / payable

(11,424)

(3,594)

– prepayments

(605)

672

– accounts payable, accrued liabilities

2,327

(957)

Cash generated from operating activities

86,827

92,602

Cash interest paid

(14,965)

(17,824)

Net cash from operating activities

$

71,862

$

74,778




Cash flows from investing activities



Acquisition of investments

$

(170,465)

$

(193,357)

Transaction diligence costs

(5,532)

(2,754)

Proceeds from partner redemptions

117,698

20,089

Proceeds on disposal of assets and liabilities held for sale

39,196

Promissory notes issued

(8,823)

Promissory notes repaid

2,499

4,916

Changes in working capital – investing

Net cash used in investing activities

$

(16,604)

$

(179,929)




Cash flows from financing activities



Repayment of loans and borrowings

$

(228,970)

$

(68,030)

Proceeds from loans and borrowings

184,465

134,005

Issuance of unitholders’ capital, net of unit issue costs

43,375

Proceeds from convertible debenture, net of fees

95,527

Distributions paid

(41,511)

(60,367)

Trust unit repurchases

(10,051)

Office lease payments

(178)

(253)

Net cash from / (used in) financing activities

$

(52,870)

$

100,882




Net increase / (decrease) in cash and cash equivalents

$

2,388

$

(4,269)

Impact of foreign exchange on cash balances

(2,994)

(1,401)

Cash and cash equivalents, Beginning of year

17,104

22,774

Cash and cash equivalents, End of year

$

16,498

$

17,104




Cash taxes paid

$

7,616

$

8,759

SOURCE Alaris Equity Partners Income Trust

For further information: Investor Relations, Alaris Equity Partners Income Trust, 403-260-1457, [email protected]

Related Links

www.alarisroyalty.com



Source link

]]>
Sustainability linked derivatives – Lexology https://www.jopsweb.org/2021/08/16/sustainability-linked-derivatives-lexology/ Mon, 16 Aug 2021 07:24:56 +0000 https://www.jopsweb.org/?p=115 Background The challenges posed by climate change affect all sectors, and financial markets have a major role in providing the funding needed for the global transition to a sustainable economy. In relation to sustainable finance, derivatives can play an important role in this transition and support the allocation of long term capital to sustainable sources. […]]]>


Background

The challenges posed by climate change affect all sectors, and financial markets have a major role in providing the funding needed for the global transition to a sustainable economy. In relation to sustainable finance, derivatives can play an important role in this transition and support the allocation of long term capital to sustainable sources. This can be achieved both by applying more traditional derivative transactions for new uses in an ESG context, as well as with a variety of new derivatives structures and transaction types with sustainable features, including sustainability-linked derivatives, ESG-related credit default swap (“CDS“) indices, exchange-traded derivatives on listed ESG-related equity indices, emissions trading derivatives, renewable energy and renewable fuels derivatives, and catastrophe and weather derivatives. This briefing considers the world of sustainability linked derivatives that will be at the forefront of the growing focus on sustainable finance.

Sustainability-linked derivatives

Old products, new applications

Derivatives play a considerable role in enabling businesses to better manage their risks through hedging, whilst contributing to transparency through providing forward information on the underlying products in a way that contributes to long-term sustainability. This will be as important as ever when it comes to the transition to sustainability.

Green bonds, which are specifically identified as being to raise money for climate and environmental related projects and initiatives, are an increasingly common feature of debt capital markets. As the transition to a green world requires the issuance of trillions of dollars of capital in finance, this creates resultant interest rate, foreign exchange and credit risks.

As ever, derivatives offer hedging solutions in these circumstances and hedging these exposures can generally be achieved by conventional derivatives products such as interest rate swaps and credit default swaps.

Innovation

Nevertheless, with the growth of sustainable investing there is increasing demand for derivative products which are specifically linked to ESG targets, and which link returns with sustainability performance and impact. These sustainability-linked derivatives generally build upon conventional hedging products (such as cross-currency swaps, or forwards) with the addition of an ESG pricing component, creating highly customisable transactions using various key performance indicators (“KPIs“) to set sustainability targets.

An example of such a “sustainability improvement derivative” was executed by ING. The swap hedged the interest risk of a $1 billion five-year floating rate revolving credit facility, but in a new feature added a positive or negative spread to the fixed rate payable by the borrower based on its ESG performance. Following that landmark transaction, other sustainability-linked derivatives in varying forms have emerged onto the market, with differing KPIs that are typically tailored to the specific borrower. These KPIs often go out to three or more years, making these derivatives a powerful means of impacting the sustainability of a company, and may in some cases be connected to ESG KPI targets set out in related ESG linked financings.

The highly customisable nature of these transactions prevents easy categorisation. Some sustainability-linked derivatives incentivise improved ESG performance through reducing a counterparty’s payment on the achievement of certain sustainability related targets (such as the ING transaction noted above), whilst others use derivatives transactions as a means of facilitating a counterparty’s ability to meet green and other sustainable targets (an example being a counterparty receiving a discounted rate under the derivative based on its positive contribution to one of the pillars of sustainable development, and in alternative cases where the counterparty is required to compensate any failure to meet relevant targets by supporting sustainability projects with defined payments linked to the pricing of the derivative).

Although this is a growing market, it is also new and embryonic and so uptake by market participants is expected to be gradual. Nevertheless, two notable further recent examples of sustainability-linked derivatives in the market are:

  • Interest Rates: in January 2020, private rail operator Italo Nuovo Trasporto Viaggiatori structured a 1.1 billion sustainability-linked syndicated loan, with 900m being designated to finance and refinance the company’s low-carbon rolling stock. As part of this financing, the company also entered into an interest rate swap which incentivised compliance with the sustainable performance indicators set out in the financing agreement.
  • FX: in September 2019, Italian power and gas company Enel hedged its exposure to the interest rate risk associated with a 1.5 billion bond through entry into a sustainable-development-goal-linked cross-currency swap. Socit Gnrale gave Enel a discounted rate for the swap based on its commitment to sustainability, whilst the bond is linked to Enel’s ability to increase its installed renewable electricity generation capacity from 45.9% to 55% by December 2021 (in default of which, interest rates on the bond will rise).

ESG-related credit derivatives

Credit derivatives (CDS) offer market participants a mechanism for managing credit risk. CDS can also be used to hedge the credit risk of a counterparty’s financial results or viability being threatened by climate change, by (i) managing the risk of future potential losses following a catastrophic environmental event resulting in bankruptcies or defaults; and (ii) managing the risk of changes in the market value of ESG/sustainability-linked bonds or loans themselves resulting from changed market factors (such as a shift in market expectations). CDS are usually publicly traded instruments, and so reference the public performance of large well know entities, hence they are unlikely to be used to hedge the risk arising from non-compliance with ESG targets in a particular ESG financing.

Research has suggested that companies with good ESG ratings pose less credit risk and offer higher returns, and the CDS market has reacted to that feature by using ESG ratings as a basis for CDS contracts. In May 2020, IHS Markit launched the iTraxx MSCI ESG Screened Europe Index (the “Screened Europe Index“), a broad European corporate CDS index derived using ESG criteria. The Screened Europe Index was launched in June 2020 and includes a basket of CDS contracts on companies meeting various ESG criteria. In September 2020, LCH CDSClear also started clearing the Screened Europe Index and its constituent single names as available CDS contracts for members and their clients.

The Screened Europe Index can be used as a macro instrument to hedge broad ESG European corporate risk (as well as to hedge bond portfolios) and also as an investment for firms wanting to gain long exposure to a portfolio of ESG companies.

ESG-related exchange traded derivatives

In response to the growing focus on sustainable finance and the likely acceleration of ESG-related issuances in the months and years ahead, global derivative exchanges like Eurex, Intercontinental Exchange (“ICE“) and Nasdaq have launched a series of new equity index futures and options contracts tied to ESG benchmarks. These ESG futures markets are growing, being used by an increasingly wide range of investors although these markets remain novel and so liquidity in most of these contracts is still relatively low. These ESG-related exchange traded derivatives allow the hedging of ESG investments, better implementation of ESG investment strategies and more effective management of cash inflows and outflows of ESG funds, as well as enabling participants to meet target allocation in a more cash-efficient way than through direct investment.

ESG index derivatives reference ESG indices, based on parent benchmarks that define the companies from which the constituents of an ESG index are selected. These indices can be based on an exclusion methodology enabling investors to eliminate certain types of exposures (e.g. companies considered non-compliant with certain ESG standards) whilst retaining similar risk-return characteristics to the parent benchmark. However, these indices can also be based on positive criteria, to allow investors to gain exposure to high ESG ratings or a specific ESG theme.

Catastrophe derivatives

One of the most visible impacts of climate change has been a rise in ecological events such as hurricanes and earthquakes, resulting in an inherent increase of natural disaster risk. This has created a demand for financial products (including derivatives) to transfer this risk, and the creation of instruments that allow them to do so. The result has been the development of “catastrophe” derivatives, which are customisable OTC derivatives which transfer part of this exposure to natural disasters to investors in return for a premium.

These catastrophe derivatives are of particular use to countries, allowing the transfer of part of such countries’ exposure to such ecological events to insurance and capital markets without increasing the principal amount of sovereign debt. These catastrophe derivatives are often structured so as to pay out quickly upon the occurrence of a natural disaster. The World Bank has been active in designing several catastrophe swaps to enable developing countries to hedge this form of exposure; in 2017, the World Bank launched $320 million of pandemic catastrophe bonds and $105 million of pandemic-risk linked swaps, hedging the risk of pandemic outbreak and providing financing for the Pandemic Emergency Financing Facility aimed at supporting developing countries at risk of the outbreak of pandemics.

A prominent 2017 example of such a derivative is a $206 million catastrophe swap issued for the Philippines. Under this swap:

  • the government of the Philippines purchased insurance policies from the Philippines Government Service Insurance System to protect national and local government assets against the risk of earthquakes and severe typhoons;
  • to transfer the risk outside of the Philippines, the World Bank acted as intermediary by executing a catastrophe swap with international investors. The World Bank transferred the premium paid by the Philippines to those investors; and
  • on the occurrence of a natural disaster covered by the swap and provided that the loss for such a disaster exceeds a pre-defined minimum, the national and local governments of the Philippines will receive a pay-out within 20 days.

