Elders: Australia’s Oldest Rural Services Business

Peter Kennan presented his in-depth investment thesis on Elders – Hybrids (Australia: ELDPA) at Asian Investing Summit 2014.

Elders – Hybrids: Hybrids are the fulcrum security in what remains a distressed common equity (Australia: ELD) at Elders Limited, Australia’s oldest rural services business. Both Elder’s common and hybrids suffered significant declines in value as the company embarked on a disastrous diversification into forestry and five years of workout followed. Now, the hybrids are trading at A$21 versus face value of A$100. Face value of the hybrids is A$150 million relative to current ordinary market cap of A$50 million. Senior debt is not trading but is not impaired and any equity value upside goes first to the hybrids. Hybrids need to be converted to allow company to raise new equity. While additional equity capital is ideally required, there is very low likelihood of aggressive action by creditors and light at the end of the tunnel: forestry exit completed, other non core business sold, seasonal conditions improving, cost reductions are ongoing.

About the instructor:

Peter Kennan is Managing Partner and CIO of Black Crane Capital. He has 15 years of corporate finance experience across a diverse range of sectors and transactions with UBS Asia and Australia. With UBS, Peter was formerly the Head of Asian Industrials Group for UBS Asia, a corporate finance sector team covering energy, infrastructure, resources, consumer/retail and general industrial companies. He achieved number 1 team rating in Asia with revenues of US$400m in 2007, grown from just US$20m over a four year period. Peter was also the Head of Telecoms and Media sector team for UBS Australia specializing in M&A, advising on many large, complex transactions. Prior to UBS, Peter spent 7 years with BP in a variety of engineering and commercial roles.

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