CONTROL of ERG could pass to UK fund manager Ingot Capital Management if the company’s proposed balance sheet restructuring is fully implemented.
CONTROL of ERG could pass to UK fund manager Ingot Capital Management if the company’s proposed balance sheet restructuring is fully implemented.
Global investment bank Babcock and Brown and local stockbroker Paterson Ord Minnett are also playing key roles in the planned restructuring.
Ingot will be the biggest winner from the plan to convert $250 million of convertible notes into shares.
When the notes were issued, holders had the right to convert each note into three ERG shares.
Under the proposed restructuring, holders of each note will receive 90 ERG shares.
The largest note holder is Ingot (and associated entities), which will end up with at least 26 per cent of ERG’s shares and potentially 45 per cent (depending on the take-up by other note holders).
Ingot director Duncan Saville plans to seek an ERG board seat. Ingot also wants the size of the ERG board reduced to five directors, implying that two of the existing six directors will soon be departing.
Ingot, which is associated with major European fund manager Foreign and Colonial, manages or advises a series of investment funds that are listed
on the London and New Zealand stock exchanges.
The largest of these is The Special Utilities Investment Trust plc, which has an exotic portfolio that includes Australian port company Patrick Corporation, electricity utilities in Bermuda and Jersey, airport operators in Europe, water companies in the UK and telcos worldwide.
Babcock and Brown has been ERG’s corporate adviser since late 2002 and has played a central role in putting together the current proposal.
Along with Ingot, it has provided loans to ERG, at a time when nervous banks have demanded that ERG repay outstanding debts.
In addition, Babcock and Ingot (through associated entities) have agreed to underwrite ERG’s proposed $50 million rights issue up to a maximum of $23 million. However, Ingot would offset any contribution against current debts owed by ERG while Babcock would offset any contribution against fees payable by ERG.
As a result, no new cash would be received by ERG as a result of these underwriting agreements.
Paterson Ord Minnett has been mandated to assist with underwriting of the rights issue.
