Close the Loop (ASX: CLG) has accelerated its strategic transformation through the US$10 million sale of ISP Tek Services and plans to use the proceeds and existing cash to retire about US$16m of debt.
The circular economy company has sold the Dallas-based business to Ivy Technology Holdings as part of a broader reshaping around its core packaging and resource recovery divisions.
The transaction comprises US$9m payable at settlement for ISP shares and a US$1m seller note to be paid in four equal quarterly instalments, with the first instalment payable on settlement.
Close the Loop is also progressing debt refinancing, convertible note settlement arrangements and cost-base reviews as it targets EBITDA of $14m to $16m in FY27.
Ongoing Portfolio Reset
The ISP sale marks a further step in Close the Loop’s effort to simplify its operating structure and concentrate on businesses where it has demonstrated stronger performance and capability.
Packaging and resource recovery will now form the centre of the business, with those divisions identified as the strongest platforms for sustainable growth and profitability.
Close the Loop will combine ISP sale proceeds with existing cash to retire about US$16m of outstanding debt, and is also in advanced discussions with potential financiers and lenders to refinance residual debt facilities of US$19.5m.
That refinancing process is expected to reduce the company’s overall interest rate by about 350 to 400 basis points, delivering annualised savings and improving future cash flow generation.
Convertible Note Settlement
Close the Loop has reached agreement with Sammy and Dania Saloum, the holders of its existing convertible notes, to provide greater certainty around its capital structure.
Under the first US$7.5m three-year 4% interest-bearing convertible note, which matured on 28 April 2026, US$4.15m will convert into Close the Loop shares at $0.20 per share.
A further US$2.5m will be repaid in cash after the refinancing process is completed, with the remaining principal and interest balance to be repaid over five years as an interest-free loan.
The second US$7.5m three-year 4% interest-bearing convertible note will also be restructured, with its principal and accrued interest of US$900,000 to convert into Close the Loop shares at $0.37 per share.
The $0.37 conversion price reflects the original acquisition price associated with the ISP transaction, while the $0.20 conversion price reflects the company’s original listing price.
Core Divisions Drive Outlook
Close the Loop’s packaging division has continued to deliver strong operating cash flows and revenue growth across multiple jurisdictions and customer segments.
The core resource recovery businesses have also performed strongly, supported by recent original equipment manufacturer contract wins, the full benefit of which is expected to flow through during FY27.
Close the Loop now expects FY27 EBITDA of $14m to $16m as the portfolio reset, debt reduction and operational improvements combine to support a stronger earnings base.
Chair Grant Carman said management was confident the streamlined operating platform would support improved execution.
“The Company has embarked on a structured program to review and align its cost base with its revenue and profitability profile, further enhancing operational efficiency and supporting a stronger, more sustainable platform for future growth,” he said.
AI-Powered Workflows
Close the Loop is also progressing AI-driven process improvement initiatives across the organisation to increase efficiency and profitability in FY27 and beyond.
“The company will become AI-powered, shifting from manual execution to strategic, AI-augmented workflows,” Mr Carman said, adding that the approach would allow employees to focus on higher-value strategy and creativity while using proprietary data to build customised intelligent systems.
Close the Loop has operations across Australia, Europe, South Africa, and the US, where it develops sustainable packaging and collects, sorts, reclaims, and reuses resources that would otherwise go to landfill.
The group’s activities include recovering print consumables and cosmetics, reusing toner and converting post-consumer soft plastics into an asphalt additive.
