Saga secures new credit facilities ahead of insurance broking fall

New credit facilities provide flexibility for debt repayment and strategic investments

Saga secures new credit facilities ahead of insurance broking fall

Insurance News

By Kenneth Araullo

Saga plc has secured new credit facilities to refinance its corporate debt, enhancing liquidity and increasing covenant headroom as it expects a fall in insurance broking earnings ahead of its Ageas partnership.

The new facilities, agreed by Saga subsidiary Saga MidCo Limited with HPS Investment Partners, will fully refinance the group’s existing debt and provide additional financial flexibility. 

The refinancing includes a £335 million term loan facility to repay the £250 million Senior Unsecured Notes maturing in July 2026, the £75 million drawn under an £85 million loan facility with Saga chairman Roger De Haan, and to partially cover transaction costs.

A £100 million delayed-draw term loan facility, available for three years, has been structured to fund amortisation within Ocean Cruise ship debt facilities, mergers and acquisitions, and capital investments. Additionally, the group has secured a £50 million revolving credit facility. 

The term loan and delayed-draw facilities allow for early repayment flexibility and mature in January 2031. The initial margin is set at 675 basis points over SONIA, reducing as the group reduces leverage. The blended pro forma interest rate is expected to be approximately 7.6%, incorporating the fixed-rate Ocean Cruise ship debt facilities, which will remain on existing terms. 

Saga notes that the completion of the new facilities is subject to standard conditions, with closing expected by March 31, 2025. This includes the repurchase, repayment, and cancellation of the £250 million Senior Unsecured Notes, the £85 million loan facility with De Haan, and the £50 million revolving credit facility.

The refinancing follows Saga’s December 2024 announcement of a 20-year partnership with Ageas UK for motor and home insurance and the sale of its insurance underwriting business. 

Saga’s financial performance

Saga expects to report an underlying profit before tax for the 2024/25 financial year that is slightly higher than the previous year, exceeding earlier guidance. 

The cruise segment has continued its strong performance, with Ocean Cruise achieving a 91% load factor – three percentage points ahead of the prior year – and an 8% increase in per diem to £358. River Cruise also saw growth, with an 89% load factor and a 15% increase in per diem to £327.

The travel division anticipates reporting an underlying profit before tax in the high single-digit millions, compared to £1.5 million the previous year, supported by a 15% increase in revenue and a 9% rise in passenger numbers. 

In insurance broking, trends observed in the first half of the year continued, with both the number of policies in force and policy sales down approximately 15% year-on-year. As a result, underlying profit before tax in this segment will be significantly lower than in 2023/24.

Meanwhile, insurance underwriting is expected to report an underlying profit before tax in the high single-digit millions, with a net current year reported combined operating ratio just over 100%, an improvement from 117.1% in the previous year. 

Available cash at January 31, 2025 is expected to be between £60 million and £70 million, excluding the £50 million undrawn revolving credit facility and the £10 million undrawn portion of the facility provided by De Haan. Net debt at the same date is expected to be slightly lower than the £614.6 million reported at July 31, 2024. 

Saga group chief executive officer Mike Hazell (pictured above) said that the company has made operational and financial progress over the past year.

"As we look ahead, we expect the momentum to continue to build in our cruise and travel businesses. As previously outlined, we anticipate that insurance broking earnings will fall in the short-term, ahead of the start of the partnership with Ageas, but are pleased that work on the transition is on track to allow the new arrangement to go live Q4 2025,” Hazell said.

He reiterated the process remains on track for completion in late 2025. 

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