Applegreen financial plan approved for NY State Thruway lease
Petrol forecourt operator Applegreen updated the market on the conditional lease signed by Empire State Thruway Partners with the New York State Thruway Authority (NYSTA) on Wednesday.
The AIM-traded firm first announced the lease on 8 September.
It said it had submitted its financial plan, which had been approved by NYSTA, with the final agreement also now approved by the New York State Office of the State Comptroller and by the New York State Attorney General.
Following detailed discussions with all stakeholders, Applegreen said the structure of the consortium had been amended, with Applegreen now to continue as the sole investor and consortium lead.
NYSTA also approved the continuation of Applegreen as the consortium lead, however Applegreen said it retained the ability to add another party to the consortium after financial close, subject to the approval of NYSTA, and would explore all options to ensure a sustainable long-term structure for the project.
The transaction would involve the acquisition of an initial 100% equity stake in a consortium that had signed a 33-year lease for the design, construction, financing, operation and maintenance of the New York Service Areas, which comprise 27 service area sites located on the New York State Thruway.
Applegreen said the estimated cost of redevelopment of the service areas was $301m, which would be funded by a combination of equity by Applegreen and a private activity bond, with the final split between equity contribution and the bond proceeds to be finalised before financial close.
It expected the equity to be funded from debt resources, which was not expected to be drawn down until between 2023 and 2025.
Total food, beverage and retail turnover for 2019 was approximately $118m, Applegreen noted.
It said that following financial close, which was expected in the first quarter, Empire State Thruway Partners would start food and retail operations on six of the sites, with redevelopment work to begin on 10 of the sites, which was expected to last between eight and fifteen months.
As the redeveloped sites come on stream, redevelopment work would start on the remaining sites, with redevelopment expected to be completed by mid-2025.
Completion of the transaction remained subject to financing.
“The food and retail operations will be consolidated within Applegreen's financial results,” the board explained in its statement.
“If Empire State Thruway Partners remains 100% owned by Applegreen, it will also be consolidated within Applegreen's financial results, however, if Applegreen adds another party to the consortium, it could result in Applegreen becoming a minority stakeholder in ESTP, in which case it will represent a minority investment under IFRS, and the group will utilise equity accounting treatment for the inclusion of the acquired entities financial results.”
Applegreen said equity accounting treatment would take its share of the profit after tax for the acquired operations for inclusion in its EBITDA.
“The transaction is currently expected to be dilutive to earnings in the company's years ending 31 December 2021 and 2022, due to the additional debt service costs incurred.
“However, management expects it to be accretive from 2023 onwards once the redeveloped sites become operational.”
At 1008 GMT, shares in applegreen were up 0.47% at 504.88p.