The board of hospitality business Silver Chef (ASX: SIV) intends to accept a new offer from investment firm Next Capital that should rescue the company from impending administration.
Silver Chef says it effectively has no choice but to accept Next Capital's offer to sell the company's core hospitality business for $18 million due to its considerable and almost-due financial obligations.
The deal will see Next Capital acquire seven of Silver Chef's subsidiaries, collectively known as the 'hospitality business'.
Should this proposal complete Silver Chef would be left with the cash proceeds of $18 million, plus the cash flows attributable to the GoGetta run-off business, offset by transaction costs.
Silver Chef's acceptance of this latest deal, which is worth $3 million more than a previous offer from Next Capital, comes after a serious tug of war between the investment group and another firm called Blue Stamp Company (BSC).
BSC hoped to enter into a refinancing deal with Silver Chef. BSC is a Brisbane-based investor that holds a 19.99 per cent share in SIV and is backed by a large US university endowment fund as well as high net worth Australian investors.
BSC proposed a fully underwritten, accelerated, renounceable, pro rata entitlement offer in late August to raise around $50 million at $0.31 per share. The funds would have been used to pay the $35 million syndicated debt facility and fund the transaction costs and working capital of the company.
Those shareholders, including BSC and founder Allan English, now support the $18 million acquisition.
The company says it expects to be debt free should the deal be accepted.
Silver Chef remains in default of its banking obligations, with less than seven days to reach an agreement with Westpac, CBA, ANZ and HSBC on a large-scale debt restructure. If that agreement is not reached the company will face administration.
"Silver Chef has been diligently advancing the $60 million recapitalisation of the Company on the terms agreed with Blue Stamp Company and announced to the ASX on 5 September 2019 and subsequent variations of that proposal," says Silver Chef.
"However, the negotiations with Silver Chef's Banking Syndicate have failed to achieve a result that was acceptable to all shareholders. Consequently, the board has determined not to proceed with Blue Stamp Company's $60 million recapitalisation proposal."
"In the circumstances, the Board and its major shareholders conceded that it was most desirable to endorse the Next Capital Proposal such that the value could be derived for all shareholders."
Shares in Silver Chef are up 10.77 per cent to $0.72 per share at 10.32am AEST.
Business News Australia
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support