Roadside assistance and insurance firm AA (AA.) topped the FTSE All-Share leader board in early trade on Wednesday after revealing plans to buyback or issue a tender offer for its outstanding bonds. The decision, said the company, comes following continued positive operational performance in the current financial year to 31 January 2020.
AA stock jumped 15% on the news, hitting 50p per share.
Today’s statement said that the company ‘expects trading EBITDA and free cash flow for the full year to be in line with market expectations.’
EBITDA stands for earnings before interest, tax, depreciation and amortisation and analysts currently anticipate approximately £347m this year, with free cash flow of more than £110m.
EASING THE DEBT BURDEN
In light of the ongoing positive performance the AA said it would use some of the cash generated to buyback and tender for outstanding bonds in the market. The company also intended to pursue a range of debt tenders, redemptions and issuances over the coming months.
The £308m company is expected to have close on £2.68bn of net debt on its books come the year end in January, a huge concern for investors. This helps explain why the share price has performed dismally this year, losing a third of its value.
The stock peaked at 419p back in 2015.
