New DirectBond – Emeco Pty Ltd USD 9.875% senior secured bond

Key points

Emeco Holdings Limited (Emeco) is the parent and guarantor of the Emeco Pty Ltd bond and has been listed on the ASX since 2006. Emeco is the world’s largest rental provider of heavy earthmoving mining equipment (predominantly Caterpillar trucks and dozers) by written down value and has operated in the industry for over 40 years.

Emeco has a presence in four of the world's leading mining countries - Australia, Canada, Chile and Indonesia, providing heavy earthmoving mining equipment to numerous major miners, smaller miners and contract miners, although it has recently announced it will exit the Indonesian market.

As of 31 December 2013, Emeco operated a fleet of 765 machines with original cost of A$1.2bn, and a written down value of A$717m, which has been independently appraised in February 2014 as having an orderly liquidation value of A$502m.

Other than a A$50m “super senior” revolving bank facility which is currently undrawn, the Emeco Pty Ltd senior secured USD 9.875% fixed rate bond has first call on the above equipment, with USD335m outstanding providing excellent asset/security backing.

As a result, the bond is rated BB- (Stable Outlook) by Standard and Poor’s, one notch higher than the parent and guarantor Emeco Holdings Limited.

While recent results have seen a material decline in profitability and EBITDA numbers as the slowdown in the mining sector reduces rental volumes and utilisation rates, the senior secured nature and very strong asset backing of the bond somewhat offsets the higher risk nature of Emeco’s business and gearing profile.

The new DirectBond is available to wholesale clients only in minimum (face value) parcel sizes of USD200,000 and is currently offered at an indicative yield to maturity of circa 8.40% in USD and over 10% if swapped back into AUD.

Wholesale investors with a login and password can view the Emeco Pty Ltd 9.875% 15 March 2019 USD bond fact sheet at the following link.

Please speak to your FIIG representative if you are interested in the Emeco Pty Ltd 9.875% 15 March 2019 USD bond.

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