Packer play to drag LLA out of the cold::::Nick Nichols 05Jul08...

Packer play to drag LLA out of the cold::::Nick Nichols

05Jul08

LIVING and Leisure Australia is poised to raise $100 million as part of its long-awaited recapitalisation plan, with the issue price set at 4c per security.

The move will leave the former MFS offshoot with a whopping 2.7 billion securities on issue, but there is still uncertainty as to how much of the group will fall into the hands of James Packer's private equity vehicle Arctic Capital.

Arctic Capital is underwriter to the issue and is seeking support from major institutions, including Morgan Stanley, to take up any shortfall from the offer to existing securityholders.

LLA said Arctic had sec-ured support from a 'foreign funds management group' for 29.9 per cent of the issue.

"The underwriter is in advanced negotiations with others for similar but smaller commitments," it said.

Existing securityholders can apply for 12.5 new securities for each one they own.

The recapitalisation will retire $127.3 million in debt owed to the National Australia Bank.

The NAB has agreed to hold off pursuing repayment of the LLA debt until August 8, when the new securities are to begin trading.

The group's existing securities, which were suspended earlier this week pending the announcement, will resume trading on Monday.

A new debt facility is to be set up with the ANZ, comprising $50 million secured debt and $10 million in working capital.

An additional mezzanine finance facility totalling $71 million has also been put into place, replacing most of the $63 million owed to the Premium Income Fund, formerly controlled by MFS, which is now known as Octaviar.

The fund will be repaid $53 million from the new mezzanine funding facility and a further $8 million will be retained by LLA to form another plank in its mezzanine finance facility.

The $8 million will be repayable in six years.

The deal appears to have discounted the amount owed to the $770 million Premium Income Fund which froze redemptions to investors earlier this year for 360 days.

The new finance arrangement will cut LLA's total drawn-down debt from $199.8 million to $122.3 million, taking its gearing level to 30.4 per cent.

LLA's independent chairperson Julanne Shearer said she was confident the recapitalisation plan would be completed.

"LLA will, following the recapitalisation, be in a position to consolidate on its recent growth initiatives," she said.

LLA owns Victorian ski fields Mt Hotham and Falls Creek, as well as the Oceanis aquarium group and it is expanding on its treetop walks attractions.

LLA is undertaking a $28.5 million expansion of the Melbourne Aquarium and has just opened its latest attraction, the Illawarra Fly treetop walk in NSW.

Acting chief executive John Schryver said the recapitalisation would 'allow LLA's management to focus on what they do best -- operate world class leisure assets'.

"With the ski season kicking off and the Melbourne Aquarium extension close to opening, the next six months will be a particularly exciting time for our security holders," he said.

Despite the turmoil surrounding the company, it is forecasting a rise in operating revenue over the 2008 financial year to $109.57 million, up from $103.93 million.

However, property revenue will be sharply lower at $5.4 million from $23.8 million in 2007.

A failed takeover bid for New Zealand's Tourism Holdings, along with $43.6 million in writedowns on its businesses will push the company to a $67.7 million loss for 2008.

This compares to a $14.22 million profit in 2007.