Wellington, Dec 23 NZPA - Stainless steel product maker Mercer Group Ltd has secured funding from Westpac for another year while issuing an operational update that showed trading wa still difficult.
Mercer Group shareholders last week approved a $9 million rights issue, which will be used to reduce loans from Westpac, Gresham Finance Ltd and Paul Hewitson, one of the company's directors.
Allan Hubbard and Jean Hubbard and their associated interests collectively hold 45.13 percent of Mercer but their assets were in statutory management and they were not expected to participate in the capital raising.
The company said today that it had accepted an offer from Westpac to extend its banking facilities to December 31, 2011. The facility will be reduced by $1.5m after the rights issue, $1m in July 2011 and $3m in November 2011. Westpac has changed the financial covenants and the company expected to comply with the new covenants.
Westpac was owed $8m under the facility at September 30, according to documents for the rights issue. The company has been in breach of its banking covenants previously.
The prospectus for the rights issue was expected to be registered today. The underwriting arrangements were now conditional only on the occurrence of a material adverse event. The rights issue was fully underwritten by Murray Capital's Rakaia Fund and by Christchurch financier Humphry Rolleston's Asset Management Ltd.
The company was now forecasting it would break even in the year ended June 30, 2011, saying that trading conditions across all businesses continued to be difficult. It expected sales of $36m, down from $37m last year.
Earnings before interest, tax, depreciation and amortisation were projected to be $1.2m for the 2011 financial year.
In the five months ended November 30, Mercer Products NZ sales were down 10 percent on last year but Mercer Products Australian sales up 50 percent.
Mercer Medical sales were down 6 percent. Mercer Stainless sales in New Zealand were up 34 percent. The Mercer Stainless Australian business had been restructured and had made losses.
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