Engineering group Metalrax has completed on a sale and leaseback agreement on two properties to ease the firm’s debt problems.
The group, one of the Midlands’ best known industrial names, said it had reached an agreement worth £1.82 million with The Scottish American Investment Company relating to the properties.
It has sold Crossgate Road, on the Park Farm Industrial Area in Redditch, where Weston Body Hardware is based, and a site on Northfields Industrial Estate, in Peterborough, where Advanced Handling is headquartered.
The group said in a trading statement that it had agreed 15-year leases with yearly rent reviews on the properties.
After receiving £1.82 million on completion of the deal, the company will pay £207,000 per year in rent.
The reduction in interest costs associated with the debt repayment will be about £108,000, meaning that the net cash impact to the Ggroup of this transaction will be in the region of £100,000.
The properties being disposed of have a net book value of £1.97 million and this disposal will result in an asset impairment of £150,000, the group said.
Metalrax chief executive Andrew Richardson said the proceeds from this sale and leaseback transaction will be used to reduce the group’s borrowings.
He said: “Reducing debt has been a key focus for the management team throughout this year. The disposal of these properties enables significant debt reduction.
“This transaction, along with several recent non-core property sales, will result in debt repayments of over £2.9 million. Coupled with growth in profits announced in our interim results, these debt repayments demonstrate a continuing strengthening of the group.”
Redditch firm Weston Body Hardware, is a subsidiary which manufactures sub assemblies for the power generation, off-highway and green energy sectors Advanced Handling manufactures handling solutions.
Metalrax saw a slight dip in revenue in the first half of its financial year, which ended on July 4, from £31.4 million to £29.3 million.
The Kings Norton company revealed it had managed to reduce its net debt from £15 million to £12.7 million. That helped to bring its gearing down from 96.2 per cent in 2009 to £81.9 per cent.
The group successfully refinanced in October 2009, with up to £23.7 million of banking facilities which it said provides a good base for the continued implementation of its strategy.