Packer underwrites LLA rescue

James Packer's Arctic Capital has come to the rescue of former MFS offshoot Living and Leisure Australia, underwriting a $100 million renounceable rights offer to recapitalise the listed fund.

LLA, which owns Victorian ski resorts Falls Creek and Mt Hotham, as well as Melbourne Aquarium, will issue units at 4¢ each or 12.5:1 to existing unitholders -11 per cent below its 4.5¢ closing price of June 27, before trading was suspended.

The deal means 10,300 unitholders in the former MFS-managed Premium Income Fund will make a partial recovery under an agreement with Jenny Hutson's Wellington Capital, which bought the fund in May.

LLA owes PIF $63 million. On Friday, Ms Hutson told the Weekend AFR: "We traded our debt situation [in LLA] for a cash payment in July plus participation through a structured debt arrangement in the future of living and Leisure.

"It is our view that a Packer-backed living and Leisure has long-term potential to be an outstanding success.

"As second-and third-ranking debt funder, our issue was to ensure that we enabled Living and Leisure to find a way forward. Otherwise there was a risk we would not have received anything back on our loan."

Ms Hutson begins a week of roadshows in Brisbane on Monday, where she will seek to convince PIF unitholders not to wind up the fund. Investors will be told that as a going concern they could receive between 45¢ and 65¢ in the dollar, depending on the success of legal action against the former MFS.
Under the new deal, LLA's responsible entity, Living and Leisure Australia Management, will be transferred from Octaviar to Arctic Capital or an associate.

Octaviar still owns 20 per cent of LLA but it is likely to be diluted.

Arctic has lined up sub-underwriters including Morgan Stanley and, depending on unitholder participation, could wind up owning between 0 and 30 per cent of LLA.

The recapitalised LLA is unlikely to exploit potential synergies with Mr Packer's NSW ski field asset, Perisher Blue. Instead Arctic hopes to tap the value inherent in more than $41 million worth of capital expenditure already undertaken by LLA in 2007-08.

LLA has already tried to sell its Oceanis business, which includes Melbourne Aquarium, for more than $140 million, but negotiations faltered. No asset sales are planned by LLA under the recapitalisation.

LLA owes senior lender National Australia Bank $128 million by August 8. Under the proposed capital raising, which closes later this month, NAB will be paid out and Australia and New Zealand Banking Group will step in to lend LLA $50 million under a new senior facility, plus an extra $10 million as working capital.

LLA's total debt will reduce from $191 million to $122 million, with gearing falling from 51 per cent to 30 per cent.

LLA was advised by Charbel Nader of Pill Capital Partners.

KEY POINTS
The deal means unitholders will make a partial recovery.
A week of roadshows to win over investors starts on Monday.