Vocus Group Ltd will not sell Vocus NZ, changes debt covenants

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.

However, Vocus is still far too risky for me to consider an investment, that’s why I’d much rather invest in these top shares.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Vocus Communications Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now