Shareholder pain in Paladin survival plan

Shareholders in uranium miner Paladin Energy will end up owning just 2 per cent of the company under a recapitalisation plan that will include a major debt for equity swap and a $US115 million high yield secured note raising.

It comes five months after Matthew Woods, Hayden White and Gayle Dickerson from KPMG were appointed administrators by the Paladin board.

Paladin had been unable to negotiate a deferral of a $US277 million debt to french utility Electricite de France, an agreement that was eventually terminated in October.

Only one proposal for a restructure was received by the administrators, led by a group of the company’s unsecured bond holders.

Shareholders will take a major haircut in the deal, according to the administrators report, with about 98 per cent of Paladin’s shares on issue to be transferred to creditors in a debt-for-equity swap.

Creditors will be transferred a 70 per cent slice of Paladin’s share issue, equivalent to about $55 million, based on the company’s market capitalisation when it last traded.

A further 25 per cent of shares will be issued to creditors who participate in a $US115 million secured note raising, while 3 per cent will be issued to the underwriter of the new bond.

The remaining 2 per cent of scrip will remain in the hands of existing shareholders.

Deutsche Bank will be repaid a $US60 million secured loan, after it bought and extended a previous loan facility from Nedbank.

The recapitalisation is subject to approval of the deed of company arrangement by a meeting of creditors next Thursday, and is expected to be completed by January 31.

Administrators had considered a sale of the company’s major asset, a 75 per cent stake in the Langer Heinrich project in Namibia, but that move was ruled out in August.

Shares in Paladin last traded at 4.7 cents each before they were suspended in June.

By comparison, shares in Paladin had changed hands for as more than $5 each in early 2008.

KPMG’s fees were expected to be up to $1.9 million.