Mercer to refinance bank debt with newly structured shareholder loan

Wednesday 2nd March 2016

Mercer Group, the stainless steel fabricator planning to split its businesses in two, will repay bank debt after restructuring a loan with shareholder and director Humphrey Rolleston.

Rolleston will provide a $750,000 underwrite on the deferred consideration from Mercer's sale of its interiors unit, and provide a $2.5 million 12-month loan at 12 percent interest, the Auckland-based company said in a statement. That will let Mercer repay $1.5 million to Bank of New Zealand and provide it with working capital of $1.75 million.

Mercer also restructured an existing $1 million loan with Rolleston's Gresham Finance unit set to mature in July, reducing the annual interest rate to 12 percent from 15 percent.

The company's directors noted a "material uncertainty" in signing off on the first-half accounts over Mercer's ability to continue as a going concern due to its reliance on BNZ funding. The company had a $2.7 million overdrawn bank account and $8.5 million of borrowings as at Dec. 31

Mercer today said it's in "positive discussions" with the bank, and expects to restructure those facilities before the end of the financial year on June 30.

Because Rolleston and his Gresham Finance unit are a related party of Mercer, the company needs an NZX waiver from having to seek shareholder approval.

"If the waiver is not granted, the company will be unable to draw down the funding until the necessary shareholder approval has been obtained, which will involve a delay of several weeks," it said. "This delay would place additional stress on the company's working capital position for that period."

Mercer's shares were unchanged at 4 cents, and have dropped 22 percent so far this year.

BusinessDesk.co.nz

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