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    Nylex to hose down debt problems
    By Ian Porter
    September 10, 2003

    There is a simple reason why Austrim Nylex directors decided to heavily dilute shareholders with a mega-issue of new scrip.

    "If we had kept selling assets to repay debt, we would have ended up with nothing: no debt and no assets," was how chief executive Glen Casey explained it yesterday.

    It would have been the logical conclusion to a period of bank control, which started in September 2000 when Austrim breached its lending covenants.

    The consortium of five banks, at that time owed more than $450 million, ultimately decided against receivership and instead put the company in a straitjacket with just one mission in life: to pay back debt.

    If Austrim Nylex - soon to become just Nylex - was ever going to regain control of its fate, Mr Casey said, it needed to get out from under the debt. Apart from the actual repayments there were "monitoring costs" and punitive interest payments amounting to around $10 million a year.

    So directors decided to make one big lunge for independence and financial stability. About 400 million new shares will be placed or issued at 25¢ each, raising issued capital to 640 million shares.

    "When we complete the $100 million equity raising and the $100 million of divestments, our debt will be $135 million and our balance sheet will earn a BBB rating," Mr Casey said.

    "We can start again," he said, adding that there were no plans for another takeover binge.

    There has been a surprising reaction to the balance-sheet reconstruction. "We have already had several offers of finance from banks on considerably better terms than we have at present," Mr Casey said.

    The proposed asset sales - part of the automotive division is expected to go - will not only reduce debt. They will also significantly reduce revenues, from more than $1 billion last year to around $650 million.

    The automotive sector is largely low-margin business, however, and Mr Casey said the plan was to get back to revenues of $1 billion a year by concentrating on organic growth in the five divisions: consumer products, automotive, plant hire, films and fabrics, and materials handling.

    The most public part of the revitalisation will be the push to restore the attraction of the group's retail brands, especially Nylex and Esky.

    "Research shows that Nylex is the most recognised brand in hoses and water products and we think we can make more of that on what is the driest continent in the world," Mr Casey said.

    "We are going to relaunch the Nylex brand, get it back on television, and develop a lot of new products, and not just traditional hose and garden products."

    Although he would not talk about product development, he did indicate that Esky might soon be offering a portable insulated box designed to keep things warm, to complement its chillers.

    This story was found at:

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