The future

It seems clear that the growth of ESG finance will be a major feature going forwards and, far from acting as a brake, the COVID-19 pandemic has accelerated this trend. On 16 September 2020, European Commission president Ursula von der Leyen announced that 30% of Europe’s 750 billion COVID-19 recovery fund will be raised through green bonds. Even as demand for ESG derivatives by counterparties grows, as they seek to hedge environmental risks or secure compliance with cap-and-trade regimes, market participants are creating increasingly complex and bespoke instruments designed to meet these needs and facilitate buyers’ objectives. This trend seems only likely to continue in the years to come and the market for ESG derivatives will continue to expand and evolve.

The biggest inhibitor of this process in the immediate future will be a lack of standardisation, in documentation and market processes, as markets inevitably take time to adjust to the new world. In this context, ISDA’s announcement that it will seek to promote such standardisation whilst expanding the range of ISDA environmental templates is a welcome one, and many market segments are already using ISDA documentation and definitions for ESG transactions. Moreover, on 17 February 2021 ISDA and ten other trade associations published a set of principles for a US transition to a sustainable low-carbon economy. It is clear that these principles which include fostering the international harmonisation of taxonomies, data standards and metrics are of application beyond the US, and will enable sound risk assessment and disclosure in addition to providing investors with the clarity needed to assess the expanding universe of ESG derivatives.

The increasing importance placed on ESG by regulatory authorities, market participants and investors is likely to continue and build over time and market participants must therefore act swiftly to secure their position in a world increasingly focused on ESG concerns. The creation and increasing usage of ESG derivatives offers increasing possibilities for clients to participate in this process, and market participants would be well advised to grapple with how such products might factor into their long-term business plans early to ensure they are well prepared for the transition.



Source link

]]>
Significant Milestones Achieved on All Drug Candidates in 2020 and Financial Visibility until 2022 https://www.jopsweb.org/2021/08/16/significant-milestones-achieved-on-all-drug-candidates-in-2020-and-financial-visibility-until-2022/ Mon, 16 Aug 2021 07:23:45 +0000 https://www.jopsweb.org/?p=103 News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here. ­ TG4050: first patients treated in two clinical trials of the novel individualized immunotherapy based on the myvac® technology – First data expected in 4Q 2021 ­ TG4001: expanded randomized Phase II trial to […]]]>



News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here.


­ TG4050: first patients treated in two clinical trials of the novel individualized immunotherapy based on the myvac® technology – First data expected in 4Q 2021

­ TG4001: expanded randomized Phase II trial to start in HPV-positive anogenital cancers, based on encouraging Phase Ib/II data

­ BT-001: the first candidate from the Invir.IO™ platform has entered the clinic

­ Financial visibility until 2022 following the partial sale of the stake in Tasly BioPharmaceuticals in 2020

Conference call in English scheduled today at 6:00 p.m. CET – Video conference in French on March 10 at 10:00 a.m. CET (details at the end of the release)

STRASBOURG, France–(BUSINESS WIRE)–
Regulatory News:

Transgene (Paris: TNG), a biotech company that designs and develops virus-based immunotherapies for the treatment of cancer, today publishes its financial results for 2020 and provides an update on its product pipeline.

Hedi Ben Brahim, Chairman and Chief Executive Officer of Transgene since January 1, 2021, commented:

“It is a great honor to join Transgene as Chairman and Chief Executive Officer at the beginning of 2021, taking over from Philippe Archinard. Over the last several months, Transgene has delivered multiple significant milestones, particularly from our new cutting-edge platforms myvac® and Invir.IO™ as we have continued to operate successfully despite the Covid-19 pandemic.

We treated the first patients with TG4050, our individualized immunotherapy based on the myvac® technology. This achievement illustrates how Transgene is positioning itself at the forefront of innovation globally by developing new solutions that could deliver important benefits for patients, clinicians and potential pharmaceutical partners. This customized immunotherapy is particularly promising, and I look forward to reporting the first data from TG4050 in the fourth quarter of 2021.

The very encouraging results with TG4001 which we announced in 2H 2020, have allowed us to rapidly initiate a Phase II randomized trial. The protocol of this study has already been approved in the U.S. and we expect patient inclusion to start in the coming months, with the aim of providing the first clinical results around the end of 2022.

This acceleration of our development is also reflected in the progress we made with BT-001, the first oncolytic virus of our Invir.IO™ platform to enter the clinic and supported by a very exciting preclinical data set. We have also seen another clinical oncolytic virus candidate TG6002 advance and deliver first promising translational data.

With financial visibility until 2022, we have the funds needed to deliver the important clinical results we expect in 2021 and 2022. Our strategy aims to leverage Transgene’s exciting new drug candidates, notably through large-scale partnerships, to generate significant value for our shareholders. I am very confident that the globally competitive product pipeline that we have today will allow us to deliver on our ambitious goals.”

GLOBAL TECHNOLOGY LEADERSHIP WITH THE MYVAC® PLATFORM AND THE THERAPEUTIC VACCINE TG4050

Transgene is developing an individualized immunotherapy based on multiple advanced genetic engineering technologies that have been developed by the company. TG4050 is the first drug candidate based on the myvac® platform. Together with NEC, Transgene has set up a customized approach that combines its expertise in viral engineering with NEC’s artificial intelligence capabilities. NEC’s algorithms enable the customization of the treatment for each patient, by indicating the most relevant targets (patient-specific neoantigens).

The Phase I clinical trials assessing TG4050 started in January 2020 in Europe and in the United States. The first patients have been treated in these two clinical trials (ovarian and oropharyngeal cancers). NEC is financing 50% of these studies. The first data are expected in the fourth quarter of 2021.

The Company has set up an in-house production unit dedicated to the manufacturing of the individualized clinical batches of TG4050 needed for each patient. This unit is operational and complies with good manufacturing practice (GMP) norms.

The myvac® platform integrates leading-edge innovations that are based on Transgene’s technological leadership in individualized immunotherapies.

  • Data validating the vaccine design principle and the underlining accuracy of the algorithm and AI used to personalize TG4050 were presented at the AACR congress (June 2020).
  • Transgene has implemented the first block chain solution dedicated to the traceability of this personalized treatment in clinical trials. This solution monitors and orchestrates all of the processes related to the design and manufacturing of Transgene’s individualized therapeutic vaccine TG4050.
  • Transgene has set up a translational research program that includes a number of very innovative genomic and transcriptomic analyses. The goal is to characterize the effect of the treatment and identify predictors of response to TG4050 in the tumor and the genome environment that may impact each patient’s response to the vaccine. These data are important as they could lead to an optimized and accelerated development pathway for TG4050.

RANDOMIZED PHASE II TRIAL OF TG4001

IN HPV16-POSITIVE ANOGENITAL CANCERS TO START,

BASED ON PROMISING INITIAL DATA FROM PHASE IB/II

Transgene has amended the initial Phase Ib/II trial protocol to allow the more rapid start of this randomized Phase II study comparing the efficacy of TG4001 + avelumab versus avelumab monotherapy. This trial will be supported by a continuing collaboration with the alliance of Merck KGaA, Darmstadt, Germany, and Pfizer, which is supplying avelumab. Transgene retains all rights to TG4001.

The trial will focus on patients with recurrent or metastatic HPV16-positive anogenital cancer without liver metastases. This patient population, without liver metastases, was shown in the Phase Ib/II study to derive improved clinical benefit from the combination regimen.

In spite of recent progress, median overall survival is less than 11 months with chemotherapy and immune checkpoint inhibitors. The 25,000 patients who are diagnosed with these diseases every year (U.S., Europe 27, UK) with these HPV16-positive malignancies still need better treatment options.

Transgene received U.S. FDA clearance of the revised protocol under an IND for TG4001. The submission of the amended protocol has been initiated in Europe (France and Spain) where clinical sites that participated in the Phase Ib/II part study are ready to resume patient inclusion after regulatory approval. Patient enrollment is expected to start in 2Q 2021.

Transgene expects to communicate the interim analysis data around the end of 2022. This timeline is based on patient enrollment starting in 2Q 2021 and there being no major impact on recruitment from the Covid-19 pandemic.

Transgene today issued a press release providing more background on this TG4001 trial.

BT-001, THE FIRST ONCOLYTIC VIRUS BASED ON INVIR.IO™, HAS ENTERED THE CLINIC AND FIRST OBSERVATIONS FROM TG6002 CONFIRM THE POTENTIAL OF OUR NEXT-GENERATION ONCOLYTIC VIRUSES

BT-001 is a patented VVcopTK-RR- oncolytic virus, with high antitumor potential, based on the Invir.IO™ platform. It is being co-developed with BioInvent. By selectively targeting the tumor microenvironment, BT-001 is expected to elicit a much stronger and more effective antitumoral response. In addition, delivering the anti-CTLA4 antibody directly to the tumor microenvironment aims to induce local Treg depletion and strong therapeutic activity. As a consequence, by reducing systemic exposure, the safety and tolerability profile of the anti-CTLA4 antibody should be greatly improved. Promising preclinical results for BT-001 were presented at the AACR and SITC annual congresses (June and Nov. 2020). A Phase I/IIa trial targeting solid tumors has started in France and Belgium at the beginning of 2021.

Initial data from the Phase I trial of TG6002 confirm the good tolerability of TG6002 and demonstrate that this Vaccinia Virus, which is the same viral backbone on which the Invir.IO™ platform is based, can reach the tumor, replicate within these cancer cells and induce the production of 5-FU when administered intravenously.

These data will be detailed at the upcoming meeting of the AACR (April 2021).

By developing the administration of TG6002 via the intravenous and intrahepatic artery routes, Transgene aims to enlarge the number of solid tumors that could be addressed by an oncolytic virus. This includes gastrointestinal tumors that are being investigated with TG6002. To-date, the oncolytic virus that has received regulatory approval has to be given via intra-tumoral administration, restricting its use to easily accessible tumors.

