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OFFERING MEMORANDUM CONFIDENTIAL
US$165,000,000
Nord Anglia Education (UK) Holdings plc10.25% Senior Secured
Notes due 2017
Nord Anglia Education (UK) Holdings plc, a public limited
company organised under the laws of England and Wales (the
“Issuer”), is offeringUS$165,000,000 aggregate principal amount of
its 10.25% Senior Secured Notes due 2017 (the “Additional Notes”,
and such offering, the “Offering”).
The Additional Notes offered hereby will be issued under the
indenture, dated as at 28 March 2012 (the “Indenture”), pursuant to
which theIssuer issued US$325,000,000 aggregate principal amount of
10.25% Senior Secured Notes due 2017 (the “Original Notes” and
together with theAdditional Notes, the “Notes”). The Additional
Notes will be issued on the same terms and conditions (other than
the issue date), and as the sameseries as, the Original Notes and
will vote on any matter submitted to noteholders with holders of
the Original Notes. The Additional Notes will shareCUSIP numbers,
ISIN numbers and Common Codes and be fungible with the Original
Notes.
The Notes bear interest at the rate of 10.25% per annum.
Interest on the Notes is payable on 1 April and 1 October of each
year. The Noteswill mature on 1 April 2017. Prior to 1 April 2015,
the Issuer may redeem up to 35% of the aggregate principal amount
of the Notes, subject to certainconditions, at a redemption price
of 110.25% of their principal amount, plus accrued and unpaid
interest and additional amounts, if any, with the netproceeds from
certain equity offerings. The Issuer may at its option redeem the
Notes, in whole or in part, prior to 1 April 2015, at a redemption
priceequal to 100% of the principal amount of the Notes, plus
accrued and unpaid interest and additional amounts, if any, to the
redemption date and theApplicable Redemption Premium (as defined
herein). The Issuer may at its option redeem the Notes, in whole or
in part, on or after 1 April 2015, atthe redemption prices set
forth herein, plus accrued and unpaid interest and additional
amounts, if any, to the redemption date. Additionally, theIssuer
may redeem all, but not less than all, of the Notes upon the
occurrence of certain changes in applicable tax laws. For a more
detaileddescription of the redemption of the Notes, see
“Description of the Notes—Optional Redemption”. Upon the occurrence
of a Change of Control (asdefined herein), the Issuer must make an
offer to repurchase all Notes outstanding at a purchase price equal
to 101% of their principal amount, plusaccrued and unpaid interest
and additional amounts, if any, to the redemption date.
The Notes are senior obligations of the Issuer that are
guaranteed by Nord Anglia Education Limited (UK) and certain of its
Subsidiaries(such Subsidiaries guaranteeing the Notes are referred
to as the “Guarantors” and the guarantees of such Guarantors are
referred to herein as the“Guarantees”). None of the Restricted
Subsidiaries organised under the laws of the PRC will guarantee the
Notes. The Notes and the Guarantees aresecured on a first-ranking
basis (together with the Issuer’s and the Guarantors’ obligations
under the Senior Secured Revolving Credit Facility (asdefined
herein)) by share pledges and other security interests as more
specifically described under “Description of the
Notes—Security”.
The Notes (1) rank equally in right of payment with all of the
Issuer’s existing and future debt that is not subordinated in right
of payment tothe Notes (subject to any priority rights of such debt
pursuant to applicable law), (2) rank senior in right of payment to
any existing and future debt ofthe Issuer expressly subordinated in
right of payment to the Notes, (3) are structurally subordinated to
all existing and future debt of Subsidiaries (asdefined herein) of
the Issuer that do not provide Guarantees (collectively, the
“Non-Guarantor Subsidiaries”) and (4) are effectively subordinated
tothe Issuer’s existing and future secured debt that is secured by
assets that do not secure the Notes, to the extent of the value of
the assets securingsuch debt. However, applicable laws may limit
the enforceability of the Guarantees and the pledge of any
collateral. See “Limitations on Validity andEnforceability of the
Guarantees and Security Interests and Certain Insolvency Law
Considerations”. The Collateral (as defined herein) pledged forthe
benefit of the holders of the Notes may be shared with certain
other creditors of the Issuer. Pursuant to the terms of the
Intercreditor Agreement(as defined herein), obligations under the
Senior Secured Revolving Credit Facility and certain hedging
obligations that we may enter into will receivepriority with
respect to any proceeds received upon any enforcement action over
any Collateral. See “Description of the Notes—Security” and
“RiskFactors—Risks Relating to the Guarantees and the
Collateral”.
For a more detailed description of the Notes, see “Description
of the Notes” beginning on page 164.
Investment in the Additional Notes involves risks. See “Risk
Factors” beginning on page 40 of this offering memorandum for a
discussion ofcertain risks that you should consider in connection
with an investment in the Additional Notes.
Offering Price: 106.5% plus accrued interest from 1 April 2013
to, but not including, the issue date of the Additional Notes.
Approval in principle has been received for the listing and
quotation of the Additional Notes on the Official List of the
Singapore ExchangeSecurities Trading Limited (the “SGX-ST”). The
SGX-ST assumes no responsibility for the correctness of any of the
statements made or opinionsexpressed or information contained in
this offering memorandum. Admission of the Additional Notes to and
quotation of the Additional Notes on theOfficial List of the SGX-ST
are not to be taken as an indication of the merits of the offering,
the Issuer, the Guarantors, their respective subsidiariesor
associated companies (if any), the Guarantees or the Additional
Notes.
The Notes and the Guarantees have not been and will not be
registered under the United States Securities Act of 1933, as
amended (the“Securities Act”) or other securities laws and may not
be offered or sold within the United States, except pursuant to an
exemption from, or in atransaction not subject to, the registration
requirements of the Securities Act. Accordingly, the Additional
Notes are being offered and sold by theInitial Purchasers only (1)
to qualified institutional buyers in reliance on the exemption from
the registration requirements of the Securities Actprovided by Rule
144A under the Securities Act and (2) outside the United States in
compliance with Regulation S under the Securities Act. For
adescription of certain restrictions on resale or transfer, see
“Transfer Restrictions” beginning on page 254.
The Additional Notes will be issued only in registered form in
minimum denominations of US$200,000 and integral multiples of
US$1,000 inexcess thereof. It is expected that delivery of the
Additional Notes will be made through the facilities of The
Depository Trust Company (“DTC”) forthe accounts of its
participants, including Euroclear Bank S.A./N.V (“Euroclear”) and
Clearstream Banking, société anonyme (“Clearstream”), on orabout 3
July 2013 in New York, New York against payment therefor in
immediately available funds, being the fourth business day
following the dateof the pricing of the Additional Notes
(“T+4”).
The Notes have been rated B by S&P and B3 by Moody’s. The
ratings do not constitute a recommendation to purchase, hold or
sell theNotes. There can be no assurance that the ratings will
remain in effect for any given period or that the ratings will not
be revised by such ratingagencies in the future if in their
judgement circumstances so warrant.
Joint Bookrunners and Lead Managers
Goldman, Sachs & Co. Credit Suisse HSBC
The date of this offering memorandum is 27 June 2013
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TABLE OF CONTENTS
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 72
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 73
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 80
INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
CORPORATE STRUCTURE . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 105
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
108
REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 148
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . .
. . . . . . . . . 149
DESCRIPTION OF OTHER MATERIAL INDEBTEDNESS AND CERTAIN
FINANCINGARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 164
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
238
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 246
TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 254
LIMITATIONS ON VALIDITY AND ENFORCEABILITY OF THE GUARANTEES
ANDSECURITY INTERESTS AND CERTAIN INSOLVENCY LAW CONSIDERATIONS . .
. . . 257
RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
264
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 264
This offering memorandum does not constitute an offer to sell or
a solicitation of anoffer to buy in any jurisdiction to any person
to whom it is unlawful to make such an offeror solicitation in such
jurisdiction. Neither the delivery of this offering memorandum
norany sale made hereunder shall, under any circumstances, create
any implication that therehas been no change in the Issuer’s or
WCL’s affairs since the date of this offeringmemorandum or that the
information contained in this offering memorandum is correct asat
any time after that date.
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IN CONNECTION WITH THIS OFFERING, TO THE EXTENT PERMITTED
BYAPPLICABLE LAWS AND REGULATIONS, THE INITIAL PURCHASERS OR
THEIRAFFILIATES OR ANY PERSON ACTING ON THEIR BEHALF MAY, FOR A
LIMITED PERIODAFTER THE ISSUE DATE, OVER-ALLOT THE NOTES OR EFFECT
TRANSACTIONS WITH AVIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES
AT A LEVEL HIGHER THANTHAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER,
NEITHER THE INITIALPURCHASERS NOR ANY PERSON ACTING ON THEIR BEHALF
IS OBLIGATED TOUNDERTAKE SUCH STABILISING ACTIONS. SUCH ACTIVITIES
WILL BE UNDERTAKENSOLELY FOR THE ACCOUNT OF THE INITIAL PURCHASERS
AND NOT FOR OR ONBEHALF OF THE ISSUER.
