Livestock vessel charterer and exporter Wellard Limited says it has generated approximately $13 million worth of cash flow for its business after reaching agreements to sell non-core WA-located assets including an abattoir, feed mill and pre-export quarantine depot.

It has also announced an agreement with its convertible noteholders to redeem US $3.5 million early, in return for a standstill agreement that they will not take any enforcement action in respect to identified covenant breaches under the convertible notes for a period ending on March 31 next year.

Wellard reported the sale of its Beaufort River Meats abattoir at Kojonup for $8 million earlier this month to International Meat Co. Pty Ltd, headed by Iranian businessman Mahmoud Parastesh.

In its latest statement to the ASX Wellard it also confirmed it has now entered into an agreement to sell its Wellard Feeds business at Wongan Hills and ‘La Bergerie’ pre-export quarantine feedlot at Baldivis for approximately $5 million, including working capital to a subsidiary of Ausvision Rural Services Pty Ltd.

The sale of each business is still subject to “the receipt of certain consents, approvals and licence transfers”, but Wellard said it expects the transactions to be completed before the end of March next year. The transactions also included provisions for all staff to transition with the businesses, the company said.

Wellard said the businesses being sold were “non-core assets that did not fit its new, more streamlined strategy”.

“The sales represent a value opportunity, and are a demonstration of the Board’s commitment to focus strongly on the shipping and trading divisions of the Company in the future,” Wellard executive chair John Klepec said.

Early $3.5m redemption in return for standstill on breach enforcement

Wellard also announced it had reached an agreement with its convertible noteholders (Black Crane Capital Limited, Penta Asset Management Limited and TradeInvest Asset Management Company (BVI) Ltd) in respect of an early redemption of 3.5 million convertible notes (worth US$3.5 million).

The early redemption was part of a standstill agreement that had been reached in respect of certain identified breaches under the convertible notes, the company said.

“The standstill agreement is subject to satisfaction of certain conditions precedent, which the Company expects will be satisfied in the next few days,” the Wellard statement said.

“Under the standstill agreement, the noteholders have agreed not to take any enforcement action in respect of certain identified covenant breaches under the convertible notes during the period beginning on the date of satisfaction of the condition precedent and ending 31 March 2019 (Standstill Period).

“Certain of these breaches will remain outstanding at the end of the Standstill Period, and the noteholders would be entitled to take enforcement action in respect of these breaches from the end of the Standstill Period.

“The Company will continue to implement its streamlined business plan and evaluate options for further balance sheet de-leveraging throughout the Standstill Period.”

The early redemption will occur progressively according to the below timeline:

Wellard said it will pay for the redemption of the notes out of available cash and the proceeds from the sale of the businesses.

As part of the standstill, the Company has agreed to pay to Penta and TradeInvest an upfront standstill fee of US$350,000 (in aggregate between them) paid on signing the standstill agreement, plus a fee that is ongoing during the Standstill Period calculated at 6pc per annum on the outstanding convertible notes of Penta and TradeInvest during the Standstill Period.

Source: Wellard Limited