Our collaboration with AstraZeneca continues to develop new innovative oncolytic viruses. AstraZeneca can exercise an option to further develop each of these novel drug candidates in the clinic.

SUMMARY OF ONGOING CLINICAL TRIALS

myvac®

 

 

 

TG4050

Phase I

NCT03839524

 

Targets: tumor neoantigens

Data demonstrating the high accuracy of AI-based neoantigen prediction technology used to design TG4050 were presented at AACR 2020

Ovarian cancer – after surgery and first-line chemotherapy

✓ Trial ongoing in the United States and in France

✓ First patient treated in 2020 – patient enrollment progressing in line with forecast

> First data expected in 4Q 2021

TG4050

Phase I

NCT04183166

HPV-negative head and neck cancer – after surgery and adjuvant therapy

✓ Trial ongoing in the United Kingdom and in France

✓ First patient treated in Jan. 2021 – patient enrollment progressing in line with forecast

> First data expected in 4Q 2021

TG4001

+ avelumab

Phase II

NCT03260023

Targets: HPV16 E6 and E7 oncoproteins

Recurrent/metastatic anogenital HPV-positive – 1st and 2nd line

✓ Continued clinical collaboration with Merck KGaA and Pfizer, for the supply of avelumab

Promising Phase Ib/II results presented at SITC and ESMO IO 2020

✓ A randomized Phase II trial comparing the efficacy of TG4001 + avelumab vs avelumab monotherapy has received U.S. FDA clearance. In Europe, the amended protocol has been submitted to French and Spanish health authorities

> Patient enrollment in the randomized trial expected to start in 2Q 2021

> First data from the randomized trial are expected around the end of 2022. This timeline is based on patient enrollment starting in 2Q 2021 and there being no major impact on recruitment from the Covid-19 pandemic.

Invir.IO™

BT-001

Phase I/IIa

Payload: anti-CTLA4 antibody and GM-CSF cytokine

Solid tumors

✓ Co-development with BioInvent

✓ Presentation of very encouraging preclinical results at AACR and SITC 2020

✓ Trial authorized. Phase I ongoing in France and Belgium

✓ First patient enrolled in February 2021

> First Phase I data expected in 1H 2022

TG6002

Phase I/IIa

NCT03724071

Payload: FCU1 for the local production of a 5-FU chemotherapy

Gastro-intestinal cancer (colorectal cancer for Phase II) – Intravenous (IV) administration

✓ Multicenter trial ongoing in Belgium, France and Spain

First findings confirm that 5-FU is produced in the tumor (Sept. 2020)

> Phase I part ongoing

> A poster on the first Phase I observations has been accepted at AACR 2021

TG6002

Phase I/IIa

NCT04194034

Colorectal cancer with liver metastasis – Intrahepatic artery (IHA) administration

✓ Multicenter trial ongoing in the United Kingdom

✓ First patient treated in February 2020; enrollment resumed in September 2020 after pausing due to Covid-19

> First observations expected in 3Q 2021

KEY FINANCIALS FOR 2020

Operating income of €9.9 million in 2020, compared to €13.7 million in 2019.

R&D services for third parties amounted to €3.0 million in 2020 (€6.7 million in 2019), mainly due to the collaboration with AstraZeneca, which generated €2.9 million in revenues in 2020. The research tax credit reached €6.3 million in 2020 (€6.5 million in 2019).

Net operating expenses of €33.9 million in 2020, compared to €39.2 million in 2019.

R&D expenses were €27.3 million in 2020 (€31.4 million in 2019) with the reduction due to lower clinical trial expenses in 2020 and to the decrease of external expenses related to the manufacturing of clinical batches.

General and administrative expenses amounted to €6.5 million in 2020 (€7.1 million in 2019).

Financial income of €6.8 million in 2020, compared to €6.7 million in 2019.

The partial sale of the Tasly BioPharmaceuticals shares in July 2020 generated a net gain on asset disposal of €2.7 million. Transgene’s remaining shareholding was revalued and resulted in financial income of €6.4 million in 2020. This figure corresponds to the difference between the market price and the historical price.

Net loss of €17.2 million in 2020, compared to €18.8 million in 2019.

Cash burn reduced to €17.0 million in 2020, versus €20.5 million in 2019 (excluding capital increase).

The net cash inflow of €18.2 million from the sale of Tasly BioPharmaceuticals shares in July 2020 reduced net cash consumption compared to 2019. This transaction enabled the Company to reimburse in advance the €10 million bank loan from the European Investment Bank (EIB) in October 2020 (against an initial maturity scheduled for this loan of June 2021).

Cash available at year-end 2020: €26.3 million, compared to €43.3 million at the end of 2019. In addition, Transgene still has access to a credit line of €15 million and holds Tasly BioPharmaceuticals shares valued at €32.3 million at the end of December 2020.

As a result, Transgene has a financial visibility until 2022.

HEDI BEN BRAHIM APPOINTED CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Hedi Ben Brahim was appointed as the Company’s Chairman and CEO, effective January 1, 2021. He has been a member of Transgene’s Board since May 2019. Hedi Ben Brahim replaces Philippe Archinard, who had led the company since 2005 and who remains a member of the Board of Transgene.

The financial statements for 2020 as well as management’s discussion and analysis are attached to this press release (Appendices A and B).

The Board of Directors of Transgene met on March 10, 2021, under the chairmanship of Hedi Ben Brahim and closed the 2020 financial statements. Audit procedures have been performed by the statutory auditors and the delivery of the auditors’ report is ongoing.

The Company’s universal registration document, which includes the annual financial report, will be available early April 2021 on Transgene’s website, www.transgene.fr.

A conference call in English is scheduled today, March 10, 2021, at 6:00 p.m. CET / 12:00 p.m. EST.

Webcast link to English language conference call:

https://channel.royalcast.com/landingpage/transgene/20210310_1/

Participant telephone numbers:

France: +33 (0) 1 7037 7166

United Kingdom: +44 (0) 33 0551 0200

United States: +1 212 999 6659

Confirmation code: Transgene

A replay of the call will be available on the Transgene website (www.transgene.fr) following the live event.

A video conference in French is scheduled on March 11, 2021, at 10:00 a.m. CET.

Webcast link to English language conference call:

https://channel.royalcast.com/landingpage/transgene/20210311_2/

Participant telephone numbers:

France: +33 (0) 1 7037 7166

Confirmation code: Transgene

A replay will be available on the Transgene website (www.transgene.fr) following the live event.

About Transgene

Transgene (Euronext: TNG) is a publicly traded French biotechnology company focused on designing and developing targeted immunotherapies for the treatment of cancer. Transgene’s programs utilize viral vector technology with the goal of indirectly or directly killing cancer cells.

The Company’s clinical-stage programs consist of two therapeutic vaccines (TG4001 for the treatment of HPV-positive cancers, and TG4050, the first individualized therapeutic vaccine based on the myvac® platform) as well as two oncolytic viruses (TG6002 for the treatment of solid tumors, and BT-001, the first oncolytic virus based on the Invir.IO™ platform).

With Transgene’s myvac® platform, therapeutic vaccination enters the field of precision medicine with a novel immunotherapy that is fully tailored to each individual. The myvac® approach allows the generation of a virus-based immunotherapy that encodes patient-specific mutations identified and selected by Artificial Intelligence capabilities provided by its partner NEC.

With its proprietary platform Invir.IO™, Transgene is building on its viral vector engineering expertise to design a new generation of multifunctional oncolytic viruses. Transgene has an ongoing Invir.IO™ collaboration with AstraZeneca.

Additional information about Transgene is available at: www.transgene.fr.

Follow us on Twitter: @TransgeneSA

Disclaimer

This press release contains forward-looking statements, which are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those anticipated. There can be no guarantee that (i) the results of pre-clinical work and prior clinical trials will be predictive of the results of the clinical trials currently underway, (ii) regulatory authorities will agree with the Company’s further development plans for its therapies, or (iii) the Company will find development and commercialization partners for its therapies in a timely manner and on satisfactory terms and conditions, if at all. The occurrence of any of these risks could have a significant negative outcome for the Company’s activities, perspectives, financial situation, results and development.

For a discussion of risks and uncertainties which could cause the Company’s actual results, financial condition, performance or achievements to differ from those contained in the forward-looking statements, please refer to the Risk Factors (“Facteurs de Risques”) section of the Universal Registration Document, available on the AMF website (http://www.amf-france.org) or on Transgene’s website (www.transgene.fr). Forward-looking statements speak only as of the date on which they are made, and Transgene undertakes no obligation to update these forward-looking statements, even if new information becomes available in the future.