The information appearing in this offering memorandum is
accurate only as at the date onthe front cover of this offering
memorandum or otherwise as at any date to which specificreference
is made in connection with such information. Our business,
financial results, financialcondition, cash flows and results of
operations may have changed since that date.
This offering memorandum is highly confidential. The Issuer is
providing it solely for thepurpose of enabling you to consider a
purchase of the Additional Notes and for the listing of
theAdditional Notes on the SGX-ST. You should read this offering
memorandum before making adecision whether to purchase the
Additional Notes. You must not use this offering memorandumfor any
other purpose or disclose any information in this offering
memorandum to any otherperson.
The Issuer has prepared this offering memorandum and provided
the information containedherein, except for such information as is
identified herein as having been derived from othersources. The
Issuer is solely responsible for the contents of this offering
memorandum. You areresponsible for making your own examination of
our business and your own assessment of themerits and risks of
investing in the Additional Notes. By purchasing the Additional
Notes, you willbe deemed to have acknowledged that you have made
certain acknowledgements,representations and agreements as set
forth under the section headed “Transfer Restrictions”.
No representation or warranty, express or implied, is made by
the Initial Purchasers, theTrustee or the Principal Paying Agent
and Transfer Agent and Registrar (together, “Agents”) as tothe
accuracy or completeness of the information set forth herein, and
nothing contained in thisoffering memorandum is, or shall be relied
upon as, a promise or representation, whether as tothe past or the
future.
Each person receiving this offering memorandum acknowledges
that: (i) such person hasbeen afforded an opportunity to request
from the Issuer and the Group (as defined herein) and toreview, and
has received, all additional information considered by such person
to be necessaryto verify the accuracy of, or to supplement, the
information contained herein; (ii) such person hasnot relied on any
of the Initial Purchasers or any person affiliated with any of the
InitialPurchasers, Trustee or any Agent in connection with any
investigation of the accuracy of suchinformation or its investment
decision; and (iii) no person has been authorised to give
anyinformation or to make any representation concerning the Issuer,
the Group and their respectivesubsidiaries and affiliates or the
Additional Notes (other than as contained herein and
informationgiven by our duly authorised officers and employees in
connection with investors’ examination ofour company and the terms
of the offering) and, if given or made, any such other information
orrepresentation should not be relied upon as having been
authorised by the Issuer or the InitialPurchasers, Trustee or any
Agent.
THE NOTES AND THE GUARANTEES HAVE NOT BEEN APPROVED OR
DISAPPROVEDBY THE U.S. SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIESCOMMISSION IN THE UNITED STATES OR ANY OTHER U.S.
REGULATORY AUTHORITY,NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON OR ENDORSED THEMERITS OF THE OFFERING OR THE ACCURACY
OR ADEQUACY OF THIS OFFERINGMEMORANDUM. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE INTHE UNITED STATES.
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Prospective purchasers are hereby notified that sellers of the
Additional Notes maybe relying on the exemption from the provisions
of Section 5 of the Securities Actprovided by Rule 144A. Neither
the Issuer nor any of the Initial Purchasers is making an offerto
sell the Additional Notes in any jurisdiction except where such an
offer or sale is permitted.The distribution of this offering
memorandum and the offering itself may in certain jurisdictions
berestricted by law. Persons into whose possession this offering
memorandum comes are requiredby the Issuer and the Initial
Purchasers to inform themselves about and to observe any
suchrestrictions. For a description of the restrictions on offers,
sales and resales of the AdditionalNotes and distribution of this
offering memorandum, see the sections headed “TransferRestrictions”
and “Plan of Distribution”. This offering memorandum summarises
certain materialdocuments and other information, and the Issuer
refers you to these for a more completeunderstanding of the
contents of this offering memorandum. In making an investment
decision,you must rely on your own examination of our business and
the terms of the offering, includingthe merits and risks involved.
The Issuer is not making any representation to you regarding
thelegality of an investment in the Additional Notes under any
legal, investment or similar laws orregulations. You should not
consider any information in this offering memorandum to be
legal,business or tax advice. You should consult your own attorney,
business advisor and tax advisorfor legal, business and tax advice
regarding an investment in the Additional Notes.
The Issuer reserves the right to withdraw the offering at any
time, and the Initial Purchasersreserve the right to reject any
commitment to subscribe for the Additional Notes in whole or inpart
and to allot to any prospective purchaser less than the full amount
of the Additional Notessought by such purchaser. The Initial
Purchasers and certain related entities may acquire fortheir own
account a portion of the Additional Notes.
This offering memorandum contains statistical and financial data
from industry publicationsand other third party sources. Although
the Issuer believes the information to be correct, it hasnot
independently verified such data, and therefore it cannot assure
you that such data arecomplete or reliable. Such data may also be
produced on different bases in different countries.Therefore,
discussions of matters relating to China, the Middle East, South
East Asia, Europe,the United States or other regions and markets
within which the Group or its subsidiariesoperate, their respective
economies and the relevant industries in this offering memorandum
aresubject to the caveat that the statistical and other data upon
which such discussions are basedmay be incomplete or
unreliable.
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION
FOR ALICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW
HAMPSHIRE REVISEDSTATUTES ANNOTATED 1955, AS AMENDED, WITH THE
STATE OF NEW HAMPSHIRE NORTHE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSEDIN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OFSTATE OF NEW HAMPSHIRE
THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE,COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT, NOR THE FACT THAT ANEXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION,MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITSOR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY
PERSON,SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE
TO BE MADE, TOANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATIONINCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
NOTICE TO US INVESTORS
EACH PURCHASER OF THE ADDITIONAL NOTES WILL BE DEEMED TO HAVE
MADETHE REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS DESCRIBED
IN THISOFFERING MEMORANDUM UNDER “TRANSFER RESTRICTIONS”. THE
ADDITIONALNOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
AND MAY NOT BEOFFERED OR SOLD IN THE UNITED STATES UNLESS THE NOTES
ARE REGISTEREDUNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE. SEE
“PLAN OF DISTRIBUTION”AND “TRANSFER RESTRICTIONS”. INVESTORS SHOULD
BE AWARE THAT THEY MAY BEREQUIRED TO BEAR THE FINANCIAL RISKS OF
ANY INVESTMENT IN THE ADDITIONALNOTES FOR AN INDEFINITE PERIOD OF
TIME. PROSPECTIVE PURCHASERS ARE HEREBYNOTIFIED THAT THE SELLER OF
ANY SECURITY MAY BE RELYING ON THE EXEMPTIONFROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE144A. THE
ADDITIONAL NOTES MAY NOT BE OFFERED TO THE PUBLIC WITHIN
ANYJURISDICTION, BY ACCEPTING DELIVERY OF THIS OFFERING MEMORANDUM,
YOUAGREE NOT TO OFFER, SELL, RESELL, TRANSFER OR DELIVER, DIRECTLY
ORINDIRECTLY, ANY ADDITIONAL NOTE TO THE PUBLIC.
THIS OFFERING MEMORANDUM CONTAINS IMPORTANT INFORMATION THAT
YOUSHOULD READ BEFORE MAKING ANY DECISION WITH RESPECT TO AN
INVESTMENT INTHE ADDITIONAL NOTES.
NOTICE TO CAYMAN ISLANDS INVESTORS
NO OFFER OR INVITATION TO SUBSCRIBE FOR THE ADDITIONAL NOTES MAY
BEMADE TO THE PUBLIC IN THE CAYMAN ISLANDS.
CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION
This offering memorandum has been prepared using a number of
conventions, which youshould consider when reading the information
contained herein. The term “Issuer” refers to NordAnglia Education
(UK) Holdings plc and the terms “we”, “us”, “our”, the “Company”,
the “Group”,“Nord Anglia Education”, and words of similar import
refer to the Issuer and its consolidatedsubsidiaries, excluding WCL
Group Limited and its subsidiaries (“WCL Group” or “WCL”), whichwe
acquired on 22 May 2013, unless otherwise specified or the context
requires otherwise. Allreferences in this offering memorandum to
the “Initial Purchasers” refer to Goldman, Sachs &Co., Credit
Suisse Securities (Europe) Limited and HSBC Securities (USA)
Inc.
“PRC” and “China” refer to the People’s Republic of China
excluding the Hong Kong SpecialAdministrative Region, the Macau
Special Administrative Region and Taiwan.
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“U.S. dollar”, “US$” and “$” refer to United States dollars;
“GBP”, “pound” and “£” refer tothe official currency of the United
Kingdom; “euro”, “EUR” and “C= ” refer to the single
unifiedcurrency of the European Monetary Union; “RMB” and
“renminbi” refer to the currency of China;“Thai baht” refers to the
official currency of the Kingdom of Thailand; “Czech crown” refers
to theofficial currency of the Czech Republic: “Hungarian forint”
refers to the official currency ofHungary; “Polish zloty” refers to
the official currency of the Republic of Poland; “Swiss
franc”refers to the official currency of the Swiss Confederation;
“Qatari riyal” refers to the officialcurrency of the State of
Qatar; “Bahrain dinar” refers to the official currency of the
Kingdom ofBahrain; “Saudi Arabian riyal” refers to the official
currency of the Kingdom of Saudi Arabia; and“UAE dirham” refers to
the official currency of the United Arab Emirates.
