JOHANNESBURG, June 5, 2012 /PRNewswire/ --
Earn-A-Car Inc. (OTC:BB - ticker symbol EACR), ("Company"), announced today that it has completed, through its wholly owned South African subsidiary, a ZAR25 Million (approximately US$3million) 3 year reducing balance capital market raise in the South African bond market.
The Company intends to use up to ZAR10 Million to repay existing revolving debt facilities, the majority of which is owed to Avis for vehicle purchases. The balance of ZAR15 Million (approximately US$1.8million) will be used to purchase just over 200 vehicles over the next four months. These will be added to the Company's current fleet of over 450 cars bringing the fleet size to well over 650 cars.
The AVIS debt repayment of approximately R6.5m (approximately US$780k) will allow this newly increased total revolving facility of R13m (available on an as and when basis) as announced on May 10, 2012, to again be used at a later date. This should allow for a further 200 cars to be purchased once the capital market loan is fully utilized.
John Storey, CEO and President of the Company, noted: "We are pleased to have completed this capital raise on terms that are commercially competitive and which will allow us to consolidate our debt currently reflected on our balance sheet. The debt was fully subscribed for, proving the businesses' ability to raise appropriately priced debt finance. This funding will allow the company to be adding some 200 vehicles to the current fleet and free up our revolving facilities for future use. Once the money is fully invested, which we anticipate happening over the next four months, revenue for the current fiscal year should improve by roughly ZAR900,000 per month, or approximately US$110, 000 per month. We anticipate our internal ROI to remain constant at around 50% pre-tax.
Further, as soon as the new capital raised is fully invested we intend to utilize the AVIS revolving credit line so as to continue to add to our fleet. This should allow for the purchase of a further 200 vehicles in due course and provide another opportunity to refinance. Should we be able to invest both the capital raise and the AVIS revolving facility this financial year, our fleet size should almost double by year end.
While the Company's management is always aware of the potential to over-leverage, our business model lends itself naturally to financial leverage by virtue of our operating margins. In any event, the Board has decided to constrain senior debt to a prudent 60% of total assets and will ensure that senior debt interest will not exceed 40% of EBIT.
Although there are no guarantees, management is confident that the Company can access even more significant financing on an ongoing basis, in order to fuel the growth of our Company which is entirely driven by customer demand. It is our intention to continue to rapidly and substantially increase the size of our fleet and our revenue stream, to fulfill the demand for our cars by individuals who are unable to meet South Africa's stringent credit requirements for traditional car finance. We remain positive that going forward, we can both meet and significantly improve the quantum of profit the Company already generates."
About Earn-A-Car Inc.
Earn-A-Car Inc., ("EAC") is the parent company of Earn-A-Car (Pty) Ltd., a South African company wholly-owned by EAC, which provides mid to low-range automobiles to individuals in South Africa with poor credit on a "rent-to-own" basis. EAC's business model is structured to take advantage of the gap that exists in the southern African market, where cars for personal and business use are in high demand as a result of a lack of public transport infrastructure, but where traditional bank financing is not an available option for people with low credit ratings. All EAC's vehicles are all fitted with the latest in anti-theft technology, as well as tracking and disabling devices which allow for its vehicles to be retrieved immediately in the event of theft, or non-payment by the customer. In EAC's recent 8K SEC Filings, EAC reported it had generated net post-tax income of approx. US$400,000 for their fiscal year ending February 2011, an improvement of 50% year-on-year, on gross sales of US$2,138,000.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks, uncertainties and assumptions that, if they never materialize or if they prove incorrect, could cause the Company's results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenue, or other financial items, any statements of the plans, strategies, and objectives of management for future operations, any statements concerning proposed new products, services or developments, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing. These statements are based on expectations as of the date of this press release. Actual results may differ materially from those projected because of a number of risks and uncertainties, including those detailed from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company assumes no obligations and does not intend to update these forward-looking statements.
Earn-A-Car Inc. is a US public company (OTC:BB - ticker symbol EACR).
For more information about Earn-A-Car (PTY) Ltd., please contact:
Mr. John Storey / Mr. Bruce Dunnington
Tel: +27 (0) 11 880 0973
Fax: +27 (0) 86 550 5919
SOURCE EARN-A-CAR INC.