Mercer Group eyes $9 mln share issue, placement

Mercer Group eyes $9 mln share issue and private placement to repay debt

By Paul McBeth

Sept. 30 (BusinessDesk) - Mercer Group, the stainless steel products manufacturer part-owned by Allan Hubbard, is mulling a $9 million share issue to investors and private placement as it looks to get itself out of debt trouble.

The company entered into a conditional agreement with an unidentified institutional investor for the placement of shares and convertible notes and the partial underwriting of a share issue to investors, it said in its annual report. The cash will be used to repay debt and boost its working capital.

“In the event that the company decides that the revised proposal is not in the best interests of the company and its shareholders, the directors are satisfied that there are alternative strategies available to the company to refinance,” the company said in a note.

Mercer has been operating outside the terms of its banking covenant since last year when its funding costs ratio fell below the agreed 2.25 times level, and it’s struggled to rein in debt, shuffling around one loan from Hubbard’s South Canterbury Finance to another related financier, Gresham Finance Ltd., a lender associated with director Humphrey Rolleston.

Auditor PricewaterhouseCoopers tagged the report, saying Mercer’s viability to operate as a going concern was reliant on securing new capital.

Gresham Finance cut the interest owing on the loan, and provided an additional $700,000 to company last week.

As at June 30, Mercer’s total borrowings were $12.3 million, up from $12 million a year earlier. About $8 million of that is owed to Westpac Banking Corp., and came due today.

The shares, which trade infrequently, last traded on June 30 at 25 cents.

Hubbard owns about 45% of the company.

(BusinessDesk)

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