Financially-stretched livestock exporter, Wellard Limited, is considering selling one of its four remaining ships to help pay off about $22.3 million owing to offshore convertible noteholders.
The West Australian based business, which made a modest $2.9 million profit for the half-year to December 31, also faces 21 per cent interest costs on the debt, plus a doubling in redemption payments to about $1.4m a month to whittle down the principal sum.
The fresh financial woes come on top of Wellard and other livestock shippers being locked out of the live trade to Turkey, which had been taking Wellard shipments exported from Brazil and Uruguay until January, when oversupply problems triggered political friction and an import halt.
The ongoing suspension has hit exporters worldwide, including significant shipments from Europe.
Wellard has advised the Australian Securities Exchange it was unable to grant security to noteholders, effectively defaulting on a standstill agreement with those noteholders.
This, in turn, could trigger other lenders to call in their loans under cross-default options open to them.
Payments up to date
Executive chairman, John Klepec, said while the shipper was up to date with all payments to financiers, board directors continued to actively consider options.
Those considerations included any opportunities to restructure its balance sheet and or sell a ship, although management was uncertain if any opportunities would arise or be completed in the short term.
In February Mr Klepec warned shareholders the company had a big job ahead to reset its balance sheet.
The outstanding funds are owed to unsecured noteholder creditors, Black Crane Capital in Singapore, which is also an ordinary shareholder, Penta Asset Management Ltd, and the Virgin Islands-based TradeInvest Asset Management Company.
The investors were not scheduled to call in their funds until a standstill period ended on September 30, but Wellard advised it could not meet certain security compliances under the agreement, forcing the standstill agreement to end last week.
The noteholders can demand immediate repayment of their $US15,500,000 in outstanding notes, but have reserved their rights and agreed to negotiating in good faith with Wellard "to achieve a mutually acceptable solution".
The standstill period's premature end has also triggered a rise in the note interest rate, and pushed up monthly redemptions from $US500,000 to $US1m.
Wellard told the ASX it would be discussing the increases with the noteholders.
It was also communicating with its other financiers because the terminated standstill period could impact on Wellard's other creditors, who may seek to call in funds or increase default penalties.
In April the company collected more than $17m from the sale of its Wongan Hills feed mill and Beaufort River Meats abattoir and a pre-export quarantine site lease, all in WA, plus its Victorian pre-export quarantine facility near Portland.
About $5m from the sale was directed to pay for an early redemption of 3.5m convertible notes.
Two years ago it sold its MV Ocean Outback for $35m to an Israeli company.
The company's primary remaining assets are the prominent livestock vessels the Ocean Swagman, Ocean Ute, Ocean Shearer and Ocean Drover the 24,000 square metre vessel which has just completed the season's final live shipment of 56,000 WA sheep to the Middle East.
The 17-year-old MV Ocean Drover, which has capacity to carry 75,000 sheep or 18,000 cattle, has previously been listed for potential sale if enquiries proved attractive enough.
Since the Turkish cattle trade was suspended in January, Wellard's other vessels have been servicing the South East Asian export market from northern Australia.
Meanwhile, former managing director and foundation investor in the business, Mauro Balzarini, has now retired from the board after stepping down from his management role early this month.
His director's seat remains vacant with Wellard giving no indication of plans to appoint a replacement.
Having sold his WA properties, and having no more ties with Wellard, Mr Balzarini now lives in New Zealand.
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The story Wellard lenders lift repayment demands after deal defaults first appeared on Farm Online.