16/12/2016 - 11:57

Emeco wins creditor backing

16/12/2016 - 11:57

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Two days after some of Emeco Holdings’ large creditors blocked a major restructuring, they have reversed their stance after being given an opportunity to acquire more equity in the group.

Emeco wins creditor backing
Emeco's large creditors have reversed their stance.

Two days after some of Emeco Holdings’ large creditors blocked a major restructuring, they have reversed their stance after being given an opportunity to acquire more equity in the group.

The Perth-based heavy equipment supplier announced today that the noteholders who voted against the scheme of arrangement have now committed to support the transaction.

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.  

Emeco said today the transaction metrics would be substantially the same.

However, one aspect 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.

US-based investment group Black Diamond Capital Management is believed to be the main party that has reversed its position.

The market welcomed the news, but not enough to reverse the big share price fall on Thursday.

Emeco shares jumped from 5.0 cents to 6.3 cents today, after falling from 7.3 cents on Thursday.

The company said it would proceed to work with all stakeholders to document the necessary arrangements to give effect to the revised transaction.

Managing director Ian Testrow said all stakeholders recognised the strategic rationale, industrial logic and value creation opportunity of the transaction.

“I am extremely proud of how our team has worked tirelessly to achieve this outcome,” he said.

Emeco’s main advisers have a big financial incentive to get the deal over the line.

If it succeeds, Sydney-based financial adviser Houlihan Lokey will be paid $9.9 million, Macquarie Capital will be paid $5.5 million and law firm Baker & McKenzie $2.0 million.

Today’s update comes after Emeco repeatedly deferred its scheme meeting on Wednesday in an effort to gain sufficient backing.

When the meeting finally got under way at 6pm in Sydney, 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. 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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