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Hubbard’s Southbury announces convertible note issue; First part of capital raising (Update 1)
January 11th, 2010Allan Hubbard’s Southbury Corporation, which is the new parent of a group of companies including South Canterbury Finance, announced it had completed a private placement of NZ$27.5 million of convertible notes as the first part of a two stage capital raising process. (Update 1 includes interview with CEO Sandy Maier.)
The notes issued could convert into equity in Southbury in the event of an IPO, or could be redeemable for cash, Southbury said. The notes were issued with an interest rate of 10% and had a term of “less than a year” before they could be redeemed by investors for cash, CEO Sandy Maier said..
Hubbard appointed DFC fix-it man Sandy Maier as CEO of Southbury in late December. Click here to see an interview with Maier that appeared in the Weekend Herald.
Southbury Corporation is the parent of South Canterbury Finance, Helicopters (NZ) Limited and Scales Corporation Limited.
Maier told interest.co.nz that there was at least one prominent known household name/institution among the investors. “They are all to my eye local, and there are no related parties, so this is all new money raised from from private individuals and institutions who do this sort of thing, and it’s a great sign.”
“We appreciate the the equity, we appreciate the cash, and it’s nice to know there are twenty seven and a half million dollars worth of people who could see themselves taking shares in us in the foreseeable future, and that’s all good news,” he said.
Maier said the timeline for when the notes could be redeemed for cash was less than a year. “It’s relatively short, and one of the reasons we went with a two stage capital process is there was a desire and a need to do another phase. We didn’t want people to think that this was casual or a hobby. It’s another step of the journey that began when we had independent directors, when we had a new CEO, when we solved the US private placement…and getting all these interests in one umbrella is important.”
“Now it buys us time, keeps our options open. What it doesn’t signify is tomorrow there’ll be something else and next Tuesday something else. We can now get into the other sets of discussions.”
Maier said the NZ$27.5 million raising was in line with what the company was looking for. “When I came in in December the assumption was about 25 to 30 (million), and that’s exactly where it came in, so it doesn’t disappoint me, doesn’t surprise me…it’s welcome right where it is.”
On Allan Hubbard’s comments on the Group’s banking arrangements, Maier said that they had the same amount available to them as before . “In order to do the consolidation under the Southbury Corp umbrella and in order to issue the notes, consent and in some cases re-jigging was required from quite a few people. There had to be a consenting and shifting and change of position within the group to get it done,” he said.
Here is the initial announcement below:
South Canterbury Finance Limited, Helicopters (NZ) Limited, and Scales Corporation Limited are now joined under the umbrella of a new parent holding company, Southbury Corporation Limited, one of the most significant business combinations in the South Island. Southbury Corporation has also completed a private placement of $27.5 million of convertible notes as the first part of a two stage capital raising process.
The three subsidiary companies have long standing and proud histories in New Zealand and represent the key investments of Allan Hubbard, one of New Zealand’s most respected and successful businessmen. Southbury Corporation is 100% owned by Southbury Group Limited, which is principally owned by Mr A.J. & Mrs M.J. Hubbard.
Southbury Corporation directly or through subsidiaries, owns 100% of the ordinary shares of South Canterbury Finance Limited and Helicopters (NZ) Limited and 79.7% of Scales Corporation Limited.
Southbury Corporation and its subsidiaries had consolidated total assets of approximately $2.8 billion and net assets of approximately $300 million on a pro forma basis as at 30 June 2009.
Southbury Corporation businesses range from the provision of commercial and consumer finance, to the ownership and operation of helicopters, apple orchards, and cool stores. Each subsidiary is a leading business in its respective industry and each operates on at least a nationwide basis.
The $27.5 million of convertible note funds raised by Southbury Corporation through its capital raising have been used to subscribe for new ordinary share capital in South Canterbury Finance Limited. The placement was arranged by Forsyth Barr Limited with subscriptions from institutional and private investors.
