Listed agricultural property investment company The Ark Fund (Ark) has agreed to merge with managed investment scheme (MIS) provider Rewards Group (Rewards) in a bid to repay its debt.
The merger will include a recapitalisation program to pay down bank debt.
The proceeds of the recapitalisation will retire $28 million worth of debt owed to the National Australia Bank (NAB) with the balance used to enhance the working capital position of the merged group, to be known as Rewards Group.
The recapitalisation of the combined group will be through a convertible bond (CB) issue to raise a minimum of $55 million. It will include an institutional placement of $44 million and an entitlement issue to Ark shareholders of $11 million.
Rewards is a developer and operator of forestry and agricultural MIS recommended by financial planners. The firm is the largest shareholder of Ark and is the tenant on all of its 32 properties.
According to an Ark statement, NAB is supportive of the proposed transaction and has signed "standstill agreements" with both Ark and Rewards to allow the parties to pursue capital raisings and agreed transaction paths.
Uliel Indi Rewards (UIR) has committed $10 million to the institutional CB issue so far. A UIR spokesperson said that if the deal didn't go ahead, both companies would have been in a "dire situation".
However, he said the recapitalisation and restructure was a "great" platform to transform the business into an agribusiness asset manager rather then rely on MIS schemes for cash flow.
"With Timbercorp and Great Southern gone and the others ... all experiencing trouble, it will be easier to win market share," he said.
