Dorchester revamps board ahead of capital reconstruction plan

Wednesday 9th June 2010

Dorchester Pacific has revamped its board structure and said its biggest shareholders have agreed to underwrite the firm’s $10 million equity raising as it strives to emerge from a moratorium.

Dorchester, which posted a $19 million loss for the year ending March, will replace long-serving chairman and director Barry Graham with current board member and Business Bakery part-owner Grant Baker. It also confirmed current executive director Paul Byrnes as permanent chief executive.

Business Bakery and Hugh Green Investments both hold just under 20% each of Dorchester’s shares. Under the capital-raising plan, both parties agreed to subscribe to 35 million shares, or $3.5 million, with an exercisable option to apply for a further five million shares, or $500,000. The capital reconstruction plan is conditional on Dorchester raising a minimum of $8 million.

The capital raising has required Dorchester to seek an exemption from the Takeovers Panel to allow Business Bakery and Hugh Green Investments to lift their stakes above 20% without having to make a full takeover offer.

Advisers Campbell MacPherson have been engaged to prepare a summary appraisal and independent advisor report on the merits of the proposed allotment of voting securities to the two major shareholders.An independent director will be appointed following an investor vote on the capital reconstruction plan.

The company last year placed a moratorium on both debenture repayments and taking in new deposits. At the end of March, Dorchester’s shareholder funds were negative $2.8 million.

Under the plan, the company will issue four types of securities to about 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.

Dorchester is dangling the prospect of investors getting paid out 100% of what they’re owed if the restructuring plan succeeds. So far it has repaid about 50 cents in the dollar.

Businesswire.co.nz

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