Meridian Industrial Group Business Plan — Debt Service, Cover Ratios & Returns

Debt-service cover and credit metrics

Debt-service cover (DSCR) is computed as cash flow available for debt service, EBITDA less tax less maintenance capital expenditure, over the sum of interest and scheduled principal. It never falls below 2.07x, comfortably above a conventional 1.30x covenant floor.

	Year 1	Year 2	Year 3	Year 4	Year 5
EBITDA	338	672	1,120	1,740	2,610
Cash available for debt service	303	604	958	1,191	1,731
Interest	81	196	237	225	176
Scheduled principal	0	0	150	350	500
Total debt service	81	196	387	575	676
DSCR	3.77x	3.09x	2.47x	2.07x	2.56x
Interest cover (EBIT/interest)	2.60x	2.28x	3.52x	6.40x	12.97x
Net debt / EBITDA	0.35x	1.85x	1.45x	0.72x	0.24x
ROCE	5.1%	8.8%	14.7%	23.8%	33.3%

Figure 20. *Debt profile and debt-service cover ratio*

Figure 21. *Return on capital employed vs cost of debt*

Investment returns

On the base case, a 5.5x EV/EBITDA exit on Year-5 EBITDA of R2.61 billion, realised via a JSE listing or trade sale, the plan delivers an equity IRR of approximately 58.8% and a money multiple of 9.66x. The equity net present value at an 18% cost of equity is roughly R4,966 million. Against a self-funded organic counterfactual returning about 10.4%, the funded expansion is decisively value-accretive.

59%

Equity IRR (base)

9.7x

Money multiple

R13.7bn

Exit equity value

10%

Organic IRR

Figure 22. *Funded expansion vs organic counterfactual — five-year equity IRR*

Figure 23. *EBITDA and margin expansion driving terminal value*

Indicative transaction terms

The following indicative terms frame a possible structure for discussion; final terms are subject to negotiation, due diligence and credit approval.

Term	Indicative basis
Total raise	ZAR 3.8 billion
Senior debt	~R2.28bn, DFI-anchored, blended ~11.5%
Debt tenor	Grace on principal Y1–Y2; amortising Y3–Y5 with balloon
Security	First-ranking over plant, fleet, facilities and shares
Financial covenants	Min DSCR 1.30x; max net debt/EBITDA 3.0x
Equity	~R1.52bn (sponsor + DFI/institutional)
Dividend policy	30% of positive net profit
Exit pathway	JSE listing or trade sale, Year 5+
Reporting	Quarterly to listed-company standards

Sensitivity analysis

Because the base-case return is heavily dependent on the exit multiple, we stress it directly. The table and charts below show how the equity IRR responds to the exit multiple and to swings in the principal value drivers.

Exit EV/EBITDA	4.0x	4.5x	5.0x	5.5x	6.0x	6.5x
Equity IRR	49%	53%	56%	59%	61%	64%

Figure 24. *Equity IRR sensitivity to the exit multiple*

Figure 25. *Equity IRR sensitivity to key value drivers (tornado)*

Analyst flagRead the returns with the exit assumption front of mind

Even at a conservative 4.0x exit the equity IRR remains attractive, but the terminal value dominates investor proceeds across the range. Prospective investors should treat the exit multiple, and the liquidity pathway that supports it, as the central variable in their own underwriting, and weight the recurring-revenue technology division accordingly, since it is the element most likely to lift the blended multiple.

Scenario analysis

Beyond single-variable sensitivities, the table below frames three integrated scenarios. The downside combines slower revenue, a compressed margin and a lower exit multiple; the upside combines faster execution, fuller synergy capture and a re-rating toward a listed-industrial multiple. Debt-service cover is reported at its minimum across the projection to test resilience.

Metric	Downside	Base case	Upside
Year-5 revenue	~R10.5bn	R12.4bn	~R13.8bn
Year-5 EBITDA margin	~18%	21.0%	~23%
Exit EV/EBITDA	4.0x	5.5x	6.5x
Equity IRR	~42%	~59%	~68%
Minimum DSCR	~1.7x	2.07x	~2.3x
Peak net debt / EBITDA	~2.3x	1.85x	~1.6x

The critical observation is that even the downside scenario keeps debt-service cover above a conventional 1.30x covenant and delivers an equity IRR comfortably in excess of the 18% cost of equity. The plan’s resilience derives from its conservative gearing and tangible asset base: the downside erodes equity upside but does not threaten debt serviceability. This asymmetry, bounded downside for lenders, geared upside for equity, is the essence of a bankable industrial transaction.

Financing process & next steps

The Group is seeking to engage prospective senior lenders and equity partners in parallel. The indicative process below moves from initial engagement to financial close over a disciplined timeframe, with due diligence and credit approval running concurrently across the debt and equity tracks.

Stage	Activity	Indicative timing
1	Initial engagement & information sharing	Weeks 0–4
2	Management presentations & site visits	Weeks 4–8
3	Commercial, financial, legal & technical diligence	Weeks 6–16
4	Term sheets & credit approval	Weeks 12–20
5	Documentation & conditions precedent	Weeks 18–26
6	Financial close & first drawdown	Week 26+

NoteWhat the Group brings to diligence

A single-source financial model with a tying balance sheet, a component capital and depreciation schedule, a candid risk register and a transparent reconciliation between sponsor and re-derived earnings. The intent is to shorten diligence by disclosing the difficult items up front rather than leaving them to be discovered.