Chemeq thrown a lifeline

Embattled WA animal health company Chemeq has been thrown a potential lifeline, receiving a refinancing proposal of up to $75 million from a private investment company.

Chemeq has been battling its bondholders, Stark Trading, in the Supreme Court, which found earlier this year that the Perth company had failed to meet milestone covenants. Stark was attempting to recover $60 million in convertible bonds from Chemeq, which is disputing the ruling.

Chemeq has now received a refinancing proposal from International Finance Corporation of Australasia (IFCA), a formerly unknown private investment company based in Perth.

In a statement to the Stock Exchange, Chemeq said the proposal involved IFCA subscribing for up to $75 million in new equity capital in Chemeq in two stages.

In the first stage, IFCA has offered to subscribe for approximately 310.08 million Chemeq shares at 19.35 cents per share, raising $60 million. IFCA would then hold approximately 75 per cent of the issued capital of Chemeq.

As soon as possible after completion of the first stage, IFCA has also offered to fully underwrite a non-renounceable rights issue to all Chemeq shareholders to raise a further $15 million at 19.35 cents per share.

There are some unusual provisos, however. The proposal requires that Chemeq's appeal of the Supreme Court decision is not decided on or before May 31. It is also subject to shareholder approval and due diligence, and to the bondholders agreeing to accept the $60 million and drop all claims against Chemeq.

Chemeq chairman John Hopkins said that despite the uncertainty as to whether the refinancing package can be implemented, the company's board felt it was in the best interests of shareholders to sign the subscription agreement and to put the proposal to Chemeq shareholders.

"We recognise that there is no certainty that we will be able to complete the deal, but we believe that this should not deter us from proceeding and doing our very best to ensure that this transaction is presented as an option for shareholders," he said.

See "How Chemeq hopes to save its bacon" for more information.