Engineered lumber company Lignor Ltd is reviewing its funding options, including the possible use of private equity, after failing to meet its own deadline for completion of a $125 million public share offer.
Engineered lumber company Lignor Ltd is reviewing its funding options, including the possible use of private equity, after failing to meet its own deadline for completion of a $125 million public share offer.
"The prospectus raising process took longer than we thought," Lignor managing director Glyn Denison said.
Lignor's failure to meet the IPO deadline means that investors who recently subscribed for $210 million of convertible bonds have been able to demand new terms and conditions.
Mr Denison said the company was reviewing both the conversion terms and the coupon payments on the bonds, which would be made more generous to reflect changed conditions in global credit markets.
The changes to the bonds would necessitate changes to the company's planned equity raising.
Mr Denison said investors had strongly supported the company's plans and he was confident Lignor would be able to proceed with its lumber project in Albany.
Institutions had committed to subscribe for $100 million of equity, leaving a $25 million retail share offer as the final leg of its capital raising.
"Its very rare for this level of funding for a start-up project by a new company," he said.
Mr Dension said Azure Capital continued as the company's corporate adviser while Macquarie Bank and Patersons Securities were still engaged as joint lead managers for an IPO.
However, he said Lignor was assessing alternatives.
"It may be that an alternative to an IPO may be a better way to go," he said. "The private equity route is one that we are discussing."
Notably, Azure was also corporate adviser to Gordon Martin's Coogee Resources Ltd, which had planned a $380 million IPO but eventually proceeded earlier this year with a private equity funding deal with Babcock & Brown.
LIGNOR TO REVIEW FUNDING OPTIONS FOR ALBANY PROJECT
Engineered timber group Lignor Limited is re-examining a range of funding options for the development of its major engineered timber project at Albany in Western Australia.
Lignor has decided not to proceed with the proposed Initial Public Offering and Convertible Bond structure in its current form and has put the current capital raising process on hold while it considers alternative financing structures.
Lignor Managing Director Glyn Denison said the decision is not expected to impact on the overall project development timetable.
"We have a range of funding options and the current IPO and Convertible Bond structure was our preference. However, due to shifting global credit markets some of the investors
proposed changes to terms that made the current IPO and Convertible Bond structure unworkable" said Mr Denison.
"We are now assessing a range of financing structures open to the company to determine the most appropriate funding option to take the project forward"
Mr Denison said investor support from domestic and international institutions for both the IPO equity and Convertible Bond issue had been extremely high, with demand for total capital in excess of AUD450 million.
"The capital markets have endorsed the robustness and viability of the project and we remain strongly committed to developing this major new industry in the Great Southern of Western Australia," said Mr Denison.
"The strong demand for equity and debt demonstrates the strong support for the Lignor project from institutional investors and we look forward to progressing alternative arrangements in the near future."
Mr Denison said that despite the decision to suspend the current capital raising process, Lignor had strong investor momentum and remained confident in the future of the project.
About Lignor Ltd
Lignor Limited is an Australian company focused on the manufacturing of Engineered Strand Lumber (ESL®) and Engineered Strand Board (ESB®) from hardwood eucalypts.
Lignor and independent consultants have conducted extensive product testing, development and market research with results indicating that the products will be extremely competitive with significant market potential.
The engineered strand lumber process and technology is widely used in North America and Europe. Lignor has registered patents (pending) to use hardwood eucalypts in this process.
The production process is environmentally friendly:
- It uses a sustainable resource at a high log conversion rate of over 70%
- The remaining log (less than 30%) is recycled as biomass fuel for the generation of heat and steam
- Carbon sequestered for life of product
- Products are environmentally benign.
Log supply and product offtake contracts have been secured and further contracts will be signed as the project moves towards commissioning.
Lignor has been given local, state and national government support with Major Project Facilitation Status and various government grants for up to $16 million.