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Pyne Gould's EPIC fund to repay bank loan after Thames Water sale

Tuesday 13th December 2011

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Pyne Gould Corp’s Equity Partners Infrastructure Company No 1 (EPIC) will repay a $48.7 million loan to National Australia Bank by the close of business today, indicating it’s settled the 34 million pound sale of its British water investment.

PGC took a $14 million stake in the NAB facility in July, and expects to be repaid by the end of the week, the company said in a statement. “No decision has yet been made by the directors as to how these funds, once received, will be invested,” PGC said.

The participation in the facility was essentially a bridging loan to ensure EPIC could sell its assets, rather than force it to try and tap shareholders for funds.

The loan was due to be repaid in April next year after the fund was given an extension. Today’s announcement comes a month after EPIC shareholders approved the sale of the fund’s 1.24 percent stake in Thames Water.

The fund tapped Macquarie Infrastructure and Real Assets (Europe) in July to fund a buyer, who emerged in October. After fees, the net proceeds of the sale were estimated at between $58.7 million and $65 million in a PricewaterhouseCoopers independent appraisal report. EPIC is managed by PGC’s Equity Partners Asset Management, a unit it bought for $18 million from cornerstone investor George Kerr, and holds 11 percent of the fund.

Kerr is making a play to take control of PGC through a separate vehicle with fellow PGC substantial shareholder Baker Street Capital. Kerr and Baker Street’s Australasian Equity Partners Fund No 1 have secured about 44 percent of PGC shares, and need more than half to call the takeover unconditional.

It’s unclear whether the remainder of the funds will be used to repay $13.2 million owed to Kerr’s Torchlight Fund No 1 LP, which owns a further 5.3 percent EPIC’s shares as well as $12 million in convertible loan notes that were issued to let EPIC maintain its stake in its motorway assets.

The coupon on the convertible notes was set at 15 percent in the first six months, rose to 20 percent in September, and will increase by 5 percent every 180 days thereafter, according to the appraisal report.

A sale of EPIC’s 17.5 percent stake in motorway service operator Moto stalled after it received an offer from a related party in June that only offered certainty on half of the investment.

PGC shares were unchanged at 35 cents in trading today, two cents short of Kerr’s takeover offer, and have shed 19 percent this year.

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