Billionaire Investor Rescues Struggling Canadian Miner, AgainBy
Imperial Metals gets new funding from Edwards, Berkowitz firms
Latest bailout ‘good news’ as company staves off restructuring
Murray Edwards and Bruce Berkowitz aren’t ready to give up just yet on Imperial Metals Corp., the struggling Canadian copper miner.
The two prominent investors are injecting much-needed financing into the Vancouver-based company through loans, a private share placement, and a rights offering, according to a statement Friday. The funds are vital to Imperial Metals after it was given reprieves on its loans and warned in August that there’s doubt it can survive without more financing or a debt extension.
Canadian oil billionaire Edwards, the largest shareholder, is giving Imperial Metals a new C$10 million ($7.8 million) loan through an affiliate company, and purchasing most of its C$5 million private share placement. An affiliate of Berkowitz’s Fairholme Partnership LP, with Edwards’s Edco Capital Corp., boosted Imperial’s C$20 million bridge loan to C$26 million. Both investors intend to exercise their options in a C$40 million rights offering.
“The fact that Edwards has stepped up on the equity side is good for the bonds,” said Tim Logie, a Vancouver-based portfolio manager at Vertex One Asset Management Inc., which holds the debt. “It looks like they’re adding C$16 million of debt ahead of the bonds, which normally I wouldn’t like to see. But the bond leverage is still low for an unsecured issue, so putting in C$45 million equity is good news.”
Imperial Metals President Brian Kynoch hasn’t been able to pull Imperial out of its tailspin even as copper prices have recovered this year. Production at the Red Chris and Mount Polley mines has missed targets, and the last time Imperial posted an annual profit was in 2013.
Imperial was also given leeway by its bankers, who agreed to permanently waive a covenant breach after extending a credit waiver twice, and extended the maturities on its two credit facilities to 2018. The lenders also removed two of the four financial covenants. The company will also pay interest on the junior credit facility, all of the 2014 convertibles and most of the 2015 convertibles in shares until Jan. 1, 2019.
A request for comment with Imperial Metals wasn’t immediately returned. No one was immediately available to comment at Fairholme or Edco.
Imperial shares rose as much as 9 percent to C$3.23 in Toronto Friday, yet remain down almost 50 percent this year. Its 7 percent, March 2019 bonds traded at 92.25 cents on the dollar to yield 13.1 percent.
Edwards, who owns an equity stake of about 35.5 percent and has been a shareholder since 1994, has previously helped bail out Imperial Metals by giving it a loan, equity financing, and guaranteeing a credit line. Berkowitz’s firm controls the biggest stake in Imperial’s bonds and second-biggest in equities, according to Bloomberg data.
Questions about Fairholme’s future involvement emerged after it was reported that the asset manager was said to be closing the hedge fund that has been providing Imperial with financing. Kynoch said Fairholme was expected to play a “key role” in the plan.