The Vocus Group Ltd (ASX: VOC) share price initially declined by 3% this morning but is currently up 0.7% after announcing that it is no longer considering selling Vocus New Zealand.
Vocus' Board concluded that it is in the best interests of shareholders for Vocus to retain its New Zealand business and has ceased discussions with interested parties.
The company said that it did receive multiple offers, but none of the offers was the right price for the company to accept it.
Vocus Chairman, Bob Mansfield, said "Vocus NZ is an excellent business with strong leadership, an attractive growth profile, a clear competitive position and a track record of delivering solid returns on capital. The Board intends to continue to invest in and grow Vocus NZ to enable that business to realise its strategic potential for shareholders."
The main reason Vocus was looking to sell its NZ business was to improve its balance sheet and avoid breaching its debt covenants. In the same ASX announcement Vocus said that its lending syndicate has consented to amending its covenants by extending the 'surge limit' relating to its net leverage ratio of 3.5x, it will reduce to 3x after 31 December 2018.
It is also in the process of arranging a full refinancing of its debt facilities. It's looking to extend the length of the debt, the size of the facility and the financial covenants. Vocus aims to have this completed this by the end of FY18.
Chairman Bob Mansfield said "The Board would like to thank our bank group for their strong support shown to date. We are comfortable that the increased financial capacity and covenants that will be sought through the refinancing will provide sufficient financial flexibility for the Company to complete its strategic and transformation initiatives over the next few years."
Foolish takeaway
It appears Vocus has managed to keep hold of one of its best businesses whilst also solving the debt problem, at least temporarily. If management can get the business back to growth this could hopefully be a turning point.
