HWE shares soar on Glencore bail-out Dec 23 10:44 AFR Wires
Embattled mining contractor Henry Walker Eltin has delivered some good news to its long-suffering shareholders, announcing a $100 million bailout by Swiss-based commodities trader Glencore.
The recapitalisation plan, announced ahead of the market open on Thursday, sent Henry Walker's shares soaring almost 20 per cent to above 50¢, although still less than half the levels of just three months ago.
"The board believes the transaction outlined today best addresses the company's future funding requirements and its viability as a going concern, entrenches a relationship with a leading participant in the mining and commodities sector and is in the interests of all shareholders," Henry Walker said in a statement.
Henry Walker Eltin is a client of Glencore's alumina operations in Jamaica.
News of the bailout follows an horrific couple of months for Henry Walker Eltin , marked by profit warnings, the loss of its chief executive and speculation about whether it would continue as a going concern.
Under the plan announced on Thursday, Glencore Finance AG will subscribe to a $60 million private placement of preference shares, convertible at 40¢ each.
It will also underwrite a $40 million pro-rata renounceable rights issue to Henry Walker shareholders, again at 40¢, at a ratio of one for every 2.18 shares held.
The new capital will be used to discharge the company's syndicated loan, other maturing financial obligations and to fund working capital requirements.
"The recapitalisation transaction provides us with funding certainty from a well respected investor in the mining industry and is an important milestone in restoring the company's financial stability and operational flexibility," Henry Walker Eltin chairman Neville Walker said.
"We have continued to receive strong support from our clients and have not lost any contracts or extensions, but we believe a timely resolution to the funding problem is important and is one of the reasons why the Glencore transaction is very positive for shareholders."
Shareholders will be asked to approve the transaction at an extraordinary general meeting expected to be held in February.
In the meantime, Henry Walker Eltin has extended its existing finance facilities through to early February 2005.
"While operating profit guidance provided in October has not changed, one-off costs associated with the facilities extension process are expected to be in the order of $6 million," the company said. "This change represents a deterioration from the previous profit before tax guidance provided on 28 October."
In late October, Henry Walker slashed its profit outlook for the current year, saying losses on several projects would wipe $16 million from its original forecasts.
It said it expected to break even or post a small loss for the year to June 2005, after delivering a pre-tax profit of $11.2 million for fiscal 2004.
If shareholders approve the recapitalisation, Glencore will nominate three new members to the company's seven-member board.
HWE Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
