75 million refinancing proposal, page-5

The book will be fascinating - good luck holders.

Refinancing deal may see Chemeq back on track

Nick Evans
Tuesday, 10 April 2007

INTEREST in Chemeq shares surged today after the company announced a refinancing deal that may see it through its current financial and legal difficulties. Private investment company International Finance Corporation of Australasia (IFCA) has proposed a subscription agreement that would see IFCA subscribe for up to $75 million in new equity capital in Chemeq, in two stages.

Chemeq shares rose immediately this morning, to begin trading at 15c, up from 8.9c on Thursday, when the company called a trading halt to consider the offer.

According to Chemeq chief executive David Williams, if the transaction is successful, the funds would allow Chemeq to repay the $60 million in convertible bond debt and end the ongoing 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," Williams said.

The new strategy would see Chemeq become a profitable licensor of its polymeric antimicrobial technology across a range of industries including industrial, chemical, pharmaceutical and human health applications.

IFCA has offered to subscribe for approximately 310.08 million Chemeq fully paid ordinary shares at 19.35c per share to raise $60 million, in the first stage. 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 would also fully underwrite a non-renounceable rights issue to all Chemeq shareholders to raise a further $15 million at 19.35c per share.

Chemeq chairman John Hopkins said that while there was some 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," 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."

Some of IFCA's conditions on the deal are outside the control of Chemeq, according to Hopkins, so the board has been unable to form a view as to whether the IFCA proposal can be implemented, at this stage.

IFCA's conditions include:

Chemeq shareholder approval to the subscription for shares by IFCA in Stage 1;

IFCA being satisfied on or before April 30, 2007 with the results of its due diligence investigations in relation to Chemeq;

The convertible bond holders agreeing to accept $A60 million 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 February 1, 2007 not being decided on or before May 31, 2007.

Despite the uncertainty surrounding the IFCA conditions, the Chemeq board has determined to pursue the deal and put the proposal to shareholders, probably in May.

In order for the subscription agreement to take effect Chemeq will need to seek the consent of the WA Supreme Court. If the appropriate court orders are obtained, Chemeq will then prepare a notice of meeting for shareholders, with an independent expert's report, as soon as possible to seek approval of the issue of shares to IFCA.

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