Friday 14th May 2010
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Dorchester Pacific, the listed financial services company part-owned by the group behind 42 Below and Ecoya Limited, needs to raise at least $8 million and win investor approval for a restructuring plan in order to escape from its moratorium.
Under the plan, the company will issue four types of securities to some 7,200 debenture holders still owed $84 million, including units in a property trust holding $33 million of hotel properties, $20 million of notes, 36.5 million new shares in Dorchester and options to buy shares.
Though it’s yet to get sign-off from trustee Perpetual Trust, it will be dependent on raising at least $8 million from a proposed rights issue of $10 million and securing shareholder and noteholder approval. Executive director Paul Byrnes has previously indicated the capital raising will have the support from Dorchester’s two major shareholders, Business Bakery and Hugh Green.
“If the plan is approved and the capital raising successfully completed the board believes that there is every possibility that debenture stockholders could ultimately receive 100 cents or more in the dollar of their original debenture stock,” Byrnes said in a statement.
Dorchester’s shares, which trade infrequently, jumped 13% to 17 cents today. Byrnes previously signalled investors would recoup between 87 cents and 91 cents in the dollar when he first put the recapitalisation plan forward in November.
Dorchester flagged it was looking to do a deal a deal with debenture holders in October, and the company has repaid 50 cents in the dollar to investors, meeting the first milestone required of the plan. The recapitalisation plan was running six to eight weeks behind schedule, and the finance company had been whittling down its prior ranking debt over this time.
Investors should receive the relevant documents at the end of the month, and a meeting is expected to take place on June 17. If the plan proceeds, Dorchester expects to be out of moratorium by July 1, which will allow it to resume taking deposits.
Matthew Lancaster, head of corporate trust at Perpetual Trust, said a final decision is expected in the next two to three weeks.
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