Appendix A: Financial statements 2020

CONSOLIDATED BALANCE SHEET, IFRS

(in € thousands)

Assets

December 31, 2020

December 31, 2019

CURRENT ASSETS

 

 

Cash and cash equivalents

5,277

1,343

Other current financial assets

21,077

42,028

Cash, cash equivalents and other current financial assets

26,354

43,371

Trade receivables

1,667

2,324

Other current assets

2,666

3,943

Total current assets

30,687

49,638

NON-CURRENT ASSETS

 

 

Property, plant and equipment

13,110

13,283

Intangible assets

141

147

Financial fixed assets

34,042

42,931

Investments in associates

Other non-current assets

7,473

9,478

Total non-current assets

54,766

65,839

Total ASSETS

85,453

115,477

Liabilities and equity

December 31, 2020

December 31, 2019

CURRENT LIABILITIES

 

 

Trade payables

5,066

7,092

Financial liabilities

1,426

2,037

Provisions for risks

511

898

Other current liabilities

6,626

8,619

Total current liabilities

13,629

18,646

NON-CURRENT LIABILITIES

 

 

Financial liabilities

16,938

26,703

Employee benefits

4,526

4,427

Other non-current liabilities

110

4

Total non-current liabilities

21,574

31,134

Total liabilities

35,203

49,780

EQUITY

 

 

Share capital

41,921

83,265

Share premiums and reserves

40,938

39,738

Retained earnings

(14,327)

(37,444)

Profit (loss) for the period

(17,231)

(18,804)

Other comprehensive income

(1,051)

(1,058)

Total equity attributable to Company shareholders

50,250

65,697

TOTAL LIABILITIES AND EQUITY

85,453

115,477

Consolidated income statement, IFRS

(in € thousands, except for per-share data)

 

December 31, 2020

December 31, 2019

Revenue from collaborative and licensing agreements

2,981

6,652

Government financing for research expenditure

6,362

6,644

Other income

572

437

Operating income

9,915

13,733

Research and development expenses

(27,346)

(31,385)

General and administrative expenses

(6,547)

(7,134)

Other expenses

(15)

(668)

Net operating expenses

(33,908)

(39,187)

Operating income

(23,993)

(25,454)

Finance cost

6,762

6,650

Share of profit (loss) of associates

Income (loss) before tax

(17,231)

(18,804)

Income tax expense

NET INCOME

(17,231)

(18,804)

Basic loss per share (€)

(0.21)

(0.23)

Diluted earnings per share (€)

(0.21)

(0.23)

Cash Flow statement, IFRS

(in € thousands)

 

December 31, 2020

December 31,

2019

Cash flow from operating activities

 

 

Net income/(loss)

(17,231)

(18,804)

Cancellation of financial income

(6,762)

(6,650)

Elimination of non-cash items

 

 

Income of associates

Provisions

722

993

Depreciation

1,786

770

Share-based payments

1,744

1,351

Others

(1,052)

1,066

Net cash generated from/(used in) operating activities before change in

working capital and other operating cash flow

 

(20,793)

 

(21,274)

Change in operating working capital requirements

 

 

Current receivables and prepaid expenses

897

(1,269)

Inventories and work in progress

443

Research tax credit

(6,352)

(6,619)

Other current assets

717

(962)

Trade payable

(2,057)

2,270

Prepaid income

(2,015)

4,461

Other current liabilities

129

537

Net cash used in operating activities

(29,474)

(22,413)

Cash flows from investing activities

 

 

(Acquisitions)/disposals of property, plant and equipment

(811)

(1,688)

(Acquisitions)/disposals of intangible assets

(41)

(43)

(Acquisitions) / disposal of non-consolidated equity securities without

significant influence

18,224

Other (acquisitions)/disposals

370

1,200

Net cash used in investing activities

17,742

(531)

Cash flow from financing activities

 

 

Net financial income

(123)

(980)

Gross proceeds from the issuance of shares

48,710

Share issue costs

(1,763)

Conditional subsidies

655

237

(Acquisitions)/disposal of other financial assets

21,041

(26,904)

Net tax credit financing

6,288

6,706

Bank loan

(11,406)

(2,371)

Financial leases and change in lease obligations

(782)

(1,234)

Net cash generated from/(used in) financing activities

15,673

22,401

Effect of changes in exchange rates on cash and cash equivalents

(7)

1

Net increase/(decrease) in cash and cash equivalents

3,934

(542)

Cash and cash equivalents at beginning of period

1,343

1,885

Cash and cash equivalents at end of period

5,277

1,343

Investments in other current financial assets

21,077

42,028

Cash, cash equivalent and other current financial assets

26,354

43,371

Appendix B: Management Discussion of 2020 Financials

Revenue

Income from collaboration and licensing agreements represented €3.0 million in 2020 versus €6.7 million in 2019. The income consisted primarily of research and development services for third parties amounting to €3.0 million in 2020 (versus €6.6 million in 2019), mainly due to €2.9 million in revenue being recognized from the collaboration with AstraZeneca over the period (versus €5.3 million in 2019).

Public funding for research expenses accounted for €6.4 million in 2020 versus €6.6 million in 2019. This is mainly due to the research tax credit for €6.3 million in 2020 (€6.5 million in 2019) and to grants received and receivable for €0.05 million in 2020 (€0.1 million in 2019).

Other income

Other income amounted to €0.6 million in 2020 versus €0.4 million in 2019. This consisted for €0.2 million of the NEOVIVA repayable advances at a preferred rate.

Operating expenses

Research and development (R&D) expenses

R&D expenses amounted to €27.3 million in 2020 versus €31.4 million in 2019.

The following table details R&D expenses by type:

(In millions of euros)

Dec. 31, 2020

Dec. 31, 2019

Payroll costs

11.5

11.2

Share-based payments

0.8

0.9

Intellectual property expenses and licensing costs

0.9

0.8

External expenses for clinical projects

5.4

10.9

External expenses for other projects

2.4

1.6

Operating expenses

4.6

4.2

Depreciation and provisions

1.7

1.8

RESEARCH AND DEVELOPMENT EXPENSES

27.3

31.4

Employee costs allocated to R&D (salaries, employer contributions and related expenses) amounted to €11.5 million in 2020 compared to €11.2 million in 2019.

Share-based payments amounted to €0.8 million in 2020, versus €0.9 million in 2019.

External expenses for clinical projects amounted to €5.4 million in 2020, compared to €10.9 million in 2019. This decrease is mainly due to the reduction of clinical trials expenses (€3.8 million in 2020 versus €7.4 million in 2019) and to the decrease of external expenses related to the manufacturing of clinical batches (€1.6 million in 2020 versus €3.5 million in 2019).

Other external expenses, including expenses for research and industrial activities, were €2.4 million in 2020, versus €1.6 million in 2019.

Operating expenses, including the cost of operating research and manufacturing laboratories, amounted to €4.6 million in 2020, compared to €4.2 million in 2019.

General and administrative (G&A) expenses

General and administrative (G&A) expenses amounted to €6.5 million in 2020 versus €7.1 million in 2019.

The following table details G&A expenses by type:

(In millions of euros)

Dec. 31, 2020

Dec. 31, 2019

Payroll costs

3.2

3.2

Share-based payments

0.9

0.4

Fees and administrative expenses

1.8

2.8

Other fixed costs

0.5

0.6

Depreciation and provisions

0.1

0.1

GENERAL AND ADMINISTRATIVE EXPENSES

6.5

7.1

Employee costs allocated to G&A stood at €3.2 million in 2020, same as in 2019.

Share-based payments amounted €0.9 million in 2020 compared to €0.4 million in 2019.

Fees and administrative expenses decreased to €1.8 million in 2020, versus €2.8 million in 2019. This decrease is mainly due to consultancy fees linked to the collaboration and financing contracts paid in 2019.

Financial income

Net financial income resulted in a net income of €6.8 million in 2020 versus a net income of €6.7 million in 2019.

Financial income amounted to €10.6 million in 2020 (compared to €9.9 million in 2019), and mainly consisted of:

  • the sale of 38% of Transgene’s shareholding in Tasly BioPharmaceuticals, which generated a net gain on asset disposal of €2.7 million;
  • a revaluation gain on the remaining Tasly BioPharmaceuticals shares held of €6.4 million, corresponding to the difference between the market price and the historical price;
  • the net proceeds from the agreements concluded for the sale of ElsaLys Biotech SA for €1.4 million (sales of the equity securities for €0.3 million, reversal of provision on receivables of €1.1 million);
  • investment income remained stable at €0.1 million in 2020.

Financial expenses amounted to €3.8 million in 2020 (compared to €3.2 million in 2019) and were mainly related to:

  • the cancellation of the SillaJen earnout for €1.9 million following the agreement reached between SillaJen and the former Jennerex Inc. shareholders;
  • accrued bank interest on the EIB loan (€0.7 million in 2020 versus €0.8 million in 2019);
  • the discounting of the ADNA debt owed to Bpifrance for an expense of €0.6 million in 2020 (versus an income of €8.7 million in 2019);
  • bank interest related to the assignment of 2019 research tax credit receivables (€0.3 million in 2020 versus €0.4 million in 2019);
  • bank interest related to the Natixis credit line (€0.2 million in 2020 versus €0.4 million in 2019);
  • interest on financial leases (€0.1 million in 2020 versus €0.2 million in 2019).

Net income (loss)

The net loss was €17.2 million in 2020, compared with a net loss of €18.8 million in 2019.

The net loss was €0.21 per share in 2020 versus net loss of €0.23 per share in 2019.

Investments

Investments in tangible and intangible assets amounted €2.4 million in 2020 (€2.6 million in 2019).

Repayable advances and loans

Since 2016, Transgene has benefited from a credit facility granted by the European Investment Bank (EIB) of €10 million. In October 2020, the company has repaid the capital of this loan as well as the accrued interest due at this date.

In April 2019, the Company signed a revolving credit agreement with Natixis for a maximum of €20 million, which can be drawn down in one or more installments. An amendment has been signed in September 2020 resizing this credit line to €15 million, following the sale of 38% of Transgene’s stake in Tasly BioPharmaceuticals in July 2020. Under this credit agreement, Transgene must pledge the shares it holds in Tasly BioPharmaceuticals prior to the first drawdown. This credit agreement is valid until June 2022 and, according to the principles of a revolving credit, the capital drawn down must be fully repaid at the latest at the end of the program’s duration. The Company has not drawn on this credit facility in 2020.

Since 2019, Transgene has been leading a research program, NEOVIVA, supported by Bpifrance. The Company could receive up to €2.6 million (€0.2 million in grants, €2.4 million in repayable advances) over a five-year period.

Liquidity and capital resources

At December 31, 2020, the Company had €26.3 million in cash available, compared with €43.3 million at December 31, 2019.

Cash burn

The Company’s net cash burn amounted to €17.0 million in 2020 versus €20.5 million in 2019.

