Rescue package offers lifeline for Mercer
One of Christchurch's oldest firms, Mercer Group, was thrown a $7 million lifeline this week.
The NZX-listed steel fabricating firm will remain a "penny dreadful" for some time with the shares trading at 1.6c a share following recent losses of $6.7m for the 2016 year.
Without approval of the $7m of new shareholder equity. Mercer's ability to continue as a going concern would be questionable according to an independent Simmons Corporate report.
The Simmons independent report was required for yesterday's annual meeting because interests associated with shareholder and former director Humphry Rolleston could end up with a 77 per cent stake if other shareholders declined to take part in a rights issue to raise the money.
The finely balanced report concluded the deal had merit despite questions about the definition of fairness to all the shareholders - they adopted the plan at yesterday's meeting.
"Unless alternative sources of capital are accessed in a relatively short period of time, the company will not be able to meet its debt repayment obligations and fund its working capital requirements," the Simmons report had said.
Mercer had negligible cash on hand mid-year with $10.1m of interest-bearing debt including BNZ loans of $5.5m, a loan of $3.5 million from Gresham Finance (a Rolleston company), and some smaller loans on equipment.
The rights issue would be underwritten by Rolleston's company Asset Management which would receive a $280,773 underwriting fee.
About $4.5m of the $7m rights issue will be used to repay debt owing to BNZ and Gresham Finance when it is completed.
Meanwhile, Mercer is working with Fonterra to discover the cause of a collapsed silo at the Edendale milk factory in Southland in September.
The silo investigation at Edendale will determine if Mercer faces any "material outcome". It took several weeks to rectify the damage from the collapse.
Chief executive Richard Rookes highlighted Mercer's new path to design of food packaging and development of sterilisation technology called S-Clave.
The company sells a range of products within these divisions and continues its steel fabrication.
It recently sold some assets, restructured and relocated its head office back to Christchurch.