Dorchester noteholders approve early discounted buyback

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Dorchester Pacific's noteholders have approved it buying back the notes early at a discount, paving the way for the company to look at ways of growing again.

Wednesday, August 15th 2012, 9:20AM

by Jenny Ruth

About 54% of the noteholders by value voted and 80% of those approved the earlier buyback - Dorchester will buy back the nearly $15 million of notes, which had been set to mature on June 30, 2013, at 92 cents each or $13.8 million.

The company expects to confirm the funding required "as soon as practicable" but on or before September 12.

Chief executive Paul Byrnes says this is just "a matter of paperwork" and he expects to confirm the buyback timetable in about a week or so.

Dorchester's reason for the early buyback was that the notes were an impediment to it being able to securing funding to grow.

Bynes says the balance of the $15 million in bank funding will go towards growing the companies lending book - about Dorchester's loan book is motor vehicles and the rest is plant and equipment for small businesses and it also provides motor vehicle related insurance under the Mainstream brand.

Dorchester still has about $3 million to draw down from last year's $12 million convertible note issue, about $4 million of non-core asset to sell and about $6 million in cash, Byrnes says.

"We have enough funding for the next 12 months. By the end of that we hope our profitability would warrant an extension of that facility which would then be solely applied to further expansion," he says.

Byrnes says the existence of the notes had also been an impediment in "merger, acquisition and consolidation discussions we've had. It was inevitably raised by the counter-parties as an issue."

The early buyback should now pave the way for more such discussions as a means to allow Dorchester to achieve scale, he says.

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