Emeco restructure costs hit $39m

Emeco Holdings today sent out a mammoth 811 pages of documentation for its revised restructuring scheme, and buried inside is a breakdown of fees showing that, while its lawyers will get paid more, the company’s financial advisers will take a haircut after the first restructuring scheme fell over.

The Osborne Park-based yellow goods supplier said the estimated cost of its planned restructuring would be $39 million (inclusive of GST), a big jump from the $30 million cost of its original scheme.

The company did not explain the increase, though presumably it will need to repeat and redraft a substantial amount of preparatory work that was undertaken last year.

The fees payable to its major advisers (including fees related to the original scheme) do not explain the increase.

Sydney-based Houlihan Lokey Capital will get paid an estimated $8.3 million (excluding GST), down from $9.9 million.

Macquarie Capital will get paid $4 million (excluding GST), down from $5.5 million.

Those savings will be swallowed up by law firm Baker McKenzie, which is set to earn a tidy $5.3 million (excluding GST), up from $2 million.

That suggests Baker McKenzie has had a very large team going over the scheme documentation with a fine-tooth comb.

The fees paid to Emeco’s tax advisers at KPMG have nearly doubled to $750,000 while fees payable to the investigating accountants at Deloitte have been slashed to $160,000.

Emeco has been forced to prepare a new restructuring scheme after the original scheme failed to gain sufficient approval at creditors meetings held last November.

The scheme was supported by 89.6 per cent of noteholders who were present and voted, well above the requisite 50 per cent threshold.

However, it gained backing from only 65.2 per cent of notes by value; this was below the requisite 75 per cent of total debts and claims owning to the Emeco noteholders. 

Two days after that major setback, Emeco announced it had negotiated a revised scheme that was supported by the critics, including US investment group Black Diamond Capital Management.

The scheme involves a three-way merger of Emeco and east coast companies Orionstone and Andy’s Earthmovers, and a debt-for-equity swap under which creditors will emerge with 54 per cent ownership of the combined group.  

One aspect of the restructuring that has changed is that the creditors who previously blocked the deal have agreed to sub-underwrite half the $20 million rights issue that is part of the scheme.

Two current shareholders, private equity groups First Samuel and Black Crane, had already agreed to underwrite half the rights issue.

Emeco shareholders and noteholders will vote on the scheme at meetings to be held in Sydney on March 13.

If the revised scheme is not implemented, Emeco said it still faced estimated costs of $15 million to $20 million – up from previous estimates under the original scheme of $7 million to $12 million.