Hong Kong-based 1010 Printing Group has bought the $51m debt of embattled printer Opus Group from the Commonwealth Bank for $20m, becoming its effective owner and by far its biggest lender.
The deal, which is still subject to shareholder approval, sees long time Opus ally 1010 pay CBA the $20m imminently due, and take on a further $31m due in September 2016, as the bank cuts its losses after a series of deadline extensions for the debt last year.
Opus says once the deal is done by the end of today (July 30) it will work out new terms of debt that will provide ‘financial stability’ for the heavily leveraged printer, which lost $35.3m last year thanks to a more than $34m write down of its goodwill and Australian publishing assets.
“As soon as possible after settlement, 1010 has advised that it will explore possibilities to restructure the debt and for new capital to be injected,” the company says.
[Related: Ups and downs of Opus]
What 1010 stands to gain from buying out CBA’s debt, what conditions it will place on the loan, and what it expects in return are still unclear, as Opus chief executive Cliff Brigstocke declined to comment as the transaction is still midway through, but promised to share more in coming days.
When asked why it chose to sell its debt for much less than its value, CBA said the terms of the deal mean it is not allowed to comment.
The move is part of Opus’ ongoing capital raising attempts to increase its equity capital and reduce the current gearing.
Opus chairman Bill Mackarell blames the company’s woes on a financial structure that has ‘shackled’ it and prevented it from “aggressively pursuing the many opportunities that are available to it”.
Opus and 1010 are long-time allies, having had commercial links for several years through senior management connections, and the Chinese firm is likely considered a friendlier creditor than a bank – although they are, by Opus’ admission, also competitors in some areas.
“As the product offerings are largely complementary and in many cases to the same international customer base, Opus and 1010 have consulted from time to time on business initiatives and as a result have developed a mutually respectful relationship,” Opus says.
[Related: More credit and debt news]
Mackarell singles out 1010 executive director Chuk Kin (CK) Lau as strong ally and says the board is pleased his company has “demonstrated such strong support for Opus’s business by committing substantial funds, time and effort”.
“Some of us have known CK Lau for a while and his impeccable reputation in the international printing industry is a strong endorsement of Opus,” he says.
1010 provides printing services to international book publishers, trade, professional and educational publishing conglomerates, and print media companies.
Its printed products include illustrated leisure and lifestyle books (including photography books, cookbooks and art books), educational textbooks and learning materials (including primary, secondary and tertiary level school books), and children’s books.
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