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Shearer sale reaps capital boost for Wellard

James Nason, 27/03/2020

Livestock shipping company Wellard Limited has received a timley working capital boost following confirmation today that its sale of M/V Ocean Shearer to the Kuwait Livestock Transport and Trading Company (KLTT) has been completed.

The MV Ocean Shearer was launched in China in 2016.

A dramatic fall in the value of the Aussie Dollar compared to the US greenback since the term sheet was signed in December has generated an additional $12.8 million in the $A value of the sale for Wellard.

The US$53 million deal was worth $A77.8 million at the time the term sheet was signed, but the A$ value has risen to A$89.8m at today’s exchange rate.

While this does not impact tWellard’s debt repayments, which are also in US$, it does significantly increase the A$ value of the cash retained from the sale, the company said in a statement to the ASX this morning.

Wellard said it will use the sale proceeds to make a US$40.8 million (A$69.1 million) reduction in its existing debt, which will reduce to US$16.9 (approx. A$28.7 million), and to increase cash on hand by US$12.2 million (A$20.7 million).

After completing the sale of two ships in recent months – the sale and leaseback of the Ocean Swagman to major shareholder Heytesbury Holdings Company Pty was completed in December – Wellard now operates three vessels, which it described in today’s statement as the “right size” for its fleet.

Wellard told the ASX that with the successful Shearer transaction it has now completed its recapitalisation program and strengthened its working capital position.

It said it will now focus exclusively on maximising earnings and profits from the MV Ocean Drover and MV Ocean Ute, and the long-term chartered MV Ocean Swagman.

“The sale of the MV Ocean Shearer reduces Wellard’s debt to very manageable levels, crystallises value from an under-utilised vessel in our fleet, and significantly de-risks the business providing working capital for the Company in the present circumstances,” Executive Chairman John Klepec said.

“We are noticing that countries with food security concerns or fresh meat requirements are becoming increasingly reliant and/or focussed on livestock imports as global airlines shut down operations, delaying imports of chilled meat.

“While COVID-19 travel restrictions are creating some logistics issues with respect to stockmen/women, crew and veterinarians, we have been able to manage these to date. At present, all of our fleet are in demand by Australian exporters.”

From the funds received, Mr Klepec said Wellard will pay out the remaining associated vessel finance to Intesa Sanpaolo Bank S.p.A. (“Intesa”) and pay out in full the debt owed to noteholders.

Funds will be directed to the following:

  • US$36.9 million (approx. A$62.5 million) to full repayment of vessel finance to Intesa;
  • US$3.9 million (approx. A$6.6 million) to full repayment of debt to noteholders; and
  • US$12.2 million (approx. A$20.7 million) minus transaction costs, will be retained as Wellard cash reserves and working capital.

The reduction in debt will reduce Wellard’s annual principal and interest costs by approx. US$8 million (approx. A$13.6 million).

In discharging the Intesa loan, the Wellard statement to the ASX today said the remaining “key-man” restrictions relating to the Balzarini family will also cease to exist.

“Accordingly, parties owned or controlled by former Wellard CEO Mauro Balzarini will no longer be required to hold a minimum 12.5% shareholding in Wellard Limited,” the statement said.

“Wellard has been advised that when this restriction is lifted, creditors associated with Mr Balzarini’s private interests will take possession of the majority of those previously restricted shares.

“Wellard has no influence over the timing and execution of that transfer, and an appropriate announcement will be made in due course.”

Source: Wellard Ltd


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