FORWARD-LOOKING STATEMENTS
Many statements made in this offering memorandum are
forward-looking statements thatreflect our current expectations and
views of future events. All statements other than statementsof
historical facts are forward-looking statements. The
forward-looking statements are containedprincipally in the sections
entitled “Summary”, “Risk Factors”, “Summary—Our
RecentDevelopments”, “Management’s Discussion and Analysis of
Financial Condition and Results ofOperations” and “Business”. These
forward-looking statements can be identified by words orphrases
such as “may”, “will”, “expect”, “anticipate”, “aim”, “estimate”,
“intend”, “plan”, believe”,“is/are likely to” or other similar
expressions. We have based these forward-looking statementslargely
on current expectations and projections about future events and
financial trends that webelieve may affect our financial condition,
results of operations, business strategy and financialneeds. These
forward-looking statements include, among other things, statements
relating to:
• our market opportunities;
• our goals and strategies;
• our competitive strengths;
• expectations and targets for our results of operations and
financial condition;
• our future business developments; and
• our acquisition and expansion strategy.
The forward-looking statements included in this offering
memorandum are subject to risks,uncertainties and assumptions about
our Group and WCL. Our actual results of operations maydiffer
materially from the forward-looking statements as a result of the
risk factors describedunder “Risk Factors” and elsewhere in this
offering memorandum. In particular, our businesscould be adversely
affected if:
• we fail to recruit new students and retain existing
students;
• we fail to increase the profitability of our schools by
continuing to increase ourpremium tuition fees;
• we experience adverse changes in the key industry drivers for
our premium schoolsbusiness;
• we experience adverse changes in general economic, political
and social conditions inthe markets in which we operate;
• uncertainties regarding the regulatory and legal environment,
particularly in China andthe Middle East, adversely affect our
business and ability to implement our growthstrategies;
• we suffer damage to the reputation of our Premium Schools and
Learning Servicesbusinesses;
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• increased competition in the international education market,
especially in the premiumschools market, decreases our market
share, increases our cost of recruiting andretaining students and
teachers or puts downward pressure on our tuition rates
andprofitability; or
• we are unable to successfully manage our growth and integrate
our acquisitions,including our acquisition of WCL Group.
These risks, which are described in “Risk Factors”, are not
exhaustive. Other sections ofthis offering memorandum include
additional factors that could materially and adversely impactour
business and financial performance. Moreover, we operate in an
evolving environment, andnew risk factors emerge from time to time.
It is not possible for our management to predict allrisk factors,
nor can we assess the impact of all factors on our business or the
extent to whichany factor, or combination of factors, may cause our
actual results to differ materially from thosecontained in any
forward-looking statement.
You should not rely upon forward-looking statements as
predictions of future events. Theforward-looking statements made in
this offering memorandum are based only on events orinformation as
at the date on which the statements are made in this offering
memorandum.Except as required by law, we undertake no obligation to
update or revise any forward-lookingstatement, whether as a result
of new information, future events or otherwise.
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with resales
of the Notes, for as long asthe Notes are “restricted securities”
within the meaning of Rule 144(a)(3) under the SecuritiesAct, the
Issuer is required to furnish upon request of a holder of the Notes
and a prospectivepurchaser designated by such holder the
information required to be delivered under Rule144A(d)(4) if, at
the time of such request, the Issuer is neither a reporting company
underSection 13 or Section 15(d) of the Exchange Act, nor exempt
from reporting pursuant to Rule12g3-2(b) thereunder. So long as the
Notes remain outstanding, the Issuer will provide to theTrustee (as
defined herein) certain financial and other information as set
forth in “Description ofthe Notes—Certain Covenants—Reports to
Holders”.
INDUSTRY AND OTHER MARKET DATA
Information contained in this offering memorandum regarding
markets, market size, marketposition, market share, growth rates
and other industry data pertaining to our business consistsof
estimates and data taken or derived from various public and private
sources, including marketresearch, publicly available information
and industry publications, as well as our knowledge ofour industry
and markets. In certain cases, there is no readily available
external information tovalidate market-related analyses and
estimates, necessitating reliance on internally
developedestimates.
While the Issuer has compiled, extracted, reproduced or
incorporated by reference marketor other industry data from
external sources, including third parties, analysts or industry
orgeneral publications, the Issuer and the Initial Purchasers have
not independently verified thatdata. Subject to the foregoing,
neither the Issuer nor the Initial Purchasers can assure
investorsof the accuracy and completeness of, or take any
responsibility for, such data. The source ofsuch third party
information is cited whenever such information is used in this
offeringmemorandum.
While the Issuer believes that its internal estimates are
reasonable, such estimates havenot been verified by any independent
sources, and the Issuer cannot assure potential investorsas to the
accuracy of such estimates or that a third party using different
methods to assemble,analyse or compute market data would obtain the
same result. The Issuer does not intend to,and does not, assume any
obligations to update any data, including industry or market data,
setforth in this offering memorandum. As a result, investors should
be aware that such data in thisoffering memorandum and estimates
based on such data may not be reliable indicators of
futureresults.
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ENFORCEMENT OF CIVIL LIABILITIES
The Issuer is a public limited company under the laws of England
and Wales. Most of theIssuer’s directors and officers and certain
other persons named in this offering memorandumreside outside the
United States, and all or a significant portion of the assets of
the directors andofficers and such other persons, and a significant
portion of our assets, are located outside theUnited States.
Similarly, most of the Guarantors are organised under the laws of
variousjurisdictions outside of the United States. As a result, it
may not be possible for you to effectservice of process within the
United States upon the Issuer, any member of the Group, certain
ofthe Guarantors or any of the aforesaid persons with respect to
matters arising under the U.S.federal securities laws or to enforce
against the Issuer, any member of the Group or any suchpersons
judgements obtained in U.S. courts, including judgements predicated
upon civil liabilityunder U.S. federal securities laws.
We and each of the Guarantors organised outside of the United
States expect to appointLaw Debenture Corporation as our and their
respective agent to receive service of process withrespect to any
action brought against us or the Guarantors in the United States
federal courtslocated in the Borough of Manhattan, The City of New
York under the federal securities laws ofthe United States or of
any state of the United States or any action brought against us,
theGuarantors in the courts of the State of New York in the Borough
of Manhattan, The City of NewYork under the securities laws of the
State of New York.
We have also been advised by our PRC legal advisor, Han Kun Law
Offices, that there isuncertainty as to whether the courts of China
would (i) enforce judgements of U.S. courtsobtained against us, our
directors or officers or the Guarantors or their directors or
officerspredicated upon the civil liability provisions of the U.S.
federal or state securities laws or (ii)entertain original actions
brought in China against us, our directors or officers or the
Guarantorsor their directors or officers predicated upon the U.S.
federal or state securities laws.
In addition, there may be limitations on the enforcement of
guarantees and securityinterests in the jurisdictions in which
certain of our Guarantors are incorporated. See “Limitationson
Validity and Enforceability of the Guarantees and Security
Interests and Certain InsolvencyLaw Considerations”.
PRESENTATION OF FINANCIAL STATEMENTS
Nord Anglia Education’s consolidated financial statements for
the years ended 31 August2011 and 2012, and its unaudited
consolidated interim financial statements as at and for the
sixmonths ended 29 February 2012 and 28 February 2013, were
prepared in accordance withInternational Financial Reporting
Standards as adopted by the European Union (“IFRS”) andusing U.S.
dollar presentational currency. Nord Anglia Education’s
consolidated financialstatements for the year ended 31 August 2010
were prepared in accordance with generallyaccepted accounting
principles in the United Kingdom (“UK GAAP”) and using
GBPpresentational currency.
WCL Group’s consolidated financial statements for fiscal 2011
and fiscal 2012, and itsunaudited consolidated interim financial
statements as at and for the 26 weeks ended 29February 2012 and 28
February 2013, were prepared in accordance with UK GAAP and
usingGBP presentational currency.
We have not identified the differences between IFRS or UK GAAP
and generally acceptedaccounting principles in other countries, nor
have we quantified the effect of applying thosegenerally accepted
accounting principles to our annual or interim financial statements
or those ofWCL Group. In making an investment decision, investors
must make their own judgement inassessing our annual or interim
financial statements and those of WCL Group. You shouldconsult your
own professional advisors for an understanding of the differences
between IFRSand generally accepted accounting principles in other
countries and how such differences mightaffect our financial
statements and your investment in the Additional Notes.
vii
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PRO FORMA FINANCIAL DATA
We present in this offering memorandum certain financial data on
an as adjusted basis togive pro forma effect to the acquisition of
WCL Group and related financings. See“Summary—Summary Consolidated
Financial and Operating Data—Summary Combined ProForma Financial
Data”, “Capitalisation and Indebtedness” and “Management’s
Discussion andAnalysis of Financial Condition and Results of
Operations”. See “Summary—Acquisition of WCLGroup” for a
description of our recent acquisition of WCL Group and its
business. The summarycombined pro forma financial data is for
informational purposes only and is not intended torepresent or to
be indicative of our future results following consummation of the
acquisition ofWCL Group. The unaudited pro forma financial data
have not been prepared in accordance withthe requirements of
Regulation S-X of the U.S. Securities Act, Directive 2003/71/EC,
includingDirective 2010/73/EU (together, the “Prospectus
Directive”), or any generally acceptedaccounting standards. Neither
the assumptions underlying the pro forma adjustments nor
theresulting pro forma financial data have been audited or reviewed
in accordance with generallyaccepted auditing standards in any
jurisdiction.
