Emeco adjourns 9 7/8% notes meeting on recapitalization, merger a day

By Wendy Van Sickle

Columbus, Ohio, Dec. 12 – Emeco Holdings Ltd. adjourned a creditors meeting for its $282.7 million 9 7/8% senior secured notes due 2019 until Wednesday, according to a press release.

The meeting was convened Tuesday [Monday in Eastern Standard Time] in Sydney under order by the Federal Court on Nov. 2, but it was adjourned until Wednesday morning [4:30 p.m. EST on Tuesday].

The company said that following Monday’s general meeting adjournment, it remained in a trading halt Tuesday while it continues to work through some issues related to a proposed scheme of arrangement.

The creditors’ meeting was, in turn, adjourned to give Emeco “greater time to resolve these matters,” according to the press release.

The company’s planned merger and recapitalization must be approved by a majority in number and at least 75% by par value of noteholders voting at the meeting, according to a previous company notice.

Emeco said on Sept. 27 that it plans to issue new notes and stock in exchange for its $282.7 million 9 7/8% senior secured notes due 2019 as part of a recapitalization plan.

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

The transaction requires approval by Emeco noteholders through a creditors’ scheme of arrangement.

Shareholders are also expected to vote at a meeting in December.

As previously announced, Emeco has 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.

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.

The new notes will not have financial maintenance covenants. They will have negative covenants customary for high-yield bonds of this type, including but not limited to limitations on capital expenditures and debt incurrence.

If Emeco has more than A$50 million of cash (for the first two financial years) or A$35 million (for all other years) after deducting for any interest payable on the new notes, it will be required to offer to buy back outstanding notes at 106.75% of par in an amount equal to 50% of the excess cash.

The new notes will be non-callable other than a make-whole call during the first three years and will be callable at 104.5% of par in year four and at par in year five.

Emeco expects the combined company’s gross debt to 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.

Other plan components

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 said it also has committed to closing its remaining cross-currency swap positions, which will generate $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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