Emeco in $149m equity raising

Earthmoving vehicles and machinery from equipment hire firm Emeco.

Emeco Holdings is understood to have opted for a $149m equity raising on Monday because it was a better option than taking what bond market investors in the US were offering.

As revealed by DataRoom, Emeco had been looking to tap the US bond market through JPMorgan.

However, to refinance the notes at a much more attractive rate, the world’s largest heavy equipment rental business would have had to raise more than the $250m needed and wait until at least two years before it could make repayments on the $442m of secured notes that had been due to expire in March 2022.

The equity raising helps to pay back some of that amount, leaving the remainder owed at $US180m ($250m), taking into account hedging and foreign exchange savings.

Of that $250m owing,

Black Diamond, which owns 23.47 per cent of Emeco, and another of its shareholders have agreed to refinance that amount so that the time frame for repayment would be 2024 rather than 2022.

The company was understood to be trying to achieve a lower rate of between 7 to 8.5 per cent for its refinancing in the US bond market.

But while the notes refinanced by shareholders will have the same coupon as the existing bond at 9.25 per cent, they are fully hedged and can buy the company some more time.

The equity raising announced on Monday through Macquarie Capital and Goldman Sachs enables the company to pay stronger dividends and puts it in one of the best capitalised positions, with its debt at 0.9 times its earnings.

As announced to the stockmarket on Monday, shares were sold at 85c each for the entitlement offer, a 17.9 per cent discount to the last closing price of $1.035.

The company has been diversifying away from coal, from which it generates more than half of its revenue, due to the lack of appeal to lenders and global investors.