Close the Loop Reports US$10M ISP Sale and FY27 EBITDA Guidance of $14-16M

Strategic Divestment Sharpens Core Focus

Close the Loop Limited (ASX:CLG) has offloaded its Dallas-based ISP Tek Services for US$10 million, marking a pivotal step in its ongoing strategic overhaul. The deal, which includes US$9 million upfront and a US$1 million seller note payable over four quarters, underscores management’s intent to concentrate on the Packaging and Resource Recovery divisions, areas where the company has demonstrated consistent operational strength and competitive edge.

This divestment follows a series of portfolio rationalisations aimed at shedding underperforming units. Close the Loop’s Chairman Grant Carman emphasised that the move allows the company to "grow from strength to strength" by focusing on its highest-performing segments. The sale proceeds, combined with existing cash, will retire roughly US$16 million of debt, substantially easing the balance sheet and lowering financing costs.

Debt Refinancing and Convertible Note Restructuring

Alongside the ISP sale, Close the Loop is advancing discussions to refinance its remaining US$19.5 million debt facilities. The company anticipates a reduction in interest rates by 350 to 400 basis points, which would translate into significant annualised cash flow improvements. While final terms are pending, management’s focus on capital optimisation aims to underpin long-term shareholder value.

Further clarity on capital structure comes from agreements reached with convertible note holders Sammy and Dania Saloum. The first note of US$7.5 million, matured in April 2026, will see US$4.15 million convert to shares at 20 cents, US$2.5 million repaid in cash post-refinancing, and the remainder converted into an interest-free loan over five years. A second note’s principal and accrued interest of US$900,000 will convert at 37 cents per share, a price reflecting the original ISP acquisition valuation. Shareholder approval is required for these transactions, given related party interests.

Positive EBITDA Outlook and AI Integration

Close the Loop’s Packaging division continues to deliver robust cash flows and revenue growth across multiple markets, while the Resource Recovery segment benefits from recent OEM contract wins expected to fully materialise in FY27. The company has set EBITDA guidance between $14 million and $16 million, a marked improvement reflecting operational discipline and strategic focus.

In a nod to future-proofing, management is rolling out AI-driven process improvements aimed at shifting workflows from manual to AI-augmented systems. This transition is designed to enhance efficiency and profitability by enabling staff to concentrate on strategic and creative tasks, leveraging proprietary data for competitive advantage.

These initiatives come on the back of a challenging period, including a half-year loss and operational headwinds reported earlier in 2026, where the company faced earnings declines and asset impairments but maintained growth in its core packaging business and began divesting non-core assets modest revenue increase for 1H26 and packaging sales up 18%.

Balance Sheet Strength and Simplified Operations

With the ISP divestment complete and a significant chunk of debt retired, Close the Loop enters FY27 with a cleaner balance sheet and a simplified operating model. The company’s sharpened focus on its core businesses and the refinancing of residual debt facilities should ease financial pressures and support sustainable growth trajectories.

However, the finalisation of refinancing terms and shareholder approval for convertible note conversions remain critical near-term milestones. The market will be watching how effectively Close the Loop can translate these structural changes into consistent performance and cash flow improvements amid ongoing shifts in the circular economy sector.