EXCHANGE RATE INFORMATION
The following table sets forth the exchange rate of the pound
against the U.S. dollar. For alldates through 31 December 2008,
exchange rates between GBP and U.S. dollars are presentedat the
noon buying rate in the City of New York for cable transfers using
U.S. dollar per GBP ascertified for customs purposes by The Federal
Reserve Bank of New York. For 1 January 2009and all later dates and
periods, the exchange rate refers to the noon buying rate as set
forth inthe weekly H.10 statistical release of the U.S. Federal
Reserve Board (the “Noon Buying Rate”).The rates may differ from
the actual rates used in the preparation of the consolidated
financialstatements and other financial information appearing in
this offering memorandum. None of NordAnglia Education, WCL Group
or the Initial Purchasers represents that the U.S. dollar
amountsreferred to below could be or could have been converted into
GBP at any particular rateindicated or any other rate.
Convenience translations into U.S. dollars are provided for
certain GBP amounts of WCL forthe twelve months ended 28 February
2013. Unless otherwise noted, all convenience translationsfrom GBP
to U.S. dollars were made at a rate of US$1.5192 per GBP1.00, the
Noon Buying Ratein effect as of 28 February 2013.
The Noon Buying Rate of the GBP on 14 June 2013 was US$1.5686
per GBP1.00.
US$ per GBP1.00
High Low Average(1) Period End
Year2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 2.0311 1.4395 1.8424 1.46192009 . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 1.6977 1.3658 1.5707 1.61672010
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.6370 1.4344 1.5498 1.53922011 . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 1.6691 1.5358 1.6105 1.55372012 . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6275
1.5301 1.5924 1.6262
High Low Average(2) Period End
MonthJanuary 2013 . . . . . . . . . . . . . . . . . . . . . . .
. . 1.6255 1.5686 1.5965 1.5856February 2013 . . . . . . . . . . .
. . . . . . . . . . . . . . 1.5112 1.5814 1.5474 1.5192March 2013 .
. . . . . . . . . . . . . . . . . . . . . . . . . . 1.5239 1.4877
1.5080 1.5193April 2013 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 1.5539 1.5113 1.5311 1.5539May 2013 . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 1.5578 1.5038 1.5297 1.5185June
2013 (through 14 June 2013) . . . . . . . . . 1.5698 1.5304 1.5543
1.5686
(1) The average of the exchange rates on the last business day
of each month during the relevant period.
(2) The average of the exchange rates for each business day
during the relevant period.
viii
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GLOSSARY
This glossary contains certain terms and abbreviations used in
this offering memorandum inconnection with our business and
industry. Such terms and meanings may not correspond tostandard
industry definitions or usage.
“BISAD” The British International School Abu Dhabi
“BISS” The British International School Shanghai
“BSB” The British School of Beijing
“CAGR” Compound Annual Growth Rate
“CPI” Consumer Price Index
“French Bac” French Baccalaureate
“FTEs” Full time equivalent students
“IBC” International Baccalaureate Curriculum
“IBD” International Baccalaureate Diploma
“ICT” Information and communication technology
“IGCSE” International General Certificate of Secondary
Education
“KPI” Key Performance Indicator
“K-12” Kindergarten to the end of secondary school
“LTM” Last Twelve Months
“ME” Middle East
“National Curriculum” National Curriculum of England
“PGCE” Post Graduate Certification in Education
“SEA” Southeast Asia
“Swiss Bac” Swiss Baccalaureate
ix
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SUMMARY
Unless otherwise specified or the context requires otherwise,
the terms “Issuer” “us”,“our”, the “Company”, the “Group”, “Nord
Anglia Education” and “Nord Anglia Education(UK) Holdings plc”
refer to Nord Anglia Education (UK) Holdings plc and its
consolidatedsubsidiaries, excluding WCL Group Limited.
This summary highlights selected information from this offering
memorandum. It is notcomplete and does not contain all the
information that may be important to you in decidingwhether to
invest in the Additional Notes. You should read the entire offering
memorandum,including the sections entitled “Risk Factors” and
“Management’s Discussion and Analysis ofFinancial Condition and
Results of Operations”, as well as our and WCL’s financial
statementsand related notes thereto, before making an investment
decision.
Overview of Nord Anglia Education
Nord Anglia Education is a leading global operator of premium
schools in China, Europeand the Middle East and South East Asia
(“ME/SEA”) through our Premium Schools (“PremiumSchools”). Our
schools educate students in kindergarten to the end of secondary
school (“K-12”).In addition, we provide educational services to
governments in the Middle East, the UnitedKingdom and Asia through
our Learning Services (“Learning Services”). We operate
inhigh-growth markets characterised by strong wealth creation,
significant foreign direct investment(“FDI”) and economic growth.
The two main drivers of our business are increasing
globalisationand a growing emphasis by parents on high quality
education for their children.
For the twelve months ended 28 February 2013, our Premium
Schools accounted for 88.4%and 90.4% of our Adjusted Revenues and
Adjusted EBITDA before central and regionalexpenses, respectively.
Learning Services accounted for 11.6% and 9.6% of our
AdjustedRevenues and Adjusted EBITDA before central and regional
expenses, respectively. For thetwelve months ended 28 February
2013, we generated Adjusted Revenue of US$288.0 millionand Adjusted
EBITDA of US$81.2 million. See “Summary Consolidated Financial and
OperatingData—Nord Anglia Education’s Key Performance
Indicators—Nord Anglia Education’s SegmentAnalysis”, “—Calculation
of Nord Anglia Education’s Adjusted Revenue”, “—Calculation of
NordAnglia Education’s Adjusted EBITDA” and “—Calculation of Nord
Anglia Education’s Last TwelveMonths Financial Information”.
Nord Anglia Education’s Premium Schools
We operate fourteen premium schools in twelve locations in
China, Europe and ME/SEA.For the six months ended 28 February 2013,
our schools in China, Europe and ME/SEAcontributed approximately
67.7%, 27.2% and 5.1% of our Premium Schools’ Adjusted
EBITDA,respectively.
Our schools in China primarily serve expatriates and our schools
in Europe and ME/SEAserve both expatriates and affluent local
families. Our overall student mix is 78% expatriates and22% local
students. Our Premium Schools are not directly exposed to
government funding riskas all of their revenues are sourced from
private sources, of which employers contributeapproximately
60%.
Since our going-private transaction in 2008, we have
significantly increased both capacityand enrolments. We have
increased our student capacity from approximately 5,400 places at
theend of FY2008 to approximately 12,524 as at 26 May 2013. As at
26 May 2013, our enrolmentwas 9,991, representing a utilisation
rate of 80% and a compound annual growth rate (“CAGR”)of 21% over
our year end full time equivalent students (“FTEs”) of 4,010 at the
end of FY2008.This growth in capacity and enrolment was achieved
through expansion at our existing schoolsand strategic acquisitions
of new schools.
1
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Nord Anglia Education’s Learning Services
We provide targeted education-related services to governments,
government agencies,regulatory bodies and related educational
authorities in the Middle East, the United Kingdom,and Asia. Our
services typically involve various aspects of the management and
operation ofpublic-sector schools. In FY2012, we decided to
de-emphasise our Learning Services operationsand are therefore no
longer bidding on new contracts and intend to gradually phase out
ourexisting contracts.
Acquisition of WCL Group
On 22 May 2013, we completed the acquisition of 100% of the
share capital of WCL Groupfor net consideration of GBP143.0 million
(approximately US$222.2 million). We financed theacquisition and
related fees and expenses through a capital contribution of
US$133.4 million ofordinary equity by our parent, Nord Anglia
Education, Inc., and borrowings of approximatelyUS$113.9 million
under a bridge loan agreement, dated 15 April 2013, among Nord
AngliaEducation (UK) Holdings plc, Goldman Sachs Bank USA, Credit
Suisse Securities (USA) LLC,HSBC Securities (USA) Inc. and others
(the “Bridge Loan Agreement”). We intend to repay ourborrowings
under the Bridge Loan Agreement in full with the proceeds of this
Offering. See“—Our Recent Developments”, “Certain Relationships and
Related Party Transactions”,“Description of Other Material
Indebtedness and Certain Financing Arrangements” and “Use
ofProceeds”.
As part of the due diligence process for the acquisition of WCL,
we developed acomprehensive integration plan and nominated senior
executives from within the Nord AngliaEducation leadership team to
drive the key integration initiatives. WCL’s
complementarycurriculum, focus on premium quality education,
teacher recruitment strategy and on-goingprofessional development,
as well as its asset-light approach to operations, are in line with
theoverall strategy of Nord Anglia Education.
