Duke Royalty signs letter of intent for its fifth loan – Duke Royalty (DUKE) has signed a letter of intent with a US provider / publisher of legal information for US$ 3.5m.
Royalty financing
Royalty financing is an alternative to regular debt financing (loans and trade credit) and equity financing (venture capital and stock sales). Duke Royalty provides alternative financing to a diversified range of profitable, well-managed businesses. The company’s objective is to generate predictable, stable cash flows from the company partners to allow the Duke to provide an attractive, yet stable, yield as well as liquidity to shareholders.
The publishing company is referred to by Duke as “PartnerCo” in its announcement. PartnerCo’s publications include enforcement manuals, code books and field guides that highlight legislative changes and guidelines. Its mission is to help the law enforcement community be more efficient by providing them easy access to the latest laws, rules, and regulations and by equipping them with the tools to educate and train officers, management, the courts and the citizens.
The opportunity
The investment opportunity meets all of Duke’s stated criteria:
- Long-standing, profitable operating history
- Experienced senior management team with high equity ownership
- Initial cash-on-cash yield of more than 13% per annum via monthly payments immediately post investment
- 40 year secured financing – distributions to be adjusted annually to reflect PartnerCo’s revenue growth
This investment opportunity is well advanced but still subject to final due diligence and definitive documentation.
The letter of intent also includes the terms to scale up Duke’s investment up to US$7.0m. PartnerCo has additional acquisition targets which Duke has agreed to finance through subsequent tranches on the same terms, subject to PartnerCo maintaining Duke’s investment criteria post-acquisition.
Duke Royalty has taken a £3.5m secured loan
Duke has secured a loan of £3.5m from a non-related third party to cover the loan to the PartnerCo. The summary terms of this loan are:
- £3.5m secured loan with expiry date of 30 June 2019
- 9% per annum interest rate until 31 December 2018, rising to 12% per annum for the final six-month period ending June 30th 2019
- 2% drawdown fee
- Automatic repayment in the event of the closure of an equity issue of more than £3.5m and/or in the event that the £3.5m loan becomes greater than 20% of the NAV of Duke
DUKE : Duke Royalty signs letter of intent for its fifth loan