Beleagured Rockingham-based animal pharmaceutical products manufacturer Chemeq Ltd has announced a $75 million refinancing proposal from a little-known St Georges Terrace banker International Finance Corporation of Australasia Pty Ltd.
Beleagured Rockingham-based animal pharmaceutical products manufacturer Chemeq Ltd has announced a $75 million refinancing proposal from a little-known St Georges Terrace banker International Finance Corporation of Australasia Pty Ltd.
The deal comes despite current legal action which threatens to send the company under.
IFCA, which is chaired by David Petersen, will subscribe for around 310 million shares at 19.35 cents each to raise $60 million under the first stage of the deal.
Mr Petersen is linked to the building of the now defunct Perth Entertainment Centre and the production companies of Michael Edgley during the late 1980s.
The share deal, which would give IFCA a 75 per cent stake in the firm, would be followed by a non-renounceable rights issue to all Chemeq shareholders to raise a further $15 million at the same price.
While the company said it could not guarantee the proposal would be implemented, Chemeq chairman John Hopkins said the board felt signing the subscription agreement and putting the proposal to shareholders was the best option.
"If this equity refinancing package with IFCA is completed, it will herald in a new era for Chemeq," he said.
"We recognise that there is no certainty that we will be able to complete the deal, but we believe that this should not deter us from proceeding and doping our very best to ensure that this transaction is presented as an option for shareholders."
IFCA managing director Cyril D'Silva told WA Business News the company had substantial funding facilities in place for the proposal from the bank he represents in Australia, US-based Alps Resources Bankers Inc.
Alps is linked to another group, Amalgamated Resources Holdings, and shares a president in Amal Rampardaruth. Little is known about Mr Rampardaruth or Amalgamated although there appears to have been some activity in technology investment, including a $US70 million financing agreement two years ago with Seattle-based HQ Sustainable Maritime Industries Inc.
Chemeq is currently awaiting the result of an appeal to a Supreme Court judgement which found it must repay $60 million to bondholders Stark Trading and Harmony Investment Fund after the company allegedly failed to fulfil the conditions of the bonds issue.
Aside from seeking the consent of the Supreme Court to implement the agreement, the deal is also contingent on the appeal not being decided before May 31, and Stark and Harmony agreeing to accept $60 million in return for the redemption of the bonds and satisfaction of their claims.
Chemeq's cash at bank was $8.3 million with creditors, accruals and retentions of $300,000 on March 31, 2007.
The full text of a company announcement is pasted below
Chemeq Limited (ASX: CMQ) has received a refinancing proposal from International Finance Corporation of Australasia Pty Ltd (IFCA) which Chemeq has today executed.
The IFCA proposal is in the form of a subscription agreement that provides for IFCA to subscribe for up to $75 million in new equity capital in Chemeq in two stages.
In the first stage, IFCA has offered to subscribe for approximately 310.08 million Chemeq fully paid ordinary shares at 19.35 cents per share to raise $60 million. Following this stage, IFCA would hold approximately 75% of the issued capital of Chemeq.
As soon as possible after completion of the first stage, IFCA has also offered to fully-underwrite a non-renounceable rights issue to all Chemeq shareholders to raise a further $15 million at 19.35 cents per share.
The IFCA proposal, a full copy of which is attached, is subject to a number of conditions precedent. The conditions precedent include (among other conditions):
- Chemeq shareholder approval to the subscription for shares by IFCA in stage 1;
- IFCA being satisfied on or before 30 April 2007 with the results of its due diligence investigations in relation to Chemeq;
- the convertible bond holders agreeing to accept A$60,000,000 in return for redemption of all of the convertible bonds in full and final satisfaction of all obligations of Chemeq in respect of the convertible bonds and as full and final satisfaction of all their claims against Chemeq; and
- Chemeq's appeal of the decision of Justice Templeman on 1 February 2007 not being decided on or before 31 May 2007.
The Board of Chemeq has considered the IFCA proposal today.
The Board notes that some of the conditions precedent to the IFCA proposal are outside of the control of Chemeq. On this basis, and given the ongoing dispute with the bond holders, the Board of Chemeq is unable to form a view as to whether the IFCA proposal can be implemented.
However, the Board is also of the view that the proposal has sufficient merit for it to be pursued by Chemeq and for the proposal to be put to shareholders.
Chemeq Chairman John Hopkins said that despite the uncertainty as to whether the refinancing package can be implemented, the Board felt that it was in the best interests of shareholders to sign the subscription agreement and to put the proposal to Chemeq shareholders.
"If this equity refinancing package with IFCA is completed, it will herald in a new era for Chemeq," Mr Hopkins said.
"The Board has always placed the interests of Chemeq shareholders at the top of its priorities."
"For that reason, the Board has decided to put the proposal to shareholders and to use its best endeavours to implement the proposal."
"We recognise that there is no certainty that we will be able to complete the deal, but we believe that this should not deter us from proceeding and doing our very best to ensure that this transaction is presented as an option for shareholders."
Chemeq Chief Executive Officer David Williams said that if the transaction was successful, the funds would allow Chemeq to repay the $60 million in convertible bond debt and end the distracting dispute with Chemeq's bond holders.
"Put together with Chemeq's existing cash resources, the fresh equity will give the Company the opportunity to pursue the new strategy outlined by the Board back in July," Mr Williams said.
"I strongly believe our new strategy has the potential to see Chemeq become a profitable licensor of its world-class polymeric antimicrobial technology across a range of industries including industrial, chemical, pharmaceutical and human health applications."
"In addition, we believe this can be achieved without significant capital commitment and years of long lead times to market by selectively choosing target markets and strategic partners to allow us to get product to market quickly and efficiently."
IFCA is a private investment company based in Perth managed by Chairman David Petersen and Managing Director Cyril D'Silva.
Chemeq has been advised that IFCA has substantial funding facilities in place with a major North American bank. IFCA uses these facilities to facilitate transactions between the private sector and international financial institutions.
To allow Chemeq to implement the equity subscription agreement with IFCA, Chemeq will seek a variation of the orders whereby Chemeq gave certain undertakings to the Supreme Court and the convertible bond holders to allow its appeal against an earlier Supreme Court decision that it had not met the terms of the final milestone covenant set out in the Convertible Bonds Deed Poll to
proceed. The subscription agreement does not take effect unless the consent of the Supreme Court is obtained.
If appropriate court orders are obtained, Chemeq will proceed to prepare a notice of meeting with an independent expert's report to be sent to shareholders of Chemeq as soon as possible to seek approval of the issue of shares to IFCA. The shareholder meeting is expected to be held in May.
