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PGC to rescue EPIC as NAB applies pressure for debt repayment

National Australia Bank is putting pressure on the EPIC infrastructure investment fund to pay down debt and this time Pyne Gould is coming to the rescue.

Monday, 4 July 2011

by Jenny Ruth

EPIC was set up by Pyne Gould Corporation director George Gould in 2007.

Pyne Gould is proposing to acquire $14 million of EPIC's (Equity Partners Infrastructure Company No 1 Limited) debt from the bank, subject to NZX approval.

EPIC's last annual report showed it owed the bank just over $45 million at March 31 last year. Pyne Gould chair Bryan Mogridge says EPIC's bank debt has risen somewhat since then but is still less than $50 million.

Pyne Gould said in a notice to NZX its loan, if agreed, "will allow EPIC to proceed with an orderly and early realisation of assets with proceeds, net of any costs, applied to full repayment of the NAB facility."

EPIC owns two major assets, a stake in Britain's Thames Water, valued in last year's annual report at $90 million, and 17.4% of Burmuda-based Moto International Holdings which owns many petrol and food facilities in Britain, valued at $46.8 million at March 31 last year.

Mogridge says the Thames stake is the most likely asset to be sold and his understanding is EPIC is discussing this with its shareholders.

"It's clear that they need to sell assets, or one asset in particular.

In our view, they shouldn't have any debt," Mogridge says.

Pyne Gould hasn't set any time limit on its proposed loan but "there's an immediacy about it, rather than a sense of urgency, let's put it that way," he says. "The reason we're helping is to allow them to get on with the job at the right speed which maximises value."

Asked whether NAB is pressing for repayment of its money, Mogridge says: "I think NAB would like its debt reduced."

Pyne Gould bought EPIC's manager from Gould's Torchlight for $18 million in August 2009, a transaction which caused some controversy. Because EPIC and Torchlight are related parties, Pyne Gould requires a waiver from NZX's listing rules before it can lend EPIC money.

The notice to NZX said if the loan isn't approved, "or another acceptable arrangement concluded, this may result in EPIC being in breach of the NAB facility."

Torchlight has had to plow back all the proceeds of the 2009 sale into EPIC and more. It bought $12 million in convertible notes in EPIC in March this year to allow EPIC to participate in a capital raising by Moto sufficient to maintain its stake and last year it bought $6.5 million of EPIC shares to allow it to pay down its NAB debt.

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