Dorchester Pacific has announced that the Deferred Repayment Plan of Dorchester Finance is now well advanced. Trustee, Perpetual Trust has confirmed that the Plan has merit to be put to secured debenture holders to vote on. There are still a number of relatively minor points to work through including finalization of all meeting material before the Plan and the documentation supporting it are in a form to go to investors.
Dorchester Directors consider that the Deferred Repayment Plan will provide a better outcome for investors than a receivership. If approved the Plan could see investors being repaid all of their principal over 3 years through a managed wind down of the Company’s loan books.
Chairman Barry Graham commented that
“while the deadline is becoming increasingly tight the Board is hopeful that the documentation can be finalized and be with investors in time for a vote before Christmas. If investors approve the plan there is then the prospect of an initial payment of 20% of principal to secured debenture holders prior to Christmas”.
The Deferred Repayment Plan provides for further additional provisioning against property loan receivables of around $10 million.
Dorchester Pacific also announced that it has negotiated and secured an option to participate in the Recapitalisation Plan of St Laurence Limited in lieu of its making an immediate cash or asset contribution. The option is exercisable at any time within 3 years of St Laurence investors approving that company’s Recapitalisation Plan. In the event of approval, majority shareholder Auguste Finance Limited will immediately contribute assets of $10m to St Laurence. The effect of the recapitalization and Auguste’s subscription for new shares in St Laurence in exchange for the $10 million of assets, pending Dorchester exercising its option, is that Dorchester’s shareholding in St. Laurence will reduce from 25% to 1%. If Dorchester exercises the option at any time over the 3 years its shareholding in St Laurence will revert to 25%. As part of this arrangement Dorchester and Auguste have agreed to cancel the Put and Call Option Deed between them entered into in March 2007.
The exercise price for Dorchester’s option is $3.333 million payable in cash or by a transfer of assets to St. Laurence.
Given the present circumstances of the companies and the uncertainty of future projections for St Laurence, Dorchester’s Directors have decided to write-down Dorchester’s investment in St Laurence to a nil carrying value.
The write-down of the investment in St Laurence together with the further provisioning against property loan receivables and trading losses for the 6 months ended 30 September 2008 are likely to leave Dorchester Pacific shareholders funds at around $5 million. Actual results are subject to the completion of Dorchester Group accounts for the period to 30 September 2008 and completion of the audit of the accounts for Dorchester Finance Limited currently being undertaken.
Mr Graham commented that
”some improvement in the level of shareholders funds could result from adjustments in asset values that may be available if investors approve the Deferred Repayment Plan”. But he also noted that “in the event that investors did not approve the Deferred Repayment Plan it is almost certain that the going concern assumption for Dorchester Pacific would be brought into question”.
It is expected that the dates for the meeting of investors to vote on the Deferred Repayment Plan and for the Company’s AGM and EGM will be advised shortly.
ENDS