US-based private equity company Centerbridge Partners has announced up to US$ 352 million in loans and new equity for Boart Longyear. The recapitalisation plan is expected to increase liquidity at the drilling equipment manufacturer and drilling services company to US$ 240 million and cut US$ 120 million from its net debt.
The finance package includes two ‘covenant-lite’ loans of US$ 120 million and US$ 105 million which will be used to pay off what the company describes as “covenant-laden bank debt” and fund the redemption of Senior Secured Notes – debt secured against company assets. The loans have an interest rate of 12% per year, falling to 11% if Boart Longyear hits a profitability target
Centerbridge will also inject between US$ 119 million and US$ 127 million into Boart Longyear’s equity base. This will go along with a rights offer that will give other shareholders the opportunity to increase their stake in the company.
Boart Longyear president & CEO Richard O’Brien said, “The recapitalisation is an important step forward for Boart Longyear and its shareholders. We are preserving our existing shareholders’ opportunity to participate in the future prospects of the company and the improving future margin potential to be realised when our markets do improve and we reap the benefit of the significant cost and efficient actions the company has taken over the past 18 months.”
The recapitalisation plan has been approved by the Board and its independent directors. It will now be put to a shareholder meeting, which is expected to be held in late December.
Boart Longyear has been hit hard by the global downturn in mining over the last two years or so. At AU$ 422 million (US$ 373 million) its revenues in the first half of this year were less than half the total of AU$ 1.1 billion (US$ 970 million) that they were just two years previously in the first half of 2012.