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First Artist Corporation – Borrowings Refinanced:  Buy at 30.5p with a target price of 65p

First Artist has today announced that as a result of recent fundraisings it has been able to renegotiate the terms of its £14.8 million loan facility with Allied Irish Bank, slashing the interest paid from 10% over LIBOR to 3.5% over LIBOR for the first 12 months and to 4% over LIBOR thereafter. It has also admitted that it is in technical breach of its Articles of Association in terms of its total borrowings to its capital and reserves ratio and is seeking to hold an EGM to amend the Articles to solve that issue.

The administrative oversight is a legacy of the previous management team and will be rectified quickly. The refinancing of its borrowings was expected and will serve to reduce interest costs by almost £1 million on an annualised basis. As such we are not amending our forecasts at this stage although we understand that First is trading strongly and see risks to the upside on current numbers. But the fact that the Barbera/Stoller management team has delivered on this key issue will be seen as positive.

Investors will now be keen to hear news on the disposal of the last non-core activity (the footbal agent business) even for a nominal sum and on how Barbera/Stoller have moved to slash the bloated central costs First suffered under its previous management. Delivery on these two matters will, we believe, drive a further re-rating of the shares and we expect news soon.

We re-iterate our Buy recommendation with a target price of 65p but the delivery of operational milestones such as the refinancing of debt gives us increased confidence in that target which values the company on a 2012 EV/EBITDA multiple of 11x.

Financial Records & Forecasts

*15 Months ~from continuing operations
# pre-exceptional items
**net of deferred consideration