As orderly wind-ups go, the break-up of Elders is proceeding in a less than orderly fashion.
With a looming debt repayment deadline next month, the company that once had ambitions of Australian corporate domination is quickly running short of time.
The $69 million sale of its Futuris auto division to a bunch of American private equity players, announced this morning, has been concluded at a discount to its $75 million book value.
While the discount may not be sizeable, it is worth remembering the book value was calculated just two months ago following a shock $166.5 million write-down of the division in the wake of Ford’s decision to exit Australian manufacturing.
Elders owes $386.5 million in total. Of that, $234 million is a secured loan owed to a syndicate made up of National Australia Bank, ANZ, Rabobank and Commonwealth Bank that is due to mature next month.
The company’s other main division, its rural services business, was the subject of a bid by its main rival Ruralco, an offer Elders rejected as insufficient.
That is valued in the books at $445 million, which from an accounting perspective is more than enough to cover the debt. But it too has been running at a loss and clearly Ruralco offered far less.
The banking syndicate has expressed its support for Elders but on highly conditional terms regarding the performance of the businesses and deadlines for the sales process.
Futuris had been on the market since 2008 and the delay in selling the division has cost Elders dearly.
Still, good news has been a rare commodity for Elders and investors this morning lapped it up. The stock may well end the day as the ASX star performer if it can maintain its 13.92% gain. It is trading at 9c.