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Dorchester staves off receivers

Wednesday 30th June 2010

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Dorchester Pacific has staved off receivership after it managed to convince investors they will get more from accepting a complicated asset swap.  

More than 80% of debenture holders, 95% of noteholders and almost all shareholders agreed to the recapitalisation plan, the company said in a statement.

The firm will now raise as much as $10 million through a rights issue, $7 million of which is underwritten by cornerstone shareholders the Business Bakery and Hugh Green Investments, which also have options to take on another $1 million between them.  

In exchange for their debentures, some 7200 investors still owed about $84 million will get units in a property trust that will trade on the Unlisted exchange and will own four hotels Dorchester says are worth $33 million.

They’ll also get 36.5 million new Dorchester shares worth $3.3 million at today’s share price of 9 cents, $20 million of three-year interest-bearing notes and options to buy more stock. 

The offer was criticised by the Securities Commission for having a “significant bias” against a receivership’s recovery, and forced the firm to release new information to appease the regulator. 

That failed to deter investors’ support, which executive director Paul Byrnes previously said was positive during last week’s nationwide roadshows, though there were signs of frustration from investors over the failure of the moratorium proposal.

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