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June 7 2016 by Jenny Wiggins

McAleese to de-list, pursue $26m equity raising after debt deal with
SC Lowy

McAleese SC Lowy
CEO Mark Rowsthorn will own between 23% and 65%
of McAleese if the equity raising goes ahead Patrick Scala

Transport group McAleese will undertake a $26 million capital raising, de-list and sell its Cootes business after striking a complex restructuring deal with Hong Kong’s SC Lowy that will dilute existing shareholders.

After months of delays, McAleese has entered binding agreements with its banks and a consortium led by SC Lowy, which includes Sydney-based investment group Remagen Capital Partners and BlackRock, to recapitalise its stressed balance sheet.

Its shares, which listed at $1.47 more than two years ago but closed at 5.8¢ before trading was halted in March, will reopen on Wednesday.

McAleese will proceed with a $26 million underwritten pro-rate entitlement offer of subordinated, secured convertible notes to shareholders. Existing investors, excluding interests associated with chief executive Mark Rowsthorn, will hold just 42 per cent of issued shares after the equity raising if they take up all their rights.

Mr Rowsthorn, who currently owns 29 per cent of the company, has guaranteed up to $26 million of the group’s debts under a new loan facility.

He will receive a stake of between 22.6 per cent and 65 per cent in McAleese after the equity raising, depending on how many of the existing shareholders participate.

The SC Lowy consortium will receive options entitling it to a 35 per cent stake.

McAleese will pay its financiers $112.3 million in exchange for wiping out some $196 million in existing senior debt.

The payment includes $16 million of cash from McAleese; the consortium’s acquisition of McAleese’s remaining senior debt for $91.3 million; and an additional $5 million payment by McAleese from the sale of its Cootes fuel haulage business.

The company’s Cootes business has struggled since being involved in a fatal accident in Sydney shortly ahead of its float in late 2013.

McAleese chairman Don Telford acknowledged that the outcome was “disappointing” for existing debt and equity investors.

McAleese will be delisted but its new board, which will include directors from SC Lowy, will be required to consider re-listing the group 24 months after it is removed from the Australian Securities Exchange.

The debt swap with SC Lowy requires approval from McAleese shareholders. If the swap is not approved, the equity raising will not proceed and the parties will recapitalise the company by other means.

McAleese will remain in exclusive negotiations with SC Lowy until September 24 and will have to pay a break fee if it enters another restructuring deal.

The company plans to hold a general meeting in late August before raising equity.

McAleese, which also issued a trading update, said that market conditions would “remain poor” until the end of June and pressure on margins would continue. The company has been cutting jobs and consolidating properties to reduce costs.

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