Dorchester Pacific to buy back 25% of notes

Dorchester Pacific to buy back 25% of notes as part of restructure

Nov. 25 (BusinessDesk) - Dorchester Pacific Ltd. offered to buy back $5 million, or a quarter of its 5% notes as part of the firm’s capital reconstruction plan.

The offer comes after the firm’s debt and equity investors agreed to accept four new securities – property trust units, 2013 notes, shares and options – in what the company called “a complex set of transactions to effect forgiveness of debenture liabilities.”

Dorchester is offering 55 cents cash for the $1 face amount of the notes, which mature in June 2013. The company will pay the brokerage fees and the prospect of getting cash on Dec. 20.

Chief executive Paul Byrnes acknowledged the discount, saying the offer did provide investors with “the option of cash-in-the-hand now.”

The company has “an obligation to use funds in the best interests of all Dorchester shareholders,” Byrnes said in the statement. Still, the offer price “should not be taken to represent the current market value of the notes.”

The buyback comes after Dorchester reported a first half loss before tax and a fair-value adjustment that resulted in a bottom line profit. Byrnes said some investors may take the opportunity to exit.

“We would hope most investors will remain with the company as we continue rebuilding the business,” he said. “However, we are aware and understand that some investors would prefer to take a cash option now.”

In August, the company raised $10.3 million through the offer via a capital raising that was underwritten by $7 million by major shareholders the Business Bakery and Hugh Green Investments.

(BusinessDesk)

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