Market backer in heavy debt

A major backer of the industry-led bid for Market City in Canning Vale will go deeper into debt to finance its share of the $120 million purchase.

Brisbane Markets Limited advised shareholders of the debt financing arrangements over Christmas as part of its continued response to a hostile $145 million takeover bid by private equity firm VGI Partners.

BML is contributing $25 million to a consortium led by the Chamber of Fruit and Vegetable Industries in WA that was named the State Government’s preferred bidder for the Canning Vale markets.

It is expected control about 25 per cent of CFVIWA bid vehicle Perth Markets Ltd and will have a seat on the board as part of an investment opposed by VGI.

BML has told shareholders it expects to pay $25 million to PML on or about January 21 as the Government moves to complete the first of its asset sales to reduce State debt.

Industry-run BML extended loan facilities with Westpac from $110 million to $135 million to meet the obligation to PML.

BML, which had drawn $91.95 million of its loan facility at June 30, advised shareholders as recently as December 18 that it would consider a capital raising to pay for the stake in PML.

However, any attempt to raise capital at less than the conditional VGI offer of $3.50 had the potential to spark legal action by disgruntled shareholders.

BML chairman Tony Joseph declined to comment yesterday because of probity issues around the Canning Vale sale.

PML has touted BML as a model for its plans to run Canning Vale but the Brisbane entity is under siege from VGI and some market users.

VGI partner Doug Tynan said BML shareholders should be concerned about the investment in Canning Vale and the debt funding arrangements.

“The company’s balance sheet is already uncomfortably geared,” he said. “Any hard-working fruit and vegetable wholesaler knows that too much debt will crush a business.”

Mr Tynan said BML should reconsider the investment in PML and focus on value and services for its Brisbane tenants.

The Government considered the VGI takeover offer and recent criticism of BML before naming PML the preferred bidder for Canning Vale.