FIIG to place Dicker floating rate notes

Philip Bayley
IT distributor Dicker Data Ltd is diversifying its funding, announcing yesterday that it will move from its reliance on a debtor finance facility and undertake a A$40 million issue of floating rate notes.

Dicker Data is the largest and oldest Australian-owned distributor of information technology hardware. It listed on the Australian Securities Exchange in January 2011.

The company is growing fast. According to its annual report, revenues have increased from $285 million in fiscal 2010 to $662 million in the year ended 30 June, 2014. Operating profit increased from $6.5 million to $14.3 million, over the same period.

To date, the company has relied primarily on debtor financing to fund its business distributing products manufactured by Hewlett-Packard, Cisco, Toshiba, Samsung, ASUS, Lenovo and Microsoft.

At the end of fiscal 2014, the company had debtor finance outstandings of $99 million and a current purchase finance facility of $19 million, against shareholders' funds of just $20 million.

The debtor finance line is secured by fixed and floating charges over the assets of the company and its subsidiaries. The purchase finance facility is unsecured.

The company advised the ASX yesterday that it was moving to significantly bolster its balance sheet by undertaking a $40 million floating rate note issue, aimed at sophisticated investors. The unsecured FRNs will have a five-year term to maturity and will pay a quarterly coupon, determined by the 90-day bank bill rate plus a margin of 440 basis points.
 
The proceeds from the issue will be used to pay down some debt and for general corporate purposes.

Investors are being offered a negative pledge, covenants and there will restrictions on distributions. The latter, hopefully, will not be too much of a hardship on the chief executive and founder, and one non-executive director, who between them own 90 per cent of the company.
 
The FRN issue is being arranged by FIIG Securities and the FRNs are being offered in minimum parcels of $50,000.