Emeco Holdings noteholders and shareholders to vote on scheme March 13

By Caroline Salls

Pittsburgh, Feb. 7 – Emeco Holdings Ltd. will hold a meeting on March 13 during which its noteholders will vote on a scheme of arrangement that includes a previously announced recapitalization and merger transaction, according to a news release.

The creditors’ scheme must be approved by a majority in number and at least 75% in face value of the noteholders voting at the meeting.

The scheme is also subject to approval by Emeco’s shareholders at an extraordinary general meeting to be held on March 13.

Emeco said its directors unanimously recommend that noteholders vote in favor of the scheme “in the absence of a superior proposal.”

As previously reported, Emeco signed a binding restructuring agreement on Dec. 30 with all parties to its initial support agreement dated Sept. 23.

Restructuring changes

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.

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.

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

Merger proposal

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

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.

Plan terms

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.

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