cmi industrial loan / nab, page-2

THEPENYGURU

To answer what I can

The orginal CMI Engineering business was sold for $51m.

The buyer was the ex Major Shareholder and MD of CMI. He bought the business via assuming the debt, he factored the debtors and then took out a vendor loan. Within a few months of acquiring the business the GFC hit and the business imploded. Revenues almost halved and the new acquirer was in cost cutting mode from day one. They were able to succefully survive those days. Since then the Water Tank market has collapsed and the Motor Vehicle manufacturing game has been hit hard by currency. On top of this they were also impacted by the floods in Queensland and Victoria.

My understanding is that the owner Max Hoffmeister has been running around trying to raise funds and actually approached the CMI bought some time back and asked if he could pay out the loan with only $8.5m (not sure what the board said but they did impair the loan to $8.5m)

Due to the downsizing of the business and the debtor factoring I suspect that there is very little equity left for CMI to call in the loan. The only real opportunity is as I suspect that the board is talking tough as Hofmeister has also provided a personal gaurantee of $2.5m and I assume the board is leveraging this to get Hoffmeister to pay back as much of the laon as possible.

Hoffmeister on the other hand may be saying that with all the legal action he may be better off waiting to see if CMI is wound up. If so the vendor loan may be written off completely.

In Summary as at June 10 the loans were;
1. $1.9m Overdraft secured by a fixed and floating charge over the assets of the business and a personal gaurantee from Hoffmeistrer
2. Debtor Financing $11.3m on debtors of $15.6m. specific debtors as security
3. Equipment loans $4.1m specific equipment
4. Finance Lease liabilities $2.7m specific assets
5. CMI Loan $17m secured be 2nd ranked after NAB and personal gaurentees
6. Unsecured Loan of $2.5m (i assume from other Hoffmeister companies)