Mercer settles debt payment plan
The stainless steel company is repaying a total of $8 million to Westpac after a rights issue to raise $9 million.
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Stainless steel product maker Mercer Group has secured funding from Westpac for another year while issuing an operational update that showed trading was still difficult.
Shareholders last week approved a $9 million rights issue, which will be used to reduce loans from Westpac, Gresham Finance and Paul Hewitson, one of the company's directors.
Allan Hubbard and Jean Hubbard and their associated interests collectively hold 45% of Mercer but their assets are in statutory management and they are not expected to participate in the capital raising.
The company says it has accepted an offer from Westpac to extend its banking facilities to December 31, 2011. The facility will be reduced by $1.5 million after the rights issue, by $1 million in July 2011 and $3 million in November 2011.
Westpac has changed the financial covenants and the company expects to comply with the new covenants.
Westpac was owed $8m under the facility at September 30, according to documents for the rights issue. The company has been in breach of its banking covenants previously.
The prospectus for the rights issue was expected to be registered today. The underwriting arrangements are now conditional only on the occurrence of a material adverse event.
The rights issue is fully underwritten by Murray Capital's Rakaia Fund and by Christchurch financier Humphry Rolleston's Asset Management.
The company is forecasting it will break even in the year ended June 30, 2011, saying that trading conditions across all businesses continued to be difficult. It expects sales of $36 million, down from $37 million last year.
Earnings before interest, tax, depreciation and amortisation are projected to be $1.2 million for the 2011 financial year.
In the five months ended November 30, Mercer Products NZ sales were down 10% on last year but Mercer Products' Australian sales were up 50%.
Mercer Medical sales were down 6%. Mercer Stainless sales in New Zealand were up 34%. The Mercer Stainless Australian business had been restructured and had made losses.
NBR staff
Thu, 23 Dec 2010
Thu, 23 Dec 2010
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
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Mercer settles debt payment plan
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