Struggling engineering group Neptune Marine Services has announced a deeply-discounted $80.6 million capital raising to reduce its debts, after its major bank agreed to a major restructuring of its loan facilities.
Struggling engineering group Neptune Marine Services has announced a deeply-discounted $80.6 million capital raising to reduce its debts, after its major bank agreed to a major restructuring of its loan facilities.
The company has also announced a cost cutting program targeting $10 million in savings and plans for management and board changes.
Euroz Securities and Patersons Securities have been appointed as joint lead managers of the 3-for-1 entitlement offer, pitched at just six cents per share,
This follows the failure of earlier attempts to raise capital at a substantially higher price, which triggered the resignation of managing director Christian Lange in November.
The company said the proceeds will be used mainly to repay debt, and to make deferred payments to the vendors of two businesses acquired by Neptune in 2007 and 2008. The vendors are owed $7.7 million.
Neptune said it negotiated revised banking facilities with National Australia Bank on 21 December. The conditions include an extension of the maturity date for all NAB debt facilities, and a waiver of financial covenants, to 31 March 2012, a standstill on loan repayments until 28 February 2011, and a doubling of its interest margin to 400 basis points above the bank bill rate.
Chairman Ross Kennan said the Board was presenting the recapitalisation plan to shareholders and prospective new investors on the basis of a comprehensive review of the Company's finances and operations.
"We strongly believe Neptune can return to underlying profitability on the basis of the initiatives being announced today," he said.
"Shareholders have every right to be disappointed with Neptune's recent performance, but we firmly believe this plan can restore value for shareholders."
Acting chief executive Robin King said that based on his experience in the industry, he believes Neptune has the capacity to deliver stronger financial performance.
"I fully appreciate the gravity of the current situation and take the management of our shareholders' funds very seriously," Mr King said.
A summary of the Neptune announcement is pasted below:
Neptune announces $80.6 million equity capital raising to recapitalise its balancesheet and set a platform for a turnaround in financial performance
-Neptune Marine Services Limited is seeking to raise up to approximately $80.6 million of new equity at $0.06 per share
-The equity capital raising will fund the reduction of bank debt and deferred payments to vendors
-The equity capital raising is necessary to ensure the ongoing financial viability of the Company
-The key terms of revised banking facilities have been agreed
-Significant management and board changes are being undertaken
-Broad-reaching operational restructuring and cost saving initiatives are also underway
The Board of Neptune Marine Services Limited (ASX: NMS, Neptune or the Company) announces that it will launch an equity capital raising to raise up to $80.6 million together with major, broad reaching initiatives aimed at returning the business to profitability.
The equity capital raising will be a 3 for 1 pro-rata entitlement offer of new shares in the Company, at $0.06 per share to raise up to $80.6 million, to eligible shareholders (and an offer of any shortfall to eligible shareholders and other investors) that will assist with the recapitalisation of the Neptune balance sheet by reducing bank debt, settling deferred payments to vendors of acquired businesses and providing working capital (Entitlement Offer). Shareholders will be able to apply for shares in addition to their entitlement.
On 21 December 2010, the Company agreed revised banking facility terms with the National Australia Bank (NAB). Further details with respect to the revised credit facilities are set out below.
In addition to the Entitlement Offer, the Board announced the following key elements of a restructuring strategy at its AGM in Perth on 30 November 2010:
-Appointment of Robin King (currently Regional Vice President for Australia, New Zealand and PNG) as acting CEO to replace the former CEO.
-Further strengthening of the Board via the appointment of at least two new non-executive directors with significant industry experience and associated skill sets.
-The engagement of PricewaterhouseCoopers (PwC) to assist management and the Board with a thorough review of the business, current organisational efficiency, asset utilisation and disposal options.
-Conduct a strategic review of the Company to identify, then sell or close underperforming business units and assets.
-The commencement of an immediate and aggressive cost reduction program targeting approximately $10 million in ongoing annual savings.
-In light of current developments, a review of the carrying value of goodwill as at 31 December 2010.
Trading in the Company's shares will remain suspended pending completion of the Entitlement Offer. The Entitlement Offer will be subject to shareholder approval at a general meeting to be held on or about Thursday, 10 February 2011 (General Meeting), which is necessary to satisfy one of the conditions of the ASX Listing Rule waivers granted to the Company by the Australian Securities Exchange (ASX).
Neptune Chairman Ross Kennan said the immediate changes were necessary and would set a platform for a return to profitability.
"The performance of our business over the last financial year and first and current quarter of 2011 has simply not been acceptable," Mr Kennan said.
"The Board has taken decisive and wide-reaching steps to turn around the Company's performance and to do so in the shortest possible timeframe.
"We require a recapitalised balance sheet in order to move forward and we understand that our shareholders will want to see commitment to significant change before they commit further investment.
"In our current situation, equity will have to be raised at a deep discount to the last market price and therefore we believe it is fair and appropriate that we offer our existing shareholders the first opportunity to invest at this discounted level."
Mr Kennan said the Board was presenting the recapitalisation plan to shareholders and prospective new investors on the basis of a comprehensive review of the Company's finances and operations.
"We strongly believe Neptune can return to underlying profitability on the basis of the initiatives being announced today," he said.
"Shareholders have every right to be disappointed with Neptune's recent performance, but we firmly believe this plan can restore value for shareholders."