Post-closing events

N/A

Transgene:

Lucie Larguier

Director Corporate Communications & IR

+33 (0)3 88 27 91 04

investorrelations@transgene.fr

Media:

Citigate Dewe Rogerson

David Dible/Sylvie Berrebi

+ 44 (0)20 7638 9571

transgene@citigatedewerogerson.com

Source: Transgene





Source link

]]>
Alto Ingredients Reports Fourth Quarter and Full Year 2020 Results https://www.jopsweb.org/2021/08/16/alto-ingredients-reports-fourth-quarter-and-full-year-2020-results/ Mon, 16 Aug 2021 07:23:35 +0000 https://www.jopsweb.org/?p=100 Full year 2020 net loss of $16.4 million, which included a $24.4 million impairment charge Full year 2020 Adjusted EBITDA of $67.4 million Total debt reduced by approximately $146 million SACRAMENTO, Calif., March 10, 2021 (GLOBE NEWSWIRE) — Alto Ingredients, Inc. (NASDAQ: ALTO), a leading producer of specialty alcohols and essential ingredients, reported its financial […]]]>


  • Full year 2020 net loss of $16.4 million, which included a $24.4 million impairment charge

  • Full year 2020 Adjusted EBITDA of $67.4 million

  • Total debt reduced by approximately $146 million

SACRAMENTO, Calif., March 10, 2021 (GLOBE NEWSWIRE) — Alto Ingredients, Inc. (NASDAQ: ALTO), a leading producer of specialty alcohols and essential ingredients, reported its financial results for the fourth quarter and full year ended December 31, 2020.

“In 2020, we significantly increased production of our profitable specialty alcohols, reduced the impact of unprofitable fuel-grade operations by idling or selling assets, and lowered operating and overhead expenses,” said Mike Kandris, CEO of Alto Ingredients. “These efforts increased our 2020 Adjusted EBITDA to over $67 million, a remarkable achievement that was within our August 2020 guidance. We also significantly improved our balance sheet, reducing our total debt by approximately $146 million during 2020.

“We are pursuing a more sustainable and profitable path forward, delivering quality products driven by solid consumer demand. We are currently operating plants with an annual production capacity of 290 million gallons, of which 70 million gallons of specialty alcohols are already contracted for 2021. Our transformation is far from complete and with a significantly improved balance sheet, we are actively developing and exploring new build and buy opportunities to grow and expand our business to further increase revenues and profitability while maintaining and controlling expenses. We believe we are well positioned to capitalize on the opportunities ahead to deliver long-term growth for all our stakeholders.”

Financial Results for the Three Months Ended December 31, 2020 Compared to 2019

  • Net sales were $168.8 million, compared to $357.6 million.

  • Cost of goods sold was $155.2 million, compared to $354.4 million.

  • Gross profit was $13.6 million, compared to $3.2 million.

  • Selling, general and administrative expenses were $6.7 million, compared to $11.8 million.

  • Operating loss was $14.2 million, compared to $37.9 million.

  • Net loss available to common stockholders was $20.5 million, or $0.30 per share, and included an impairment charge of $24.4 million related to the company’s Western assets. This compares to a loss of $41.4 million, or $0.85 per share, for the three months ended December 31, 2019.

  • Adjusted EBITDA was $16.4 million, compared to $1.9 million.

  • Cash and cash equivalents were $47.7 million at December 31, 2020, compared to $19.0 million at December 31, 2019.

Financial Results for the Full Year 2020 Compared to 2019

  • Net sales were $897.0 million, compared to $1.4 billion.

  • Cost of goods sold was $844.2 million, compared to $1.4 billion.

  • Gross profit was $52.9 million, compared to a gross loss of $9.9 million.

  • Selling, general and administrative expenses were $32.0 million, compared to $35.5 million.

  • Operating income was $9.9 million, compared to an operating loss of $74.7 million.

  • Net loss available to common stockholders was $16.4 million, or $0.28 per share, compared to a loss of $90.2 million, or $1.90 per share.

  • Adjusted EBITDA was positive $67.4 million, compared to negative $1.7 million.

Fourth Quarter and Full Year 2020 Results Conference Call
Management will host a conference call at 8:00 a.m. Pacific Time / 11:00 a.m. Eastern Time on Thursday, March 11, 2021, and will deliver prepared remarks via webcast followed by a question-and-answer session.

The webcast for the call can be accessed from Alto Ingredients website at www.altoingredients.com. Alternatively, you may dial the following number up to ten minutes prior to the scheduled conference call time: (877) 847-6066. International callers should dial 00-1 (970) 315-0267. The pass code will be 8599307. If you are unable to participate in the live call, the webcast will be archived for replay on Alto Ingredients website for one year. In addition, a telephonic replay will be available at 2:00 p.m. Eastern Time on Thursday, March 11, 2021 through 11:59 p.m. Eastern Time on Thursday, March 18, 2021. To access the replay, please dial (855) 859-2056. International callers should dial 00-1 (404) 537-3406. The pass code will be 8599307.

Use of Non-GAAP Measures

Management believes that certain financial measures not in accordance with generally accepted accounting principles (“GAAP”) are useful measures of operations. The company defines Adjusted EBITDA as unaudited net income (loss) attributed to Alto Ingredients, Inc. before interest expense, provision (benefit) for income taxes, asset impairments, loss on extinguishment of debt, purchase accounting adjustments, fair value adjustments, and depreciation and amortization expense. A table is provided at the end of this release that provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss) attributed to Alto Ingredients, Inc. Management provides this non-GAAP measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing the company’s performance on a period-over-period basis. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to net income (loss) attributed to Alto Ingredients, Inc. or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and you should not consider this measure in isolation or as a substitute for analysis of the company’s results as reported under GAAP.

About Alto Ingredients, Inc.
Alto Ingredients, Inc. (ALTO), formerly known as Pacific Ethanol, Inc., is a leading producer of specialty alcohols and essential ingredients. The company is focused on products for four key markets: Health, Home & Beauty; Food & Beverage; Essential Ingredients; and Renewable Fuels. The company’s customers include major food and beverage companies and consumer products companies. For more information please visit www.altoingredients.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements and information contained in this communication that refer to or include Alto Ingredients’ estimated or anticipated future results or other non-historical expressions of fact are forward-looking statements that reflect Alto Ingredients’ current perspective of existing trends and information as of the date of the communication. Forward looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “should,” “estimate,” “expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,” “might,” “will,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. Such forward-looking statements include, but are not limited to, statements concerning Alto Ingredients’ plans, objectives, expectations and intentions. It is important to note that Alto Ingredients’ objectives, expectations and intentions are not predictions of actual performance. Actual results may differ materially from Alto Ingredients’ current expectations depending upon a number of factors affecting Alto Ingredients’ business. These factors include, among others, adverse economic and market conditions, including for specialty alcohols and essential ingredients; export conditions and international demand for the company’s products; fluctuations in the price of and demand for oil and gasoline; raw material costs, including production input costs, such as corn and natural gas; and the effects – both positive and negative – of the coronavirus pandemic and its resurgence or abatement. These factors also include, among others, the inherent uncertainty associated with financial and other projections; the anticipated size of the markets and continued demand for Alto Ingredients’ products; the impact of competitive products and pricing; the risks and uncertainties normally incident to the specialty alcohol production and marketing industries; changes in generally accepted accounting principles; successful compliance with governmental regulations applicable to Alto Ingredients’ distilleries, products and/or businesses; changes in laws, regulations and governmental policies; the loss of key senior management or staff; and other events, factors and risks previously and from time to time disclosed in Alto Ingredients’ filings with the Securities and Exchange Commission including, specifically, those factors set forth in the “Risk Factors” section contained in Alto Ingredients’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 16, 2020.

Media Contact:
Bryon McGregor, Alto Ingredients, Inc., 916-403-2768, mediarelations@altoingredients.com

Company IR Contact:
Michael Kramer, Alto Ingredients, Inc., 916-403-2755, Investorrelations@altoingredients.com

IR Agency Contact:
Moriah Shilton, LHA Investor Relations, 415-433-3777, Investorrelations@altoingredients.com

ALTO INGREDIENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)

Three Months Ended
December 31,

Year Ended
December 31,

2020

2019

2020

2019

Net sales

$

168,818

$

357,617

$

897,023

$

1,424,881

Cost of goods sold

155,181

354,421

844,164

1,434,819

Gross profit (loss)

13,637

3,196

52,859

(9,938

)

Selling, general and administrative expenses

(6,735

)

(11,823

)

(31,980

)

(35,453

)

Gain on litigation settlement

11,750

Gain on sale of assets

3,223

1,580

Asset impairments

(24,356

)

(29,292

)

(24,356

)

(29,292

)

Income (loss) from operations

(14,231

)

(37,919

)

9,853

(74,683

)

Loss on debt extinguishment

(6,517

)

(6,517

)

Interest expense, net

(3,790

)

(5,192

)

(17,943

)

(20,206

)

Fair value adjustments

(2,462

)

(9,959

)

Other income (expense), net

271

(147

)

750

104

Loss before benefit for income taxes

(20,212

)

(49,775

)

(17,299

)

(101,302

)

Benefit for income taxes

(17

)

(20

)

(17

)

(20

)

Consolidated net loss

(20,195

)

(49,755

)

(17,282

)

(101,282

)

Net loss attributed to noncontrolling interests

8,671

2,166

12,333

Net loss attributed to Alto Ingredients, Inc.

