Financier Dermot Desmond is set to receive €2.74 million in fees for agreeing to extend the term and increase the amount of bailout loans to Datalex, the Dublin-listed travel retail software group in which he is the main shareholder.
Details of the financing, facility extension and arrangement fees are contained in a circular issued by Datalex to investors this week, ahead of an extraordinary general meeting (egm) that takes place immediately after its annual general meeting on September 24th.
The company is seeking approval at the egm to extend the term of €11.3 million of loans secured last year from Mr Desmond’s Tireragh vehicle by 12 months to November 2021. It is also looking for the nod from shareholders to borrow up to an additional €10 million from Tireragh, repayable on the same date.
Both facilities carry a 10 per cent annual interest charge that rolls up until the loans mature.
The €2.74 million of fees equate to a further 12.6 per cent of the maximum that can be drawn down under the Tireragh facilities.
Datalex, the subject of an accounting scandal last year, revealed in June that Mr Desmond had agreed to extend the term of existing loans and provide the additional €10 million of funds, allowing the company’s directors to prepare 2019 accounts on a going-concern basis. The company plans to raise equity by late next year to fund the repayment of the Tireragh loans and make sure it has additional working capital.
Mr Desmond owns 29.9 per cent of Datalex.
The board of the company has concluded that “now is not the appropriate time to complete an equity fundraising”, the circular said. “The group continues to face financial challenges exacerbated by the adverse effect that the Covid-19 pandemic has had and continues to have on the aviation industry generally and which has caused significant dislocation in the equity capital markets.”
Datalex and its financial and legal advisers considered a “number of alternative funding options” to meet its short-term funding needs, including the taking of finance from other lenders, but concluded that these contained risks in the current environment, it said.
The company warned that the group’s ability to continue to trade could be placed in “significant doubt” if shareholders do not back the funding deal with Tireragh.
“The board is confident that the group will be in a position to meet its obligation to repay the outstanding amounts under the amended and restated facilities agreement when they fall due,” it said.
Datalex reported two weeks ago that its loss on an adjusted earnings before interest, tax and depreciation (ebitda) basis narrowed to $1.3 million (€1.1 million) for the first half from a shortfall of $1.5 million for the same period last year, even as revenue fell 42 per cent in the first half to $13.2 million.
The company forecasts that ebitda for the full year will come to between $750,000 and $1.5 million this year.*
“The assumptions include the completion of certain customer contract renewals in 2020 which have been requested by a customer airline,” it said. “Delays in completing these renewals may result in the associated revenues being deferred into 2021. Management is actively working with the airline customer to complete the renewal during 2020.”
* This article was amended on 9th September, 2020
