Global pathways and language provider, Study Group, recently raised £205 million through its first ever bond issuance. In September, European institutional investors were offered senior secured notes (a secure form of bond) due in 2018 with an 8.875% interest.
The company says it will use the majority of the proceeds to refinance debt it accumulated from bank loans during its acquisition by Providence Equity Partners for AUD$660 million in 2010. After seeing profits fall two years in a row due to poor performance in Australia and the US, the company expects both markets to finish 2013 showing positive growth.
CEO David Leigh told The PIE News the company’s timing with the issuance was in line to take advantage of a promising bond market.
“We didn’t need to go to the market but we just wanted to take the opportunity of a good debt market,” he said.
“But having not done a first issue before, we didn’t know for sure how they would perceive the business model, but the success of the issue tells us that it went well and the bonds have continued to trade well since they were issued.”
Further proceeds will be distributed to shareholders and used to pay transaction fees. “It gives us a very sound capital structure to continue to build the business and in particularly a mechanism that we could use in the future to raise additional funds, if we had capital requirements or wished to make acquisitions,” added Leigh.
Study Group’s portfolio spans pathway programmes, career education and Embassy English language schools in the UK, US, Canada and Australia.
“The career education business in Australia is going nicely this year”
It attributed last year’s £33.6 million pre-tax loss mainly to challenges in Australia’s visa system. Leigh said however that recent changes to visa policy in the country have been “filtered out to the market so we’ve seen good growth in recent months”.
“The career education business in Australia is going nicely this year but the language education business is the one that has been harder to grow,” he said. “This year give or take it will be flat on last year.”
North American pathway partnerships, the group’s youngest venture, also showed weakness last year. Leigh is optimistic that growth will come despite absolute numbers not reflecting it initially.
“There are over 4,000 HE institutions in the US, from what we can make out, less than 20 have actually brought in a partner like Study Group to provide a pathway programme,” he said.
“So the opportunity to: A, bring more students in, and B, find more university partners who are keen to provide a more culturally diverse environment for their domestic students we think is significant.”
Despite media speculation about Study Group’s interest in acquisitions (such as CEG), Leigh says there is nothing definite on the table. “We’re keen to look at acquisitions only if the business will significantly help us to grow. That would be my one and only test,” he commented.