We expect our acquisition of WCL to generate significant
benefits for the combined group,including significant cost savings
as we integrate WCL’s operations into our platform andstreamline
the duplication of certain central cost functions. We expect to
improve the financialperformance of WCL by applying our proven
operating model to WCL and improving WCL’sacademic standards and
the infrastructure of its schools in order to drive student
achievementand increase enrolment.
Overview of WCL Group
WCL founded its first school in Washington D.C. in 1998 and now
delivers premium K-12education through its eleven international
schools in North America, the Middle East and Europe(“WCL’s Premium
Schools”). In addition, WCL offers leading-edge educational
products andservices to schools worldwide (“WCL’s Learning
Services”).
For the twelve months ended 28 February 2013, WCL’s Premium
Schools accounted for91.6% and 92.1% of WCL’s Adjusted Revenue and
Adjusted EBITDA before central and regionalexpenses, respectively.
For the twelve months ended 28 February 2013, WCL generatedAdjusted
Revenue of US$88.6 million and Adjusted EBITDA of US$19.9 million.
See “SummaryConsolidated Financial and Operating Data—WCL’s
Operating Data and Non-GAAP FinancialInformation—Calculation of
WCL’s Adjusted Revenue”, “—Calculation of WCL’s AdjustedEBITDA” and
“—Calculation of WCL’s Last Twelve Months Financial
Information”.
WCL’s Premium Schools
WCL operates eleven schools with combined enrolment as at 26 May
2013 of 4,547students in nine locations, with six schools in North
America, four schools in the Middle East andone school in
Europe.
WCL’s schools in the Middle East primarily serve expatriates and
its schools in NorthAmerica and Europe serve both expatriates and
affluent local families. WCL’s overall student mixis 65%
expatriates and 35% local students. WCL’s schools are not directly
exposed togovernment funding risk as all of their revenues are
sourced from private sources.
WCL’s Learning Services
WCL develops and markets international curriculum products for
the education of three to14 year-olds. In the 2012/2013 academic
year, these products are used by approximately500,000 students in
approximately 1,500 schools in over 80 countries.
2
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Our Strengths
Diversified Platform with Benefits of Scale
Nord Anglia Education is one of the world’s largest K-12 premium
school operators,operating fourteen schools in twelve locations and
eight countries across China, Europe andME/SEA. No single school in
our geographically diverse network accounted for more than 15%
oftotal Adjusted Revenues in FY2012.
Our platform allows us to leverage expertise and resources
across our entire network toenhance the quality of education and
create significant operating benefits, including:
• strong brand equity supported by a reputation for quality,
which enables us to driveenrolment growth and set tuition fees at
the higher end of the market;
• credibility with our stakeholders, including educational
authorities, teachers, parents,developers, landlords and sellers of
premium schools;
• implementation of best practices, including cost management
and control throughbenchmarking;
• creating global citizens of students through initiatives such
as the Global Classroom,which enhances the value proposition of our
schools to parents and prospectivestudents. See “Business—Our
Approach to Academic Quality”; and
• training and development of principals and teachers through
initiatives such asNord Anglia University.
The acquisition of WCL Group significantly increases the
diversity of our platform andstrengthens Nord Anglia Education’s
position as one of the world’s leading premium
schoolsorganisations. WCL’s six schools in North America provide a
solid foundation in the importantNorth America market, and its four
schools in the Middle East and one school in Europestrengthen our
presence in those regions.
The addition of WCL’s schools also diversifies our geographic
distribution as shown in thefollowing table, which presents
regional enrolments for Nord Anglia Education as at 27 May 2012and
26 May 2013 and for the combined group as at 26 May 2013.
Nord Anglia
Education
as at 27 May
2012
% of
Total
Nord Anglia
Education
as at 26 May
2013
% of
Total
Nord Anglia
Education and
WCL combined
as at 26 May
2013
% of
Total
Full time equivalent students
China . . . . . . . . . . . . . . . . . 3,749 49.9 4,156 41.6
4,156 28.6
Europe . . . . . . . . . . . . . . . . 3,771 50.1 3,790 37.9
4,470 30.7
ME/SEA. . . . . . . . . . . . . . . . — — 2,045 20.5 3,368
23.2
North America . . . . . . . . . . . . — — — — 2,544 17.5
Total. . . . . . . . . . . . . . . . . . 7,520 100.0 9,991 100.0
14,538 100.0
3
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The following tables show segment analysis for the last twelve
months of Nord AngliaEducation and WCL Group on a pro forma
combined basis. See “—Summary Combined ProForma Financial
Data”.
Pro Forma Combined Last Twelve Months Segment Analysis
For the twelve months ended 28 February 2013
(US$ millions)Nord AngliaEducation WCL
Combined NordAnglia Education
and WCL
(unaudited)
Adjusted Revenue(1)(2)
Premium SchoolsChina. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 125.8 — 125.8
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 112.7 13.2 125.9
ME/SEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 16.1 17.9 34.0
North America . . . . . . . . . . . . . . . . . . . . . . . . .
. — 50.1 50.1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 254.6 81.2 335.8
Learning Services . . . . . . . . . . . . . . . . . . . . . .
33.4 7.4 40.8LTM Adjusted Revenue . . . . . . . . . . . . . . . . .
. 288.0 88.6 376.6
For the twelve months ended 28 February 2013
(US$ millions)Nord AngliaEducation WCL
Combined NordAnglia Education
and WCL
(unaudited)
Adjusted EBITDA(1)(2)
Premium SchoolsChina. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 61.4 — 61.4
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 23.0 2.9 25.9
ME/SEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 4.5 4.5 9.0
North America . . . . . . . . . . . . . . . . . . . . . . . . .
. — 17.0 17.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 88.9 24.4 113.3
Learning Services . . . . . . . . . . . . . . . . . . . . . .
9.4 2.1 11.5Central and regional expenses . . . . . . . . . . . . .
(17.1) (6.6) (23.7)
Full year impact of cost savings(3) . . . . . . . . . . . — —
3.2
LTM Adjusted EBITDA . . . . . . . . . . . . . . . . . . . 81.2
19.9 104.3
(1) Derived from Nord Anglia Education’s financial information
prepared in accordance with IFRS and WCL’s financialinformation
prepared in accordance with U.K. GAAP.
(2) See “—Summary Consolidated Financial and Operating Data—Nord
Anglia Education’s Key PerformanceIndicators—Calculation of Nord
Anglia Education’s Adjusted Revenue”, “—Calculation of Nord Anglia
Education’sAdjusted EBITDA”, “—Summary Consolidated Financial and
Operating Data—WCL’s Operating Data andNon-GAAP Financial
Information—Calculation of WCL’s Adjusted Revenue” and
“—Calculation of WCL’s AdjustedEBITDA”.
(3) Budgeted cost savings relating to the acquisition of WCL
currently being implemented arising from the ongoingelimination of
duplicative head-office functions. There can be no assurance that
such cost savings can beachieved.
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Robust and Highly Attractive Business Model
Resilient Performance Across Economic Cycles
Total enrolment in our schools has grown at a CAGR of 21% from
the end of FY2008through 26 May 2013. Of this increase in
enrolment, 2,700 new student enrolments were throughstrategic
acquisitions and 3,281 through organic growth. We are well
positioned to deal withnegative national or regional trends due to
our geographically diverse operations across keyeducation
markets.
Expatriate families often move from country to country for their
employer. We refer to thismovement as expatriate churn. As one of
the top school operators in each of our markets, webelieve that we
are able to gain a disproportionate share of new enrolments among
expatriatefamilies. As a result, we have consistently been able to
secure more new starters than leavers.
The average student tenure across our network over the last
three fiscal years is 3.4 years,which provides stability in our
student enrolment levels. Over the last three fiscal years,
ourstudent persistence rate, defined as the percentage of students
re-enrolling in our schools,excluding those that leave for reasons
outside our control (for example, expatriate churn andgraduation),
has averaged 98%.
WCL has also shown strong growth across economic cycles. WCL’s
enrolment increased by100.9% between September 2004 and September
2008 and by 99.7% between September 2008and September 2012. Between
September 2004 and September 2012, WCL’s enrolment(excluding the
impact of the acquisition of its school in Spain in 2011) grew at a
CAGR of 16.4%.Over the last three fiscal years, the average student
tenure across WCL’s schools is 4.9 yearsand WCL’s persistence rate
has averaged 93%.
Price Inelasticity
The private-pay nature of our model helps ensure that our
schools are not directly exposedto any government funding risk and
are insulated from any volatility in such funding as a result
ofchanging economic or political conditions.
Approximately 60% of our tuition fees are paid by expatriate
employers, who are lesssensitive to moderate pricing increases as
education allowances typically represent only a smallpercentage of
an expatriate’s total compensation. In addition, we believe
self-funding expatriatesand affluent local families, are also able
to afford moderate price increases. As a result, we havebeen able
to increase our tuition fees across our markets at an average of
4-6% per annum overthe last four years (in excess of the median
rate of inflation in the markets where our schools arelocated),
while continuing to generate organic enrolment growth.
WCL’s schools also follow the private-pay model, and WCL has
increased its tuition feesacross its markets at an average of 2.2%
over the last three years. Approximately 61% of WCL’sstudents’
tuition fees are paid by corporates.
