Australian copper producer Aeris Resources (ASX: AIS) marked a milestone this week when it revealed a major three-pronged restructuring transaction that saw its senior debt and equities on issue slashed in half, and its share price respond positively as a result.
The transaction involved the sale of the company’s senior debt – previously held by Standard Chartered Bank (SCB) – to Special Portfolio Opportunity V (SPOV), a subsidiary of a fund managed by Asian investment house PAG. Concurrently, Aeris and SPOV have entered into a restructuring agreement to reduce the debt from $US63.3 million to $US30 million.
Associated with the restructure is an agreement by SCB to cancel 467 million of its 560 million convertible redeemable preference shares, which reduces the total number of Aeris equities on issue, on a fully diluted basis, by 50 per cent to 467 million.
SPOV has also agreed to convert is existing 140 million convertible preference shares into ordinary shares, which will see PAG subsidiary become Aeris’ major shareholder with a holding of 50 per cent of issued equity.
Queensland-based Aeris, which owns the Tritton Copper Operations in New South Wales, has realised a material improvement in its balance sheet following the transaction, which will provide it with the financial strength to invest in its portfolio of organic growth opportunities and participate in appropriate M&A opportunities in the base metal and gold sectors in the future.
The finalisation of the balance sheet restructure comes at a perfect time given the improving copper market outlook and investor appetite for ASX-listed base metals growth stories.
Shareholder upside was further boosted through the additional cancellation of SCB’s previously held price participation agreement, now providing 100 per cent exposure to copper prices above A$8,000/t for the company.
Aeris executive chairman Andre Labuschagne said the restructure had put the company in the best position it had been in corporately in the past five years.
“With debt reduced, potential shareholder dilution reversed and the capital structure simplified, the company is now positioned to attract renewed interest from quality investors and trade on a normalised basis, reflective of the fundamental value and growth prospects for the company,” Mr Labuschagne said.
“From an Aeris shareholder perspective, the debt restructure agreement is a significant and value-accretive event.
“As well as a 53 per cent reduction in the senior debt level, the cancellation of the preference shares effectively halves the fully diluted shares on issue.”
The restructure was announced alongside promising half-year results, with Aeris this week revealing a 33 per cent increase in revenue for the six months to December 31, to $105.3 million, with gross profit from operations up a significant 269 per cent, to $11.2 million.
A net loss of $6.6 million was recorded, largely on the back of financing costs and the capitalisation of interest on the previous SCB-held senior debt.
Aeris added the positive mood with an exploration strategy update on Friday that highlighted the significant brownfields and greenfields resource opportunities around Tritton as well at the company’s other key focus, the Torrens exploration project in South Australia.
Aeris shares ended the week at 17.5c, its highest levels in almost five years.
