Westpac, Kiwibank and other banks grant Hirepool extra time to refinance

Equipment rental firm Hirepool has received an extension to a three-year senior bank facility to allow time for it to refinance more than $100 million of debt.

The Auckland-based company – 62.9 per cent owned by Australian private equity firm Next Capital – has until April 30 to secure new funding facilities, which were to expire on October 31, 2020.

Hirepool’s existing banking syndicate of Westpac, Bank of China, China Construction Bank and Kiwibank have agreed to waive further principal repayments on term debt of $81.5m, revolving credit of $20m and working capital of $5m until the deadline. The debt has been classified as current liabilities on the company’s balance sheet.

Hirepool also has a mezzanine debt facility of $31.4m through Perpetual Corporate Trustee in Australia.

Bank of New Zealand has withdrawn from the senior banking syndicate, according to notes to Hirepool’s financial statements for the year to June 30, 2020.

Hirepool, which posted net profit of $11.46m during the year, said it had hired a debt advisory firm to manage the refinancing process.

“The directors are confident that the group will be able to secure new funding facilities before 30 April 2021,” Hirepool said while adding that it had repaid $13m of principal in 2020 and $16.5m in 2019.

“Based on the current trading conditions and the economic outlook for the construction sector the directors anticipate the group maintaining profitability and free cash flows.”

The big uncertainty is the Covid-19 pandemic and Hirepool warns that a further outbreak in New Zealand resulting in rising alert level restrictions could affect its business operations and potentially impact the company’s ability to refinance.

Hirepool received $4.255m in Government wage subsidies to cover payments to 613 staff and also was granted rental concession from landlords during the level 4 lockdown.

The accounts show that trading revenue took a hit from Covid, falling from $163.3m in 2019 to $145.38m in 2020. Net profit of $11.46m compared to $14.14m in 2019.

Hirepool has gone through some restructuring since 2014 when Next Capital tried to sell the business in a $262 million initial public offering but had to call that off when institutional investors pushed back against the sale price.

At the time Next owned 64 per cent and Macquarie Group had 21 per cent. Former Tauranga Mayor Tenby Powell and his wife, Sharon Hunter, also had a shareholding having previously owned the business.

Macquarie and Powell/Hunter are no longer listed as shareholders in Hirepool while Ireland-based Penguin Issuer Designated Activity Company Ltd became a 16.77 per cent shareholder in August 2017, according to Companies Office records.

Hirepool’s key management are incentivised through share options linked to a shareholder exit event.

In October 2017 14.9m share options were issued to 17 key management personnel who had purchased shares in Hirepool at 43c each. The options may vest if there is an exit event before October 2022, subject to conditions, including the internal rate of return achieved by the group’s majority shareholder.

As at June 30, 2020, there were 11.33m share options remaining following the forfeiture of a number of parcels when key management resigned.

Hirepool is New Zealand’s biggest equipment rental firm having operated for more than 60 years. The company has 70 branches nationwide.

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