Sage looks to placement in the States to raise $400m

The FTSE 100 group, which provides business management software to small and medium-sized companies, is headquartered in Newcastle–upon-Tyne, with offices in Manchester and Winnersh, and training centres across the UK, including Leeds.

HSBC and JP Morgan, acted as joint lead placement agents on the private placement. HSBC said the deal saw “close collaboration” between HSBC’s Yorkshire and North East corporate banking centre and debt capital markets division.

Stuart Warriner, corporate finance partner at PwC in Leeds, told the Yorkshire Post the professional services firm is increasingly seeing borrowers tap alternative funding sources such as the US private placement market.

He explained: “For certain borrowers, this shift from reliance on the traditional bank loan market to a more diverse range of funding options enhances their ability to negotiate the most attractive terms.”

HSBC said that this represented Sage’s longest dated US private placement to date, “reflecting the credit quality of the company and continued strength of the US private placement market”.

Martin Lunt, HSBC’s regional head of corporate banking in Yorkshire and the North East, said: “We are pleased to have worked with Sage on this US private placement where low fixed cost of funding has been achieved with debt maturity profiles currently not typically available in the banking market.

“This private placement was heavily oversubscribed and to achieve debt maturity profiles of up to 12 years is testimony to the belief in this company and its management team.”

Sage last month posted a six per cent year-on-year rise in first-half adjusted pre-tax profit, meeting market expectations, as more of its small business customers subscribed to its accountancy packages.

The company, which provides software to more than six million small businesses, posted underlying pre-tax profit of £184.9m for the six months to the end of March. Underlying revenue rose three per cent year-on-year to £626.3m.

Sage said recurring revenue, such as for support contracts and software delivered as a service, rose six per cent, offsetting a three per cent fall in sales of off-the-shelf software packages.

It said subscriptions for Sage One, its entry-level software for start-up and small businesses available as an internet cloud service, had reached 11,500, a fourfold increase in the last 12 months.

The company continued to return cash to shareholders, with a £200m special dividend, equivalent to about 17p a share, on top of the interim payout of 3.69p a share.

Separately, finance director Paul Harrison, who lost out to Guy Berruyer for the chief executive’s role in 2010, said last month he was leaving to become finance director at the Sheffield and Silicon Valley-based software company WANdisco.

On the private placement announced yesterday, John Swift, group treasurer for Sage, said: “This transaction was a great success, with the group locking in further core funding to underpin its long-term gearing ratio of a minimum of 1x net debt/Ebitda. The fixed interest rates achieved, ranging from 2.60 per cent to 3.86 per cent for maturities between five and 12 years, give the group a greater certainty of cost of funding at relatively low rates.”

HSBC’s corporate banking team in the North East was led by senior global relationship manager Peter Helliwell, with Rob Lamb leading on behalf of HSBC’s debt capital markets team.

Formed in 1981 in the North East of England, Sage was floated on the London Stock Exchange in 1989. Sage has more than 13,380 employees globally.

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