$5,000 max allotment angers shareholders

Austrim Nylex gets go-ahead to raise $100m

Austrim Nylex on Monday received the go-ahead to raise $100m to help pay off debt, but not before a grilling from shareholders alarmed about the dilution of their investment.

A share placement, fully underwritten by broker Bell Potter Securities, will raise $80m at 25 cents per share, while a further $20m, with $8.3m underwritten, will be raised through a share purchase plan.

Some shareholders were angry that they could only buy a maximum $5000 in shares under the share purchase plan and that would be subject to scaleback in the event of oversubscription.

Austrim Nylex, whose diversified businesses range from garden hoses, eskies, wheely bins and water tanks to automotive products and plant hire, said the money raised would pay off $70m of its debt with the rest going to working capital.

Austrim Nylex's debt at June 30, 2003 was $399m. It is selling off $80m of assets, with $46m already sold, to help bring down the debt.

Chief executive Glen Casey told shareholders at an extraordinary general meeting that the company was currently facing operational constraints, with suppliers demanding cash on delivery.

He said Bell Potter asked that Austrim Nylex's major shareholder Kerry Stokes take part in the capital raising, which raised the ire of smaller shareholders.

Stokes, through investment vehicle Garden Park Equities, is a 19.9% shareholder and will spend a further $13m on shares. However, because of the dilution, his stake will fall to 15.5%.

Kym Saville, who heads a superannuation trust, said there was no doubt the company needed to raise money but it had gone about it the wrong way.

"There is demand for existing shareholders to invest at the right price," he said.

"But shareholders will only get the scraps that drop from Kerry's table."

Another shareholder, with one million shares, said the value of his stake would drop by two thirds because of the capital raising and because he was unable to buy more than $5000 in the issue.

Australian Shareholders' Association representative Robert O'Brian was in favour of the capital raising, saying without it the company was dead.

"We (ask) you to bring it back from the graveside," he told the board.

Casey told journalists later that he understood the concerns of some shareholders, many of whom would have invested in Austrim Nylex when its shares were around $1.80-$2.00.

He said if Stokes had not been involved in the capital raising: "it would have been far harder to sell for us to attract investors.

"If we had gone to other major shareholders, of which we have 20,000, we would then have been playing favourites against the shareholder base," Casey said.

Chairman Dick Nitto said Austrim Nylex's remaining businesses were generally performing well and generating significant cashflow.

"We are concentrating our capital and management resources on operations with strong long term prospects and expect to make significant gains in the current financial year," he said.

14 October 2003