$

(20,195

)

$

(41,084

)

$

(15,116

)

$

(88,949

)

Preferred stock dividends

$

(319

)

$

(319

)

$

(1,268

)

$

(1,265

)

Net loss available to common stockholders

$

(20,514

)

$

(41,403

)

$

(16,384

)

$

(90,214

)

Net loss per share, basic and diluted

$

(0.30

)

$

(0.85

)

$

(0.28

)

$

(1.90

)

Weighted-average shares outstanding, basic and diluted

67,512

48,438

58,609

47,384

ALTO INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value)

December 31,

December 31,

ASSETS

2020

2019

Current Assets:

Cash and cash equivalents

$

47,667

$

18,997

Accounts receivable, net

43,491

74,307

Inventories

41,767

60,600

Prepaid inventory

891

1,528

Assets held-for-sale

58,295

69,764

Derivative assets

17,149

2,438

Other current assets

4,786

4,430

Total current assets

214,046

232,064

Property and equipment, net

229,486

332,526

Other Assets:

Right of use operating lease assets, net

11,046

24,346

Notes receivable

14,337

Assets held-for-sale

16,500

Intangible assets

2,678

2,678

Other assets

5,225

4,381

Total other assets

33,286

47,905

Total Assets

$

476,818

$

612,495

ALTO INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(unaudited, in thousands, except par value)

December 31,

December 31,

LIABILITIES AND STOCKHOLDERS’ EQUITY

2020

2019

Current Liabilities:

Accounts payable – trade

$

13,047

$

29,277

Accrued liabilities

11,101

22,331

Current portion – operating leases

2,180

3,457

Current portion – long-term debt

25,533

63,000

Derivative liabilities

1,860

Liabilities held-for-sale

19,542

34,413

Other current liabilities

15,524

6,060

Total current liabilities

86,927

160,398

Long-term debt, net of current portion

71,807

180,795

Operating leases, net of current portion

8,715

21,171

Other liabilities

13,134

23,086

Total Liabilities

180,583

385,450

Stockholders’ Equity:

Alto Ingredients, Inc. Stockholders’ Equity:

Preferred stock, $0.001 par value; 10,000 shares authorized;
Series A: 0 shares issued and outstanding as of December 31, 2020 and 2019
Series B: 927 shares issued and outstanding as of December 31, 2020 and 2019

1

1

Common stock, $0.001 par value; 300,000 shares authorized; 72,491 and 55,508 shares
issued and outstanding as of December 31, 2020 and 2019, respectively

72

56

Non-voting common stock, $0.001 par value; 3,553 shares authorized; 1 share issued and outstanding as of December 31, 2020 and 2019

Additional paid-in capital

1,036,638

942,307

Accumulated other comprehensive loss

(3,878

)

(2,370

)

Accumulated deficit

(736,598

)

(720,214

)

Total Alto Ingredients, Inc. Stockholders’ Equity

296,235

219,780

Noncontrolling Interests

7,265

Total Stockholders’ Equity

296,235

227,045

Total Liabilities and Stockholders’ Equity

$

476,818

$

612,495

Reconciliation of Adjusted EBITDA to Net Loss

Three Months Ended
December 31,

Years Ended
December 31,

(unaudited)

2020

2019

2020

2019

Net loss attributed to Alto Ingredients, Inc.

$

(20,195

)

$

(41,084

)

$

(15,116

)

$

(88,949

)

Adjustments:

Interest expense, net

3,790

5,192

17,943

20,206

Asset impairments*

24,356

21,655

24,356

21,655

Fair value adjustments

2,462

9,959

Loss on debt extinguishment

6,517

6,517

Benefit for income taxes

(17

)

(20

)

(17

)

(20

)

Depreciation and amortization expense*

6,015

9,648

30,269

38,880

Total adjustments

36,606

42,992

82,510

87,238

Adjusted EBITDA

$

16,411

$

1,908

$

67,394

$

(1,711

)

________________

* Adjusted for noncontrolling interests.

Commodity Price Performance

Three Months Ended
December 31,

Years Ended
December 31,

(unaudited)

2020

2019

2020

2019

Production gallons sold (in millions)

49.0

125.4

271.9

491.0

Third party gallons sold (in millions)

51.6

70.1

264.4

328.4

Total gallons sold (in millions)

100.6

195.5

536.3

819.4

Production capacity utilization

49%

82%

56%

82%

Average sales price per gallon

$

1.72

$

1.70

$

1.63

$

1.61

Average CBOT ethanol price per gallon

$

1.41

$

1.42

$

1.25

$

1.39

Corn cost – CBOT equivalent

$

3.79

$

3.93

$

3.56

$

3.83

Average basis

$

0.27

$

0.46

$

0.28

$

0.43

Delivered cost of corn

$

4.06

$

4.39

$

3.84

$

4.26

Total co-product tons sold (in thousands)

270.0

725.7

1,447.5

2,821.7

Co-product return % (1)

42.6%

35.6%

44.1%

35.1%

________________

(1) Co-product revenue as a percentage of delivered cost of corn.



Source link

]]>
Debt Is the No. 1 Financial Roadblock of 2020 https://www.jopsweb.org/2021/08/16/debt-is-the-no-1-financial-roadblock-of-2020/ Mon, 16 Aug 2021 07:22:41 +0000 https://www.jopsweb.org/?p=91 defocused view through a dirty car windshield during a car ride. Many Americans are well aware of the budgeting strategies they should be following to keep their finances in good shape, but major financial roadblocks prevent them from achieving their savings goals. While many of these roadblocks grow out of irresponsible behaviors, plenty of others […]]]>


defocused view through a dirty car windshield during a car ride.

Many Americans are well aware of the budgeting strategies they should be following to keep their finances in good shape, but major financial roadblocks prevent them from achieving their savings goals. While many of these roadblocks grow out of irresponsible behaviors, plenty of others result from either unavoidable circumstances or a few careless mistakes. After all, even a few months of poor credit card usage can turn into a decade-plus of paying compound interest — potentially crushing your ability to reach financial milestones for the foreseeable future.

“Debt is a challenge for working families because so many of them are living within a couple hundred dollars of what they make each month,” said Michael Grieg, owner of the personal finance blog NinjaBudgeter. “When you have debt, you’re using that money that could be saved or invested to service the debt.”

To find out the biggest financial roadblocks for Americans in 2020, GOBankingRates surveyed nearly 900 people who are currently carrying household debt and asked them about their goals, priorities, obstacles and game plan for tackling debt. The results painted a picture of how debt can ultimately become a massive barrier to Americans who are striving to secure the life that they want.

GOBankingRates’ survey covers the following topics:

  • Key Findings

  • Debt Will Stop 58% of American From Reaching Their 2020 Goals

  • Debt Has Caused Stress, Sleepless Nights for Many Americans

  • Saving For Retirement Is the Top Priority Once They’re Debt-Free

  • How To Eliminate Your Debt in 2020

Key Findings

Here are some of the most notable takeaways from the survey:

  • Nearly 60% of Americans said that some form of debt would keep them from achieving their financial goals in 2020. In particular, 22% of respondents cited credit card debt as an obstacle, and 18% brought forth their student loan debt. Looking back, household debt has prevented 28% of Americans from reaching their 2019 goals.

  • About 58% of respondents said they would need to make more money to get out of debt faster. In comparison, only 35% said they need to follow a budget and control their spending.

  • Approximately 1 in 4 said their debt left them in a state of constant stress, and almost 1 in 5 described dealing with several sleepless nights as a result of the money they owe. In fact, 12% of respondents have been brought to tears over the amount of debt that they have. To put things into perspective, the average total household debt for each American is a staggering $46,330.53.

  • Eliminating debt was a goal for almost half of those surveyed. Americans also said they wanted to raise their credit score and stop living paycheck to paycheck, with 29% and 28% of respondents choosing these options, respectively. To do this and break the cycle of debt, they may need to learn the true cost of borrowing money.

Back to the top

Debt Will Stop 58% of Americans From Reaching Their 2020 Goals

Over half of all survey respondents cited their credit card debt, student loans, mortgage or auto loans as a key roadblock to accomplishing everything they want to achieve in 2020. That’s not surprising, given how much total household debt Americans claimed to have. The average debt across all groups was a whopping $46,330.53 — a figure that can easily leave some families under the shadow of financial instability.

Americans’ Biggest Roadblocks To Accomplishing Their Goals in 2020

Roadblocks

Response Rate

My low salary/income

33.71%

I don’t anticipate having any roadblocks in 2020

29.76%

My credit card debt

22.10%

My student loan debt

18.26%

My housing costs (including rent)

18.26%

My family expenses (i.e., child care, college)

11.72%

My mortgage

10.26%

My auto loan debt

7.33%

A major life event (e.g., wedding, divorce, having a baby)

6.43%

Other

3.38%

“Debt is such a big problem because amortized interest is the exact opposite of compound interest we can earn in an investment,” said Garrett Konrad, a partner and investment advisor at IFC and Insurance Marketing Inc. “If you think about compound interest, it is fairly underwhelming at first, and the longer time period you have to grow assets, the more meaningful and overwhelming it becomes. Amortized interest and interest we pay on debt is the exact opposite in that we feel it is benign until it becomes an out-of-control problem.”

Related: The Average Student Loan Debt in Every State

Digging a little deeper into the demographic breakdown also resulted in some fascinating findings. Debt appeared to peak at an average of $72,367.52 between ages 35-44, which is understandable — financial obligations like mortgages, student loans and child care expenses may start overlapping at this time of life. However, debt for other demographics ages 25 and older consistently averaged between $45,000-$50,000, which means that the $70,000-plus balance for the 35-44 age group is clearly an outlier. Additionally, it’s troubling that reported debt only declines slightly for respondents ages 65 and older. Americans could be entering retirement while saddled with concerning levels of debt.

On average, female respondents had approximately $4,000 more in debt than their male counterparts. They were also more likely to cite a low salary as a major roadblock — 38% of women versus 30% of men chose this option — which might indicate that it’s more difficult for women to pay down their debt and avoid adding to it in the first place. Supporting this finding, only 26% of female respondents said they don’t anticipate facing any roadblocks in 2020, compared with 33% of male respondents.

However, although some form of debt surfaced repeatedly as a roadblock, the two answer choices that received the highest number of responses aren’t necessarily related to debt. One-third of respondents said their low income would prevent them from reaching their goals in 2020, and about 30% said they aren’t expecting to encounter any roadblocks, showing that a large segment of those polled is either in great financial shape or just wildly optimistic.

Back to the top

Don’t Miss: Best Balance Transfer Credit Cards of 2019

They Want To Save Money, Improve Their Credit and More

If Americans actually achieved their financial goals for 2020, they would directly address their issues with debt and set themselves up for more ambitious goals in the future. Over half of all survey respondents said their goal was to save more money, which is one of the clearest paths to eliminating — and preventing — debt. Having an emergency fund stashed in a high-yield savings account can stop an unexpected medical bill or layoff from evolving into serious levels of debt.

