Dairygold has described its debt-for-asset swap transaction agreement with Reox as a “win-win” for all parties, resolving an issue which has been hanging over the co-op since Ireland’s property sector crashed six years ago.
The portfolio of 18 properties acquired by Dairygold includes development assets at South Terrace, Cork City; Kinsale Road, Cork; Long Mile Road, Dublin; Annacotty, Co Limerick; and one overseas holding in Ilminster, in Somerset, England.
Reox Property Assets, having a net book value of around €24m as of June 30, 2013, will be acquired in return for the release of the €16m loan note and certain legacy property-related liabilities owed by Reox to Dairygold, plus a cash payment of around €500,000 from Dairygold to Reox.
Dairygold chief executive, Jim Woulfe, said: “This transaction is in the best interests of Dairygold as it further strengthens the Dairygold organisation, removing its financial exposure to Reox and allowing it to focus on business growth and its post-quota strategy.”
The agreement is subject to the approval of Reox shareholders at an EGM on March 28.
Reox was established in 2006 when Dairygold spun off Alchemy Properties, a portfolio of property assets, as well as its two other subsidiary businesses, Breeo Foods and 4Home Superstores. The Breeo business was sold to Kerry Group plc and the 4Home business closed with seven of the larger stores in Munster sold back to Dairygold, as part of its Co-Op Superstore network.
When Reox was set up in May 2006, Dairygold kept a 25% shareholding in the company and supported its initial capitalisation with a €33m redeemable interest-bearing bond.
The rapid deterioration in the Irish economy and property prices since 2008, and the associated deterioration in Reox’s fortunes, resulted in Dairygold acquiring control of a number of Reox property assets in 2011. They acquired these core assets in return for cash, settlement of debts and a reduction of the redeemable bond and its replacement with a €19m unsecured, subordinated, redeemable interest-bearing loan note.
Reox repaid €3m of the loan note in December 2012 and deferred its December 2013 €3m annual repayment, with €16m now outstanding to Dairygold under the loan note.