Coote Industrial will be able to make a start on its growth objectives after it received a $44 million payment from Greentrains while it enters into a major shareholding deal with Elphinstone Group.
Coote Industrial will be able to make a start on its growth objectives after it received a $44 million payment from Greentrains while it enters into a major shareholding deal with Elphinstone Group.
Coote has been waiting for some time for payment from Greentrains after the latter bought 42 locomotives and 54 wagons from Coote subsidiary, valued at a total of $82.7 million, last year.
Greentrains, which is working towards a local listing, had reduced the amount to $75 million but has had trouble refinancing the debt.
Earlier this year, Coote managing director Mike Coote said Greentrains needed to raise $15 million in equity, which was a pre-condition for refinancing its debt.
Greentrains had locked in $11.5 million, with a $6.5 million placement to Victorian Caterpillar dealer Dale Elphinstone's company Elph Pty Ltd, and $5 million in convertible notes subscribed to by Orange Grove Brickworks.
Today, Coote said it had taken an equity stake in Greentrains and retained rolling stock assets valued at $17 million in order to settle the first $44 million tranche.
"... this is an important first step towards realising the targeted benefits for Coote Industrial; including increased asset reliability in South Spur Logistics and the expansion of Gemco Rail's rolling stock maintenance, repair and overhaul services," the company said in a statement.
It added that $34 million of the payment will be used to reduce debt and the balance retained for working capital.
Further comment was being sought at time of publishing.
Meantime, Coote today executed a $4 million convertible note deed with Elph, which is part of the Elphinstone Group, which is already a substantial shareholder in the company.
The notes will be issued in two tranches with the first involving 10.871 million notes for $1.864 million and the second comprising of 12.458 million notes for $2.136 million.
Coote said the funds from the second tranche, which is subject to shareholder approval, will be advanced as an interim loan.
Coote said it will use funds from the convertible note deed to invest in Greentrains and for working capital.
Earlier this year, Elph subscribed to 6.5 million Coote shares at 20 cents each for a total cost of $1.3 million.
Shares in Coote closed down one cent to 32c today.
The announcement is below:
Settlement of First Tranche Sale to Greentrains Ltd
The directors of Coote Industrial Ltd (CXG) are pleased to announce that Greentrains Ltd has finalised its acquisition of the first tranche of locomotives and rolling-stock, with a payment of $44m.
Coote Industrial retained rolling stock assets valued at $17m and has taken an equity position in Greentrains Ltd in
order to settle the entire receivable for the first tranche sale.
The company's equity stake in Greentrains Ltd complements the $6.5m investment made by Elph Pty Ltd and an
investment of $5.1m made by Orange Grove Brickworks Pty Ltd, establishing a sound platform for the emerging entity.
In addition to the tangible opportunities available to Greentrains, this is an important step towards realising the
targeted benefits for Coote Industrial; including increased asset reliability in South Spur Logistics and the expansion of Gemco Rail's rolling stock maintenance, repair and overhaul services.
$34m of the proceeds has been allocated to debt reduction and the balance is retained as working capital.
Cornerstone Investor - Elph Pty Ltd: Convertible Note Deed
Coote Industrial Limited (CXG) today executed and settled on a $4m Convertible Note Deed with Elph Pty Ltd, further strengthening the company's relationship with Elphinstone Group, a substantial shareholder in Coote Industrial.
Funds received under the Convertible Note Deed have been used to invest in Greentrains Ltd and are available as working capital in Coote Industrial.
Headline terms and conditions of the Convertible Note Deed include:
Two tranches: Issue of the first tranche of 10.871m convertible notes for $1.864m is not subject to shareholder
approval. Issue of the second tranche of 12.458m convertible notes for $2.136m is subject to shareholder
approval, with those funds advanced as a loan in the interim
- Face value of convertible notes: $0.1714612
- Rate of conversion: one ordinary share for one convertible note
- Coupon rate 8%
- Maturity 4 years after issue
- Convertible on or before the earliest redemption date, 12 months after issue
A general meeting of shareholders of Coote Industrial Ltd will be convened to consider the Board's recommendation to approve the company's issue of the second tranche of convertible notes.
Upon conversion of the first and second tranche convertible notes, Elph Pty Ltd would hold 25% of Coote Industrial Ltd's issued shares.