Of course, eliminating that debt in itself was another major goal for survey respondents. Nearly half of those surveyed said that getting rid of debt is among their financial goals for 2020. Beyond that, over 1 in 4 Americans wanted to raise their credit scores and stop living paycheck to paycheck — both of which are closely related to debt as a financial roadblock.

However, there are plenty of reasons to worry about the impact of debt on Americans’ lives. Major financial goals — like investing more in the stock market, buying a home or starting a family — all appeared to be less important to many survey respondents than basics like saving more money and paying off debt. Essentially, consumer debt might be causing significant delays in achieving certain life milestones.

“If someone wants to borrow from a bank to buy a house, other debt might be an impediment,” said Megan Gorman, a managing partner at Chequers Financial Management. “As a result, the traditional American avenue to building up one’s net worth gets blocked.”

Back to the top

Debt Has Caused Stress, Sleepless Nights for Many Americans

Aside from putting financial milestones on hold, debt can have even broader implications, like causing constant stress and creating problems in personal relationships. While it’s fortunate that about 40% of survey respondents haven’t dealt with these issues, other Americans have seen their debt develop into crises beyond their financial lives. Over 1 in 4 respondents said they’re constantly stressed over their debt, and 18% said they’ve spent several sleepless nights because of it — both of which can contribute to a range of worrisome health issues.

Impact of Debt on Americans’ Personal Lives

Statement

Response Rate

My debt has prevented me from achieving my goals

27.73%

I’m constantly stressed over debt

26.72%

My debt has caused me to have several sleepless nights

17.93%

My debt has prevented me from getting a loan

13.98%

My debt has prevented me from getting a good credit card

13.87%

I have cried over how much debt I have

12.06%

My debt has caused issues in my personal relationships

10.94%

None of the above

43.18%

Other

2.25%

However, the data broken down by age demographic shows that there might be light at the end of the tunnel. Stress over debt peaks between ages 35-54, which largely corresponds to the period of life when respondents reported having the most debt. While debt doesn’t necessarily decline as you pass the age of 55, based on the survey results, stress levels appear to do so. About 32% of 35- to 44-year-olds and 33% of 45- to 54-year-olds reported constant stress over their debt in 2019, compared with 27% of 55- to 64-year-olds and only 22% of respondents aged 65 and older — the lowest stress level among all age groups.

In terms of the impact of debt on their lives, female respondents expressed a lot more worry about their finances than male respondents did. About 25% of women versus 11% of men said they faced several sleepless nights in 2019 due to their debt. Female respondents were significantly more likely than male respondents to have cried over how much debt they have, at 20% and 5%, respectively. And, more women were constantly stressed over their debt compared to men — a difference of 12 percentage points. It’s important to note that female survey respondents also reported making less money and carrying more debt than male respondents, which means they might have more reasons to stress out and lose sleep.

Back to the top

Read More: Many Americans Would Sacrifice Having a Family To Avoid Credit Card Debt

Saving For Retirement Is the Top Priority Once They’re Debt-Free

So, what would Americans do if they were free from debt? On the whole, they seem committed to making long-term financial plans. About 54% of survey respondents said they would either save more for retirement, invest more money or buy a home, all of which are important goals — which once again illustrates how debt can be a major roadblock to building the sort of responsible financial life that Americans want.

Interestingly, traveling more is the No. 1 thing that 18% of respondents said they would do if they could get rid of their debt, and it was the second-most popular answer choice. This statistic could indicate that debt is causing people to forgo vacation time — and self-care — that would otherwise help alleviate the negative health effects of financial stress. At the same time, it’s wiser in the long term to invest any extra money or save it into an emergency fund or retirement account, rather than spend the money on a vacation.

Find Out: Best Cities To Live In If You Want To Pay Off Your Student Loans Quickly

In the event that their debt was wiped out, Americans ages 55-64 were the most likely to save more for retirement, with 37% of respondents in this age group choosing to tackle their nest egg. This trend makes sense, since retirement is fast approaching for 55- to 64-year-olds. It’s also interesting to note that 18- to 24-year-olds — the youngest age group in the survey — were far more likely to invest once debt was out of the equation, showing financial savvy. About 33% of respondents ages 18-24 chose investing more money as their top priority, compared with 16% of 35- to 44-year-olds, which was the next-highest response rate for this option.

The No. 1 Thing Americans Would Do If They Could Eliminate or Reduce Their Debt

Demographic

Answer Choice

Save More For Retirement

Invest More Money

Buy a Home

Travel More

Ages 18-24

9.26%

32.72%

11.11%

16.05%

Ages 25-34

23.21%

15.18%

9.82%

17.86%

Ages 35-44

31.78%

15.50%

17.05%

13.18%

Ages 45-54

31.06%

12.42%

14.29%

15.53%

Ages 55-64

37.27%

7.45%

9.32%

20.50%

Ages 65 and older

26.54%

14.20%

7.41%

24.07%

Men

22.89%

20.73%

11.23%

17.49%

Women

30.42%

11.56%

11.56%

18.63%

In comparison, women were more likely than men to prioritize saving more for retirement, at 30% and 23%, respectively. It’s possible that women could be further behind in their retirement savings, given the gender pay gap and their higher levels of debt. Conversely, male respondents were more likely than female respondents to choose investing more money — 21% vs. 12%, respectively — which is a tried-and-true path to building wealth.

Back to the top

How To Eliminate Your Debt in 2020

According to GOBankingRates’ survey, 58% of Americans think that making more money is the key to getting out of debt faster. While this plan will almost certainly work, it’s not a strategy that people can reliably deploy on their own. There are definitely long-term career moves that can boost your earning power, but securing a raise in the next year can be difficult. Instead, you should consider alternative options, like refinancing your loans or creating a realistic budget — and sticking to it.

“In order to get out of debt, you need to be actively managing it. Whether you’ve got student loans, credit card, or mortgage debt, it’s hard to make a dent in your loan principal if too much of your monthly payment is going toward interest charges,” said Robert Humann, general manager of student and personal loans at Credible. “All types of debt can be refinanced — you can often pay off credit card debt with a personal loan that’s got a lower interest rate, for example. The key to getting lower rates when refinancing is to first work on improving your credit score, and then get rates from multiple lenders.”

Additionally, following a budget and controlling your spending — the second-most common response to GOBankingRates’ question about ways to eliminate debt — hits on a basic approach that people of any profession or income level can rely on. There’s nothing else that can universally benefit someone’s financial situation in the same way.

“In terms of managing debt, it’s all about the basics,” Gorman said. “It’s about building a budget and sticking to it. There isn’t any magic wand that can change this. That’s why it’s so hard for Americans to get out of debt.”

Everything You Need To Know About Budgeting: How To Create a Budget You Can Live With

While adhering your spending to a budget might seem simple, there’s a reason why so many Americans are deeply in debt — budgeting can be much more difficult in practice. However, the discipline pays off in a bright financial future, free of debt-related stress.

“It will take some short-term sacrifice, but it is going to give you the rest of your lifetime to be in a stronger financial position if you do it now,” Konrad said. “Cancel dinners out, get creative with date night on a budget, put your athletic club membership you use twice a month on hold, and really try to just hammer your debt with cash flow.”

Back to the top

More From GOBankingRates

Grace Lin contributed to the reporting for this article.

Last updated: Nov. 19, 2019

Methodology: GOBankingRates surveyed 887 Americans ages 18 and older from across the country between Oct. 23, 2019, and Nov. 7, 2019, asking six different questions: (1) What are your financial goals for 2020? Select all that apply; (2) Do you anticipate any of the following will prevent you from accomplishing your goals in 2020? Select all that apply; (3) Of the following, what do you think you need in order to get out of debt faster? Select all that apply; (4) What’s the No. 1 thing you would do if you could eliminate or reduce your debt? Select ONE; (5) By your best estimate, how much total household debt (mortgage, credit card, student loans, auto, medical, etc.) do you currently have? and (6) Have any of the following statements applied to you in 2019 (so far)? Select all that apply. All respondents had to pass a screener question, “Do you currently carry any sort of household debt (i.e. credit card debt, mortgage debt, student loan debt, auto loan debt, etc.)?” with the answer of “yes.” GOBankingRates used Survata’s survey platform to conduct the poll. Respondents were reached across the Survata publisher network, where they take a survey to unlock premium content, like articles and e-books. Respondents received no cash compensation for their participation. More information on Survata’s methodology can be found at survata.com/methodology.

This article originally appeared on GOBankingRates.com: Survey: Debt Is the No. 1 Financial Roadblock of 2020



Source link

]]>
Home equity loan to consolidate debt https://www.jopsweb.org/2021/08/12/payday-loans-same-day-no-paperwork-i-need-instant-same-day-payday-loans/ Thu, 12 Aug 2021 05:17:35 +0000 https://www.jopsweb.org/2021/08/12/home-equity-loan-for-debt-consolidation-options/ Editorial independence Home equity loans are an option for homeowners with excessive debt. A home equity loan is risky as your home will be used as collateral. However, rates for this product are typically lower than those on personal loans and credit cards. Here’s how you can decide if a home equity mortgage is right […]]]>

Home equity loans are an option for homeowners with excessive debt.

A home equity loan is risky as your home will be used as collateral. However, rates for this product are typically lower than those on personal loans and credit cards.

Here’s how you can decide if a home equity mortgage is right for your debt consolidation goals.

Can I consolidate debt with a loan from my home equity?

Borrowers who have a home equity loan can withdraw a lump amount and do what they want with it. Home equity loans can provide cash in a lump sum to pay high interest bills.

Home equity loan interest rates tend to be lower than other high-interest loans such as credit cards. Home equity loans can be an option for consolidating debt and paying it off if you are looking to reduce the rate difference, you can try https://dedebt.com/

Pro tip

Home equity loans can help consolidate debt. However, your home is at risk so only apply for this type of loan when you are certain you can afford the repayments.

You must make sure you have the funds to repay the loan. You risk losing your valuable collateral – your house – if you don’t pay. Ortoli says that timely payments are essential in order not to create spiraling debt. Ortoli states that home equity loans should only be used to consolidate debt. Ortoli adds, “A home equity loan should only ever be used if you have stable income and you are certain you can pay all your monthly payments on the new loan.”