The notes issued convert into equity in Southbury Corporation in the event of an IPO, or are otherwise redeemable for cash. South Canterbury Finance has provided a guarantee for the redemption of the notes in exchange for an indemnity from Southbury Corporation.
Mr Allan Hubbard, major shareholder of Southbury Corporation Limited said: “The formation of Southbury Corporation and issue of new notes convertible to equity are major steps in our restructuring. Taken together with the recent appointment of independent board members and Group CEO, resolution of the USPP noteholder matter, restructuring of group banking arrangements and the recent confirmation of South Canterbury Finance Limited’s BB+ credit rating, it means we are well on the way to a totally fresh approach to the future.”
Tags: Allan Hubbard, Sandy Maier, South Canterbury Finance, Southbury
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January 11th, 2010 at 12:09 pm
Baby Steps for South Canterbury Finance and Southbury
http://davidhillary.blogspot.com/2010/01/baby-steps-for-south-canterbury-finance.html
Hard to work out what their strategy is mixing these disparate assets!
January 11th, 2010 at 9:56 pm
baby steps are better than the funereal tread of strategic,they have found nothing for the stockholders but they did find the five million a year the directors and staff award themselves!
January 12th, 2010 at 7:29 am
Well here is confirmation from the CEO himself that the company, as yet, does not have a strategy for recapitalising, and is only buying some time.
http://www.stuff.co.nz/business/industries/3221668/Uncertainty-over-listings
Perhaps I might be right after all, they could just spin off the marketable assets: Scales Corp, Helicopters NZ, and use the money to recapitalise SCF, and to enable it to offload the dairy farms and other ill-fitting assets and perhaps some impaired assets too. But it seems more likely I’m wrong, they apparently have decided to ‘kick the can down the road’ a bit further waiting for 2006 to come back again.
January 12th, 2010 at 9:04 am
another story, another admission from the CEO:
“We have already reported losses to the market and that needs to be either made up from earnings or new equity. In our case we would almost definitely be looking for equity in some form,” he said.
from http://tvnz.co.nz/business-news/ipo-option-hubbard-s-interests-3327994
He is, I presume, talking about SCF, not Southbury, since it is the former, not the latter, that reports to the market. So this indicates that SCF is still making losses rather than profits. Not surprising, but an admission none the less. So much for just having a bad year?
January 13th, 2010 at 8:01 am
A little more detail here http://www.stuff.co.nz/timaru-herald/news/3221883/SCF-chief-fires-first-shot :
The convertible notes, maturing in October 1, 2010, pay an annual interest rate of 10 per cent and can be converted to equity if an initial public share offer occurs.
and here http://www.odt.co.nz/news/business/88665/southbury-completes-first-capital-raising?page=0%2C0
Craigs Investment Partners broker Chris Timms said it appeared that wealthy individuals had been “shoulder tapped” to take up the notes.
“Their exit position will be the notes converting to equity at the IPO (initial public offering).
“I imagine the conversion will be at an appropriate discount to sweeten the deal.”
Southbury said in a statement the notes converted into equity in the event of an IPO or were otherwise redeemable for cash.
SCF had provided a guarantee for the redemption of the notes in exchange for an indemnity from Southbury.
So I’d suspect from all this that:
1. It increases SCF’s exposure to its parents
2. should there be no IPO by 1st Oct 2010, some compensation to note holders other than interest could be payable
3. The notes could convert to equity in any of Southbury Corporation, Scales Corporation, Helicopters NZ or South Canterbury Finance (i.e. the door is open to spin off Scales and/or Helicopters NZ if there is no market demand for Southbury Corp and/or SCF)
January 22nd, 2010 at 9:29 pm
Hi,
Where does the guarantee that SCF has provided fit into things?
I would guess it will rank ahead of unsecured, trade creditors, the pref shares, and the ordinary shares.
I would further guess it will rank behind the bonds (SCF010, SCF020, and SCF030).
Is that correct?
Alan.