Strong Business Visibility with Predictable Revenue Streams
We have good visibility on future enrolments through our high
persistence rates andaverage student tenure of 3.4 years. Further,
our policy to require a full term’s notice for anypotential leavers
enhances in-year visibility as we are entitled to receive a
full-year of tuition ifwe are notified of a student’s intention to
leave after the start of Term 2, beginning in January. Inaddition,
we have had few instances of bad debt.
Our ability to measure student re-enrolment rates among existing
students and to estimatenew enrolments for subsequent periods
provides revenue predictability and enables us to planstudent
capacity.
WCL’s student body is relatively young, with 70% of students
under the age of 13 as atSeptember 2012. This makes WCL Group well
placed to benefit from strong re-enrolments, whichsupport expansion
and revenue visibility. Over the last three fiscal years, WCL’s
average studenttenure was 4.9 years and its persistence rate
averaged 93%.
5
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Favourable Working Capital Dynamics and a Capital Efficient
Approach to Growth
We receive approximately 57% of our annual tuition fees in
advance of the school year,which starts in late August/early
September. We have generally received an additional 20% ofour
tuition fees prior to the start of Term 2, beginning in January,
and the remainder prior to Term3, beginning in April. In FY2012,
approximately half of our students paid the full annual tuitionfees
in advance of the school year in exchange for a small average
discount. As a result, ourworking capital needs are principally
sourced from pre-paid tuition fees.
In addition, our expansion strategy is based on an “asset-light”
model and is focused onsecuring high quality purpose-built
facilities through long-term leases. Accordingly, we are able
toexpand capacity at our existing schools and secure capacity at
new schools without incurringmajor capital expenditure. For
example, in China, developers of high-end residential
communitiespaid for the construction of our school facilities
within their developments, and our recentlyannounced new school in
Dubai is being built to our specifications by our landlord. As a
result,our capital expenditure associated with these schools is
generally limited to furniture, equipmentand other materials for
classroom, sports and extra-curricular activities. Further, the
majority ofour schools in China are newly built, which we would
expect to result in low maintenance costsand capital expenditure in
the near future.
The capital expenditure for capacity expansion at our existing,
new and acquired schoolshas been primarily funded by the owners of
the real estate. As a result, we have relatively lowcapital
expenditure requirements associated with our expansion. In the case
of our acquiredschools, we have structured these transactions so
that we acquire the operating businesses andtypically negotiate
long-term leases from the sellers who retain ownership of the real
estate.
WCL also has a favourable working capital cycle. WCL receives
approximately 56% of itsannual tuition fees in advance of the
school year, approximately 30% prior to January and theremainder by
May. As a result, WCL’s working capital needs are principally
sourced frompre-paid tuition fees. In addition, the timing
differences between the receipt of tuition fees byNord Anglia
Education’s schools and WCL’s schools will complement our working
capital cycle,as cash receipts by WCL’s schools in April and May
each year spread our cash flow over agreater number of months.
WCL also operates on an “asset-light” model, with all of its
schools subject to long-termleases, with the exception of its
school in Houston, which WCL owns.
Premium Quality Education and Leading Reputation
Our commitment to quality drives the strong operating
performance of our Premium Schoolsas evidenced by overall enrolment
growth and high levels of re-enrolment. We focus on theneeds of
individual students and offer high quality education across
multiple curricula. Ourproprietary IT platform supports this by
tracking each student’s performance against personalisedtargets and
drawing our attention to the requirements of individual students.
Through this highlyindividualised system we are better able to
maximise each student’s academic achievement. Inaddition, the
platform allows us to set clear expectations of learning objectives
for a classroom,class year or entire school and intervene as
required.
We believe our schools are among the most respected providers of
premium quality K-12education in each of our markets. This supports
high referral rates, and more than 90% ofparents surveyed in the
academic year 2012/2013 would recommend our schools. Moreover,
ourreputation and attention to individual student needs are key
determinants of parental choicewhen choosing our schools over the
schools of our competitors.
Our principals and teaching staff are highly-qualified and
experienced, having been througha rigorous recruitment process. We
are able to attract highly-qualified staff due to ourinternational
scale, long track record and competitive compensation packages.
Further, we havean organisation-wide emphasis on the retention of
teachers through on-going professional
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development initiatives and a policy to promote from within
wherever suitably capable candidatesare identified. Initiatives
such as Nord Anglia University, which provides
comprehensiveprofessional training programmes for teachers and
principals, underscore our commitment toprofessional development.
We believe the foundation for the high quality education we provide
isbuilt upon the quality and motivation of our teachers.
Our students consistently outperform their peers in standardised
examinations. In the lastfive academic years, our students’ average
examination results were higher than the average inthe United
Kingdom for the International General Certificate of Secondary
Education (“IGCSE”),which students take at the age of 16, and
globally for the International Baccalaureate Diploma(“IBD”), which
students take at the age of 18. For the 2012 academic year, 86.2%
of ourstudents gained 5 A* to C grades compared to 84.7% in the
2011 academic year and the UKaverage for 2012 of 81.8%. In the same
year, the average IBD score achieved by our studentswas 33.3 points
compared to 32.6 points in the 2011 academic year and a global
average scorein 2012 of 29.8 points. In addition, 17% of our
graduates in 2012 went to the world’s top 30universities and 75%
went to the world’s top 600 universities, as ranked
bywww.topuniversities.com as at 20 January 2013. Given that our
admissions approach is notbased upon academic ability, and that
English is the second language for a large number of ourstudents,
we believe our students’ examination results and university
destinations demonstratethe quality and effectiveness of our
approach to education.
WCL has a strong commitment to education, focusing on academic
rigour, studentengagement and a high quality international learning
experience. Like Nord Anglia Education,WCL follows a largely
non-selective admissions policy. The aim of each school is to
maximiseoutcomes for students of all abilities.
Superior Operational Capabilities
We strongly emphasise operational efficiency and adopt a
data-driven approach to manageour business. Our global, regional
and school teams track and analyse KPIs on a weekly basisand refine
our operating strategy accordingly.
We focus on the following key areas of our operations:
• Student recruitment: We have a systematic approach to student
recruitment. Ourcomprehensive recruitment strategies are adapted to
each of our specific markets andexecuted by each school’s
principal, admissions team and marketing manager. We usea
relationship management system that enables us to monitor an
applicant’s file atevery stage, from initial enquiry through
enrolment.
• Pricing: We monitor market trends, taking into consideration
historic and regionaleconomic trends and supply and demand
dynamics, to set our tuition fee levels.
• Cost management: We use metrics-based management throughout
our schooloperations to enhance efficiencies. We achieve
operational efficiencies through variousmeans, including efficient
class scheduling and optimising our teaching resources. Weoptimise
our teaching resources by minimising the amount of
administrativeresponsibilities allocated to our teachers to ensure
that each teacher spends moretime focused on teaching.
• Capacity planning: We have developed expertise in planning and
adding capacity tomeet demand. This enables us to manage growth by
efficiently utilising capacity atexisting schools and expanding as
necessary. We also work with architecturalconsultants who
specialise in optimising school configurations. Our approach
togrowing our network of schools is highly analytical and includes
the use ofdemographic and economic models, when identifying
opportunities for expansion.
• Cash and financial management: We have a centralised finance
team that enables usto monitor and manage our business effectively.
We have a track record of robust cashmanagement and have
historically had few instances of bad debt.
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We plan to integrate WCL into our operational platform and apply
the same metrics andanalytical tools to WCL’s schools that we use
for our existing schools. Having successfullyintegrated eight new
schools since 2009, we believe our experience in managing
acquisitionsand greenfield projects provides us with the resources
and expertise required to successfullymanage the integration of WCL
into our portfolio.
We use a “balanced scorecard” of key performance indicators
which provides measures ofperformance relevant to all stakeholders
including parents, students, teaching staff and investors.We
believe this comprehensive and proven method of monitoring a
school’s performance willhelp us effectively integrate and improve
the desired outcomes where necessary in the WCLschools.
Partner of Choice
Our scale and reputation make us a desirable partner for
sellers, developers and landlords.We believe that sellers of
schools are often focused on the operating track record,
financialstability and the reputation of potential buyers. We also
believe that sellers are eager to secure asale of their school to
partners who will operate the school to high standards. Our
acquisitions ofschools in China, Switzerland and Thailand resulted
from exclusive discussions with sellers whowere primarily concerned
with these matters.
Similarly, developers and landlords seek to attract a recognised
operator of schools with areputation for quality in order to
enhance the value of their adjacent residential real estate.
Ourschool in Puxi, Shanghai is an example of our collaboration with
a developer and the localgovernment who were eager to develop Puxi
into an attractive location for expatriates. Westarted the school
in 2005 with a capacity of 500 places and since then we have
increasedcapacity to 2,000 places, with all the expansion being
funded by the developer.
