Wednesday 14 July 2021 by Jonathan Sheridan Emeco-wallpaper-900 Trade opportunities

New issuance case study - Emeco

On the 24th of June Emeco priced its inaugural A$250m offering of 6.25% Guaranteed Senior Secured Notes due 2026.

Having previously looked to come to market in early 2020, COVID-19 proved too big a disruption and the offering was postponed until market conditions were less volatile and more favourable.

The Notes were well oversubscribed in the primary offer, with FIIG securing $45m of the initial $150m transaction size. The excess demand shown in the order book of approximately $370m resulted in the transaction being upsized to $250m and priced at the tight end of the initial guidance of 6.25% - 6.50%.

Background to the company

Emeco is an ASX listed company with a market capitalisation of $634m (as at 12 July 2021). The group was founded in 1972 and listed on the ASX in 2006 however its current form owes a lot to numerous acquisitions (and disposals) along the way.


Emeco is headquartered in Perth and is a provider of heavy earthmoving equipment to the mining sector. The group operates three core segments: Rental, Workshops and Pit ‘N’ Portal. The first two divisions are relatively self-explanatory, renting out equipment for open-cut operations and maintaining it respectively. Pit ‘N’ Portal is a business that was acquired in February 2020 and it provides a range of mining services solutions and associated services mainly for underground mining.

The group has recovered well from 2015/16 which was a challenging time for the entire resource sector, through a general recovery of the sector but also thanks to a number of equity-funded strategic acquisitions. The commodity markets are in favour at present however Emeco has consistently generated healthy revenue growth over the last few years:


Emeco’s core operations cover a range of resources and it is noticeable on the charts below that the group has been successfully diversifying away from what was a heavy reliance on the coal sector. In the current financial year 36% of the group’s revenue was generated from the gold sector. This shift towards gold was largely as a result of the Pit ‘N’ Portal acquisition in early 2020.

Emeco’s commodity diversification (1H19 vs 1H20 vs 1H21)

Much of the difficulty that Emeco faced in 2015/2016 was due to excessive leverage. The chart below makes it clear that management has learnt from that experience with leverage dramatically reduced from c.10x EBITDA in 2015 to c.1x EBITDA now. Management has also articulated their desire to keep it at the current level, if not lower. This is prudent given the cyclical nature of the sector and it makes Emeco today a fundamentally better proposition compared to seven years ago.


Background to the transaction

The transaction significantly strengthens Emeco’s funding platform and supports the company’s key financial objectives:

  • Materially reduces the cost of debt outstanding as the net proceeds are able to fully repay the outstanding 9.25% USD Notes
  • Establishes a new domestic funding base
  • Increases the proportion of AUD denominated debt (given the business is now wholly domestically focused)
  • 5-year maturity extends and diversifies Emeco’s debt maturity profile

FIIG was pleased to be able to support the transaction for an issuer we have had a long relationship with via their bonds in the capital markets.

For enquiries about this and the other primary market opportunities that FIIG makes available to its clients please get in touch with your Relationship Manager.