Consider the pros and disadvantages of a home equity mortgage to consolidate debt

Advantages

  • Interest rates are generally lower than other loans.
  • Ortoli states that it might be easier to qualify because the secured debt is more easily.
  • Ability to compare rates and terms from different financial institutions.
  • The funds are delivered in one lump sum to the borrower so they can immediately pay large debts.
  • There are no restrictions on borrowing money.
  • The prices are generally fixed.

The inconvenient

  • Lenders could place a lien upon your house if you default by using your home as collateral.
  • Ortoli claims that because it is easy to access, people may not be financially ready for it.
  • Home equity loan borrowers could end up owing more on their home than the value of the property, which can lead to deeper financial troubles.
  • This is an additional loan to an existing mortgage.

There are other ways to consolidate debt

Klingelhoeffer states that while consolidation can be a powerful strategy at the end of the night, you should not consider it a cure. Positive cash flow is key to resolving debt. The ability to free up cash monthly could help you channel money into your retirement fund or emergency fund. Experts will agree that it’s important to start early as it is a positive way to build wealth.

There are other options available for debt consolidation if you don’t want to put a lien on the house and are looking to consolidate your debt.

Balance Transfer Credit card:A few balance transfer cards offer an introductory rate of 0%. The APR is usually in effect for 12-18 months. You can transfer multiple debts to the card. All of your payments will go 100% on any balance, not just the interest. This strategy is a great way to pay off your debt quicker and save money on interest. The issuer may have restrictions about what debt can be transferred. A home equity loan, however, does not have such restrictions.

Personal:Depending on your APR, a Personal loan may be better or worse than a traditional mortgage. Personal loans that are unsecured don’t require collateral such as your home. If you are able to obtain a personal mortgage rate that is lower then your home equity, this could work in your favor. The personal loan funds can be used however you wish. You should be cautious about prepayment fees and origination charges.

Debt management plan:Credible credit counseling agencies can help you sort out your options if you have too much debt. We recommend that your agency is certified by the National Foundation for Credit Counseling.

Plan to settle your debtsYou can use a debt settlement company to help you negotiate your debts. This service is not always free. This service is not free. You can contact creditors and request to negotiate or settle any outstanding balances.

Refinancing:Current interest rates are very low, which means that if you have a home you may be eligible to receive new, more favorable loan terms. Chuck czajka, founder and CEO of Macrocurrency concepts Florida, states that refinancing a 30-year loan can give you the opportunity to spread the loan over 30 years rather than 10 as with a home-equity loan. You can use the money you have left to pay your debt if your monthly mortgage payments are lower by refinancing.

You could refinance collection by getting a mortgage for more than you owe, and then receiving a check for the difference. This can be used at closing. Czajka says that one option is to refinance the entire mortgage, and take out the equity required to pay off the debts. Be aware of closing costs. Closing costs can be higher than the amount of your debt.

How to Get a Home Equity Loan for Debt Consolidation

Here are some ways to get started if you’re convinced that a home equity loans is right for you.

  1. First, you need to know the estimated value of your house so you know how much equity.
  2. Take steps to improve credit scores and you will be able to get a better rate.
  3. Czajka said, “You can get a loan for home equity to consolidate your debts by applying to the bank that has your mortgage.” “This bank will likely be familiar with you and be able help you get through this home equity loan process quicker.”
  4. Before you apply, compare the rates, conditions, fees and offers with at least three lenders.
]]>
5 Ways to Cope When Your Cost of Living Rises https://www.jopsweb.org/2021/03/11/5-ways-to-cope-when-your-cost-of-living-rises/ Thu, 11 Mar 2021 08:11:22 +0000 https://www.jopsweb.org/2021/03/11/5-ways-to-cope-when-your-cost-of-living-rises/ It is normal for prices to gradually increase over time. But lately much of America has felt unable to keep up with the dramatic increase in the cost of everything from shelter to food and transportation to health care. Nearly half of people believe the number one threat to their financial future is the rapidly […]]]>


It is normal for prices to gradually increase over time. But lately much of America has felt unable to keep up with the dramatic increase in the cost of everything from shelter to food and transportation to health care.

Nearly half of people believe the number one threat to their financial future is the rapidly rising cost of living, according to a survey by TD Ameritrade.

So how do you cope when your cost of living goes up? Here are the best ways to make sure you don’t fall behind, no matter what your situation.

One Email a Day Could Save You Thousands

Expert tips and tricks delivered straight to your inbox that could help save you thousands of dollars. Register now for free access to our Personal Finance Boot Camp.

By submitting your email address, you consent to our sending you money advice as well as products and services which we believe may be of interest to you. You can unsubscribe anytime. Please read our Confidentiality declaration and terms and conditions.

1. Create a new budget

Your budget is the foundation on which you can build the rest of your financial life. When the cost of living goes up and your financial situation changes dramatically, budgeting can make your life easier.

If you don’t have a budget yet, there are as many budgeting methods as there are types of people, so pick one that best suits your situation. You can also use a budgeting app to automate the whole process.

If you already have a budget, you can enter and adjust the numbers to reflect your current cost of living. Also make sure your income is up to date so you know exactly how much is coming in and going out.

To really cut costs, manually go through the last few months of your bank statements, add up your monthly expenses, and categorize them. This process will let you know exactly where your money is going, which is essential for the next steps.

2. Reduce discretionary spending

As you go through your monthly expenses, you may come across a few surprises here and there. Maybe you spent more on food delivery than you thought. Or maybe you’ll wince at all the money you’ve spent on gas when you see how many trips you’ve taken to Target.

Start cutting back on some of your unnecessary spending. For example, you can cut take out and restaurant meals for a month. Planning ahead before you shop will help keep your total under control – grocery delivery apps like Instacart are great for this as they offer a free pickup option. Avoiding in-store purchases prevents you from picking up items you don’t need.

If you’ve already hit a minimum budget and can’t cut spending any longer, the next steps might help.

3. Cancel subscriptions and negotiate invoices

Subscriptions often sneak into your budget and hide there, eating up your money without you even realizing it. Try to identify all of your recurring payments, whether monthly, quarterly, or annually – services like TrueBill can help you do that. If you’re paying for more cable channels than you watch, consider switching your subscription to a new package. Or if it’s not something you use regularly, maybe it’s time to roll back.

Even if you don’t have a subscription, you might be paying unnecessary fees for things like your bank account or credit card – consider upgrading to a free checking account or a credit card with no annual fee. You can also negotiate recurring bills like insurance payments or lower services like your cell phone plan. If you have credit card debt, consider negotiating a lower APR or considering debt consolidation to lower your monthly payments.

4. Use your talents to increase your income

If you are unable to negotiate the raise you deserve at your job, it may be time to consider parallel work. Consider using a skill or interest that you have to earn some extra cash at the same time. Or consider developing a new skill that could help you increase your bankroll.

If you love to drive, download audiobooks and fill in the gaps in your schedule as a delivery or carpooling driver. Are you a domestic animal? Websites like Rover will put you in touch with pet sitting concerts in your area. For a long-term solution, look for positions in your industry or workplace that meet your compensation goals, then figure out how to get the skills and experience you need to land those jobs.

Don’t rely on government assistance, especially if you are on low income or if your pay or hours have been cut. It is worth seeing if you are eligible for SNAP benefits. You can also claim unemployment in your state.

5. Consider moving

If you’ve taken steps to manage your expenses and increase your income and your budget is still tight, it might be time to consider a move. While moving is never easy, and sometimes isn’t an option, there are plenty of places that offer a low cost of living coupled with relatively high average incomes for flexible people. These even include large cities like Austin, TX and Minneapolis, MN.

Whatever you have to do, taking steps to create space within your budget is always worth it. Whether you want to save money for an emergency fund, have a great vacation, or spend more time with your family, taking the stress out of trying to make ends meet lets you focus on more fulfilling goals.



Source link

]]>
Debt management company warns creditors to prepare for increased activity https://www.jopsweb.org/2021/03/11/debt-management-company-warns-creditors-to-prepare-for-increased-activity/ Thu, 11 Mar 2021 08:11:22 +0000 https://www.jopsweb.org/2021/03/11/debt-management-company-warns-creditors-to-prepare-for-increased-activity/ Debt management firm TDX Group has claimed that creditors should prepare for an expected increase in the activity of consumers suffering from financial problems as a result of Covid-19. Carlos Osorio, UK debt collection manager at Equifax TDX Group, said the suspension of various areas of debt collection and enforcement provided only a temporary solution. […]]]>


Debt management firm TDX Group has claimed that creditors should prepare for an expected increase in the activity of consumers suffering from financial problems as a result of Covid-19.

Carlos Osorio, UK debt collection manager at Equifax TDX Group, said the suspension of various areas of debt collection and enforcement provided only a temporary solution.

Without predicting an increase in the number of consumers needing help when collections continue, creditors will likely find it difficult to cope, Osorio added.

Read more: City watchdog urged to extend support to struggling households until 2021

Read more: Personal bankruptcies ‘forecast to rise rapidly’ in Q4 as payment interruptions end

“While the temporary halt in debt collection activities, in both the public and private sectors, has provided much needed respite, it does not solve the central problem of whether people will be able to pay when collections resume.” , Osorio said. .

“The box has been thrown on the road, and creditors need to predict the expected surge in business.

“The key question will be how to increase their staffing capacity quickly enough to prepare for the heavy workload of their collections teams.

“With offices and call centers requiring social distancing measures, the task of increasing staff and training becomes much more complicated and expensive. Upcoming issues include long wait times in the contact center and perhaps less efficient interaction with customers who need help.

“This will impact the quality of the collections business at a time when clients need quick and empathetic assistance.

“Creditors must build sufficient capacity and must not wait for collections to start to pick up, otherwise they may simply increase the pressure and stress on already financially vulnerable customers.”

Read more: Government urged to take action against late foreclosure payments



Source link

]]>