Experienced Management Team
Our senior management team combines seasoned executives with
experience in runningpublicly-listed companies and strong
operational expertise as well as leading academic thinkers.Andrew
Fitzmaurice has been with the Company for more than ten years and
was CEO whenNord Anglia Education was a publicly-listed company in
the United Kingdom. Since going privatein 2008, we have further
invested in building a highly qualified management team, including
ourCFO and our COO, both of whom have prior public company
experience, in addition to variousother senior positions.
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Our Strategies
We focus on the strategic initiatives described below to
strengthen our position as one ofthe world’s leading premium
schools organisations, and we intend to apply these initiatives
toWCL’s schools.
Continue to increase student enrolments at our existing
schools
We have been successful at driving enrolment growth and aim to
continue this growth byapplying our systematic processes for
enquiry generation, converting enquiries to enrolment andretention
of existing students. Our school principals lead the recruitment
effort with dedicatedadmissions and marketing teams. We generate
enquiries and visits through referrals, web-basedstrategies and
other marketing activities.
Maintain price leadership at our existing schools
We have made significant investments in our schools which enable
us to consistentlyprovide high-quality premium education. We intend
to leverage our superior quality andreputation to maintain price
leadership in each of our markets and realise pricing growth
inexcess of inflation.
WCL has also successfully driven enrolment growth through a
rigorous approach to studentenrolment.
Improve the efficiency and enhance quality and consistency of
our teaching resources
Our teaching costs are the largest component of our cost
structure and therefore a keydriver of margins. We focus on driving
teaching efficiencies through class scheduling andeffective
deployment of our teaching resources. We optimise our teaching
resources byminimising the amount of administrative
responsibilities allocated to our teachers to ensure thateach
teacher spends more time focused on teaching.
Capacity addition
Where opportunities arise, we may increase capacity by expanding
our current schools,opening new school campuses or acquiring
schools. In addition, we may opportunistically enternew markets,
primarily in China, North America, Europe and ME/SEA where we
believe there isor could be strong demand and subsequent expansion
opportunities for premium schools.
WCL has adopted a similar approach to increasing capacity and
entering new markets.
Our Approach to Academic Quality
Our philosophy is to help all our students to be the best that
they can be. Our schools areinclusive in that they accept students
with a wide range of academic ability. Through our
“HighPerformance” approach we ensure that high academic performance
is the goal for all students.
As with our previous acquisitions, we plan to apply our approach
to academic quality toWCL’s schools to ensure consistent academic
standards.
The key elements that we focus on to promote a high level of
academic quality are:
An academically rigorous educational programme
Our curricula meet internationally recognised requirements and
are adapted to meet localregulatory requirements, culture and
customs. The majority of our schools teach the NationalCurriculum
of England (the “National Curriculum”).
We utilise a highly customised IT platform designed around each
student. It enables us totrack performance of students on an
individual basis as well as benchmark within and across ourschools.
We believe that this maximises student learning and performance by
giving each
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student and faculty an accurate gauge of individual progress. In
addition, this platform allows usto set clear expectations of
learning objectives at a classroom, class year or school level
andintervene as required. Further, our IT platform creates
accountability among faculty members anddrives consistency in
instruction by applying comparable metrics across our network.
In addition to our rigorous approach to classroom-based
learning, we have a supplementaryinformal online learning
environment which operates across all our schools that we call
theGlobal Classroom. The Global Classroom is an internet-based
system which allows our studentsto learn with other students in our
schools throughout the world. This innovative and
distinctivelearning environment introduces students to a new
learning style, which creates independentlearners, preparing them
well for future university study and turning them into global
citizens.
Like Nord Anglia Education’s schools, all of WCL’s schools use a
British style of educationand teach using the National Curriculum
or the IBC.
Highly qualified principals, teachers and administrative
staff
We demonstrate our commitment to premium quality education by
hiring and retaininghighly qualified principals, teachers and
administrative staff. We require all our teachers to befully
qualified and have significant teaching experience in national or
international schools. Theminimum credentials we require include
formal teacher qualifications, such as a Post GraduateCertification
in Education (“PGCE”) or its equivalent and at least two years of
teachingexperience.
Our principals and teachers also benefit from the centralised
support and experience of oureducational team, led by Professor
Deborah Eyre. In addition, we have in place variouscontinuing
professional development initiatives, including Nord Anglia
University, which isdesigned to prepare some of our best teachers
for career progression and help continuouslyimprove all of our
teaching staff. We regularly and rigorously review the performance
of ourprincipals and teaching staff to ensure that their
performance meets our high standards.
As with Nord Anglia Education, the majority of WCL’s teachers
are qualified in the UK whoare familiar with the National
Curriculum and a British style of education.
Class sizes
Both Nord Anglia Education and WCL restrict classes to a maximum
of 22 students, with afew exceptions, in order to provide each
student with close teacher interaction and individualattention and
support. This benefits students, and provides a rewarding
environment for ourteachers and promotes staff retention.
High quality school facilities
Our school facilities, such as science laboratories, music and
theatre resources, swimmingpools and other high quality sports
facilities enhance the educational experience of our students.In
addition, the majority of classrooms utilise interactive
computerised white boards that facilitatestudents’ participation in
learning. We use internationally-recognised architectural
consultantsspecialised in school design to direct the development
of new facilities and the expansion orrefurbishment of our existing
schools in order to promote the efficient use of our facilities by
staffand students.
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Our Recent Developments
On 22 May 2013, we completed the acquisition of 100% of the
share capital of WCL Groupfor net consideration of GBP143.0 million
(approximately US$222.2 million). We financed theacquisition and
related fees and expenses through a capital contribution of
US$133.4 million byour parent, Nord Anglia Education, Inc., and
borrowings of US$113.9 million under the BridgeLoan Agreement. Our
total borrowings under the Bridge Loan Agreement equalled
US$125.0million. We used the excess borrowings under the Bridge
Loan Agreement to fully repay $11.1million outstanding under our
term loan facility with HSBC (the “HSBC Facility”), which we
hadentered into in December 2012 in connection with the acquisition
of our school in Thailand. See“Certain Relationships and Related
Party Transactions” and “Description of Other MaterialIndebtedness
and Certain Financing Arrangements”. We intend to repay our
borrowings underthe Bridge Loan Agreement in full with the proceeds
of this Offering.
On 21 April 2013, we entered into a definitive agreement for the
development of a newpurpose-built K-12 school in Dubai in the
United Arab Emirates. The owner of the rights to theland will build
the school to our specifications and, on completion, we will lease
the school. Thetarget date for the school opening is September
2014. We expect the school to provide capacityof approximately
1,500 places.
On 15 April 2013, La Côte International School SA entered into a
definitive agreement forthe development of a new state-of-the-art
K-12 campus in Aubonne, Switzerland with anexpected opening in
September 2014. It will accommodate the students from the
existingcampus of the La Cote International School and will provide
total capacity of approximately 840places.
On 11 April 2013, following an extensive tender process, the
Hong Kong Education Bureauawarded us a vacant school in Kowloon,
Hong Kong. We intend to open the school in September2014, following
a comprehensive renovation. We expect the school to serve primary
and lowersecondary students, grades one to eight, with a capacity
of over 660 places.
On 1 April 2013, we began consolidating the results of BISAD
under IFRS, as we obtainedeffective control of BISAD from that
date. We entered into a definitive agreement to acquire the49%
equity interest in BISAD owned by an affiliate of our parent in
September 2012. Wecontinue to work with the local education
authority to effect the transfer of the shareholding. See“Certain
Relationships and Related Party Transactions”.
On 28 March 2013, Barclays Bank PLC increased its commitment
under our Senior SecuredRevolving Credit Facility from $30 million
to $40 million. See “Description of Other MaterialIndebtedness and
Certain Financing Arrangements”.
In addition to the above recent developments, in line with Nord
Anglia Education’sacquisition strategy, we are in advanced
discussions for the acquisition of a limited number ofsingle-site
schools.
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Our Corporate Structure
The following chart shows a simplified summary of our corporate
structure. See “CorporateStructure” and “Corporate
Structure—Subsidiaries”.
Nord Anglia Education Limited(UK)
NA Schools Ltd (UK)
China SlovakiaSwitzerlandPolandLearningServices
UK
Bahrain
Malaysia UAESaudiArabia
Hong KongHungaryCzech
Republic
US$325 millionOriginal Notes and
US$165 millionAdditional Notes
US$40 million SeniorSecured Revolving
Credit Facility
Nord Anglia Education (UK) Holdings plc(the “Issuer”)
Guarantors2
Thailand WCL GroupLimited
QatarLearningServices SpainU.S.
US$150 million1
PIK Toggle Notes Nord Anglia Education, Inc.
1 Nord Anglia Education, Inc.’s US$150 million 8.50%/9.50%
Senior PIK Toggle Notes due 2018 (the “PIK ToggleNotes”). The PIK
Toggle Notes are unguaranteed and unsecured.
2 For a complete list of subsidiaries, including unrestricted
subsidiaries, see “Corporate Structure—Subsidiaries”. Fora complete
list of guarantors, see “Description of the Notes—Brief Description
of the Structure and Ranking of theNotes, the Guarantees and the
Security—The Guarantees”.
