Wednesday, May 25, 2011

Redcape recapitalisation

Corporate activity around the ex-Hedley pub fund with Redcape coming out of a trading halt this morning to announce a potential proposal to recapitalise the group. Last week a consortium of investment funds, led by Goldman Sachs, acquired a 39% stake in Redcape's senior bank debt, including voting rights.

Redcape has been advised by the consortium that it is interested in a proposal to underwrite a recapitalisation of the group. The has now blocked the proposal to sell 20 pubs to the private Laundy Group, which requires approval of the banking syndicate.

Redcape director are currently investigating the terms of the proposal which is where the interest will lie for existing shareholders with potential for dilution. Redcape is down 5c (20%) on the news with  a quite high volume traded.  KS has previously commented on the stark difference in performance between Redcape and the ALE (ASX:LEP) pub group after that group raised capital from shareholders early in the GFC to cut debt. Similar capability has been constrained for Redcape by the Hedley holding.

Tom's receivers continue to hold a majority stake with board representation. The most recent top 20 holders list also included local business identity Greg Kern (who remains on the board), ex-Hedley CFO Donnelly, and Tom's partner Jeannine Cooke. It would be presumed that Redcape has also maintained a number of local smaller investors following the high profile float in 2007, which also included an allocation to Hedley employees.

Update: AFR (paywalled) has reported that Goldman Sachs and US hedge fund York Capital purchased their debt stakes from Westpac and BoQ for about 80c in the dollar. The recapitalisation move is likely to heavily dilute existing unit holders. AFR reports the receivers are unlikely (unable) to participate in any rights issue. There seems to  be quite a bit of confusion around the current status of proposed deals. There is much nastiness going on with Laundy apparently annoyed that life-long banker Westpac has sold out on them. This sore has festered too long!

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