Emeco, holders back revised restructuring terms for recapitalization

By Susanna Moon

Chicago, Jan. 3 – Emeco Holdings Ltd. said it signed a binding restructuring agreement on Dec. 30 with all parties to its initial support agreement dated Sept. 23.

The revised agreement includes the following amendments, according to a company notice:

• The sub-underwriting of the remaining A$10 million of the company’s A$20 million pro rata rights issue by the additional supporting noteholders;

• Three directors to be nominated to the Emeco board by the Orionstone creditors, the Emeco noteholders who are party to the revised restructuring support agreement and the additional supporting noteholders; and

• Emeco noteholders will hold 31% of the combined group, down from 34% previously, plus the issue of new shares, which represent 5% of the combined group on a post-rights issue basis, to the additional supporting noteholders.

The company noted that a new management incentive plan consisting of 10% of the company’s equity post-transaction will be implemented “to further align the interests of management and shareholders.”

Ian Testrow, Emeco managing director, has agreed to keep the additional supporting noteholders whole as a result of the placement diluting their shares, the release noted.

Otherwise, the terms are substantially the same as those of the original agreement.

The transaction requires the approval of shareholders and of Emeco’s creditors at meetings to be held in March.

The revised agreement “is further endorsement of the strategic merits of the transaction, which will strengthen Emeco’s capital structure, provide an enhanced fleet and a strong platform for growth and value creation,” Testrow said in the company update Tuesday.

“It is extremely positive that large shareholders and creditors of Emeco believe there will be opportunities for value creation as demonstrated by them fully underwriting the A$20 million pro rata rights issue.”

‘Constructive discussions’

Emeco said on Dec. 16 that it had won the backing of noteholders who had initially voted against its planned recapitalization and merger.

After “constructive discussions,” those holders had switched to being committed to the transaction and also agreed at the time to sub-underwrite A$10 million remaining of the A$20 million rights offering as part of the transaction.

The company’s current creditors’ scheme process was expected to be dismissed at a Federal Court of Australia hearing, the release added.

The update came after an announcement Dec. 14 that the company had failed to win the support of creditors for its recapitalization and that it would have to look at other options to strengthen its balance sheet.

The news followed two additional adjournments for the creditors meeting, with the proposal failing to meet the requirement that it be supported by at least 75% of the total debt and claim owing to noteholders.

The other requirement, that it achieve the support of at least 50% of the noteholders present at the meeting, was met.

Emeco previously said that $175.49 million, or 65.23%, of the notes by value were voted in favor and $93.55 million, or 34.77%, were voted against. By number, 43, or 89.58%, were in favor and five, or 10.42%, were against.

The creditors meeting had already been adjourned until Wednesday morning local time and the meeting was adjourned two further times on Wednesday in an attempt to resolve the issues.

The creditors meeting was for holders of the company’s $282.7 million of 9 7/8% senior secured notes due 2019.

Emeco announced on Sept. 27 that it was proposing to issue new notes and stock in exchange for the 9 7/8% notes as part of a recapitalization plan.

The company also proposed to merge with Orionstone and Andy’s Earthmovers.

As previously announced, Emeco signed a binding restructuring support agreement with the holders of about 45% of its notes and with the shareholders and creditors of Orionstone and Andy’s.

Under the transaction, the claims of the noteholders, Orionstone creditors and Andy’s Earthmovers creditors will be extinguished in exchange for their share of 54% of the ordinary shares of the combined group, subject to dilution from a management incentive plan, and A$472.5 million of 9¼% five-year senior secured notes.

Emeco expects that the combined company’s gross debt would be A$490 million, compared with Emeco’s A$390 million of gross debt, and its debt-to-EBITDA ratio to be 5.1 times, compared with Emeco’s 7.2 times ratio.

In addition to the exchange, the plan is expected to include the following elements:

• The merger with Orionstone through the exchange of 100% of the ordinary shares of Orionstone for 7% of the ordinary shares of the combined group;

• The merger with Andy’s through the exchange of 100% of the ordinary shares of Andy’s for 5% of the ordinary shares of the combined group;

• The cancellation of all commitments under Emeco’s A$75 million asset-backed loan facility due December 2017, which was undrawn as of June 30, and an expected refinancing by Emeco into a new A$65 million revolving loan facility; and

• A pro rata equity issue of A$20 million Emeco ordinary shares to existing shareholders pre-transaction, with A$10 million underwritten by current Emeco shareholders First Samuel and Black Crane.

The company previously said it also has committed to closing its remaining cross-currency swap positions, which will generate A$12 million of cash proceeds.

Emeco is a provider of equipment solutions to the mining industry and is based in Perth, Australia. Orionstone is a heavy earthmoving equipment supplier based in Mackay, Australia. Andy’s is an equipment rental business based in Bendigo, Australia.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.