Our Ultimate Controlling Shareholder
The Baring Asia Private Equity Fund IV (“Baring Asia Fund IV”
and collectively with TheBaring Asia Private Equity Fund III and
controlled coinvestment vehicles “Baring Private EquityAsia”) is
our controlling shareholder. Baring Asia Fund IV is an Asian
regional private equity fundwith $1.5 billion of commitments under
management. Baring Private Equity Asia and affiliates(collectively
“Baring Asia”) is one of the largest and most established
independent private equityfirms in Asia with more than $5 billion
of commitments under management. Baring Asia runs apan-Asian
investment programme, specialising in mid-market companies
requiring capital forexpansion, recapitalisation or acquisitions.
The firm has been investing in Asia since its formationin 1997 and
has more than 90 employees located in offices in Hong Kong,
Shanghai, Beijing,Mumbai, Singapore, Tokyo and Jakarta. Baring Asia
currently has more than 30 portfoliocompanies across Asia with more
than 80,000 employees and revenues of more than $16 billionin 2012.
The firm was previously part of Dutch insurer ING but became
independent through amanagement-led buyout in 2000 and is currently
100% owned by its partners.
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THE OFFERING
The following summary of the offering contains basic information
about the Notes, theGuarantees and the Collateral. It is not
intended to be complete and is subject to importantlimitations and
exceptions. Terms used in this summary and not otherwise defined
shall have themeanings given to them in “Description of the Notes”.
For a more complete understanding of theNotes, the Guarantees and
the Collateral, please refer to “Description of the Notes”
herein.
Issuer .............................................. Nord
Anglia Education (UK) Holdings plc.
Additional Notes Offered.................. $165 million
aggregate principal amount of 10.25%Senior Secured Notes due
2017.
Offering Price .................................. 106.5% of the
principal amount of the Additional Notesplus accrued interest from
1 April 2013 to, but notincluding, the issue date of the Additional
Notes.
Maturity Date ................................... 1 April
2017.
Interest ............................................ The
Additional Notes will bear interest from 1 April 2013at the rate of
10.25% per annum, payable semi-annuallyin arrears.
Yield to Maturity............................... 8.191%.
Interest Payment Dates ................... 1 April and 1 October
of each year.
Ranking of the Notes....................... The Notes:
• are the Issuer’s general obligations, secured asdescribed
below under “—Security”;
• rank equally in right of payment with all of theIssuer’s
existing and future debt that is notsubordinated in right of
payment to the Notes;
• rank senior in right of payment to any existing andfuture debt
of the Issuer expressly subordinated inright of payment to the
Notes;
• are structurally subordinated to all existing andfuture debt
of Subsidiaries of the Issuer that do notprovide Guarantees;
• are guaranteed on a senior basis by theGuarantors, subject to
limitations described underthe caption “Limitations on Validity
andEnforceability of the Guarantees and SecurityInterests and
Certain Insolvency LawConsiderations” and in “Risk
Factors—RisksRelating to the Guarantees and the Collateral”;
and
• are effectively subordinated to the Issuer’s existingand
future secured debt that is secured by assetsthat do not secure the
Notes, to the extent of thevalue of the assets securing such
debt.
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Guarantees...................................... The Issuer’s
obligations under the Notes areguaranteed by the Guarantors. The
obligations of eachGuarantor under its Guarantee are limited to an
amountnot to exceed the maximum amount that can beguaranteed by
each such Guarantor by law. By virtue ofthis limitation, a
Guarantor’s obligations under itsGuarantee could be significantly
less than amountspayable with respect to the Notes, or a Guarantor
mayeffectively have no obligation under its Guarantee. See“Risk
Factors—Risks Relating to the Guarantees andthe Collateral—The
Guarantees may be challengedunder applicable insolvency or
fraudulent transfer laws,which could impair the enforceability of
the Guarantees.In addition, the pledge of certain Collateral may in
somecircumstances be voidable”, “Risk Factors—RisksRelating to the
Guarantees and the Collateral—Corporatebenefit and capital
maintenance laws and otherlimitations on the Guarantees and the
security interestsmay adversely affect the validity and
enforceability ofthe Guarantees and the security interests”
and“Limitations on Validity and Enforceability of theGuarantees and
Security Interests and CertainInsolvency Law Considerations”.
Ranking of the Guarantees.............. Each Guarantee:
• is a general obligation of the Guarantor thatgranted such
Guarantee, secured as describedbelow under “—Security”;
• ranks equally in right of payment with all of suchGuarantor’s
existing and future debt that is notsubordinated in right of
payment to suchGuarantee;
• is effectively subordinated to all such Guarantor’sexisting
and future secured debt that is secured byassets not securing the
Notes, to the extent of thevalue of the assets securing such debt;
and
• ranks senior in right of payment to suchGuarantor’s existing
and future debt that isexpressly subordinated in right of payment
to itsGuarantee.
See “Risk Factors—Risks Relating to the Guaranteesand the
Collateral” and “Limitations on Validity andEnforceability of the
Guarantees and Security Interestsand Certain Insolvency Law
Considerations”.
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Security ........................................... The
obligations of the Issuer and the Guarantors underthe Notes and the
Indenture are secured on afirst-ranking basis (subject to certain
agreed securityprinciples and the Perfection Requirements) by:
• a pledge over all present and future shares ofcapital stock of
the Issuer; NA Schools Limited; NAEducational Services Limited;
Nord AngliaEducation Limited; Nord Anglia VocationalEducation and
Training Services Limited; NordAnglia Education Development
Services Limited;Nord Anglia Middle East Holding S.P.C.;
NordInternational Schools Limited; the British SchoolSp. z o.o.;
Collège Champittet SA; Collège AlpinBeau-Soleil SA; La Côte
International School SA;Brighton Education Services Sdn. Bhd.;
theEnglish International School Prague s.r.o.; BritishInternational
School Bratislava s.r.o.; NAE HongKong Limited; Rice Education Hong
Kong Limitedand EEE Enterprise Limited;
• security in respect of certain shareholder loansmade by Nord
Anglia Education, Inc. to the Issuer(if and to the extent
outstanding on the ClosingDate);
• fixed and floating charges over the businessassets of certain
Guarantors;
• assignments in respect of certain insurancepolicies, contracts
or claims of certain Guarantors;and
• pledges over the bank accounts of certainGuarantors.
We have also agreed to pledge shares of capital stockof certain
future Guarantors to secure the Notes and theGuarantees (other than
of any Immaterial Subsidiary ora Restricted Subsidiary incorporated
in or organisedunder the laws of the PRC, the Czech Republic
orSlovakia or any jurisdiction that prohibits suchRestricted
Subsidiary from guaranteeing the payment ofthe Notes).
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By 21 July 2013, which is the date 60 days after theacquisition
of WCL Group, the Collateral will includepledges of the capital
stock of all members of WCLGroup, other than those designated as
UnrestrictedSubsidiaries, certain Spanish subsidiaries and
itssubsidiary organised in Qatar.
Security granted by the Issuer and the Guarantors willbe limited
by applicable law and certain agreed securityprinciples as
described under “Limitations on Validityand Enforceability of the
Guarantees and SecurityInterests and Certain Insolvency Law
Considerations”and “Risk Factors—Risks Relating to the
Guaranteesand the Collateral”.
The assets securing the Notes also secure the SeniorSecured
Revolving Credit Facility and may securecertain hedging obligations
and Pari Passu Debt on anequal and ratable basis and may be
released undercertain circumstances. See “Risk
Factors—RisksRelating to the Guarantees and the Collateral—Thereare
circumstances other than repayment or discharge ofthe Notes under
which the Collateral securing the Notesand Guarantees will be
released automatically, withoutyour consent or the consent of the
Trustee”,“Description of Other Material Indebtedness and
CertainFinancing Arrangements—Intercreditor Agreement”
and“Description of the Notes—Security”.
Intercreditor Agreement ................... The Intercreditor
Agreement governs the relationshipsand relative priorities among:
(i) the lenders under theSenior Secured Revolving Credit Facility;
(ii) anypersons that accede to the Intercreditor Agreement
ascounterparties to certain hedging agreements; (iii) theTrustee,
on its behalf and on behalf of the Noteholders;(iv) intragroup
creditors and debtors; and (v) the director indirect shareholders
of the Issuer in respect ofcertain structural debt that the Issuer
has or may incurin the future (including any subordinated
shareholderloans). In addition, the Intercreditor
Agreementregulates the relationship between the Issuer and
itsRestricted Subsidiaries, on the one hand, and theshareholders of
the Issuer and related parties, on theother hand. See “Description
of the Notes” and“Description of Other Material Indebtedness and
CertainFinancing Arrangements—Intercreditor Agreement”.
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Use of Proceeds.............................. Of the net
proceeds from the Offering, we intend to use:(i) US$125 million to
repay in full our borrowings underthe Bridge Loan Agreement; and
(ii) US$50.6 million forgeneral corporate purposes, including to
fund theacquisition of additional schools or to repay
borrowingsunder our Senior Secured Revolving Credit Facility,
see“Use of Proceeds”.
Optional Redemption ....................... At any time prior to
1 April 2015, the Issuer may,subject to certain exceptions, on any
one or moreoccasions, redeem up to 35% of the aggregate
principalamount of the Notes at a redemption pri