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30th
June 2006
NEW
FINANCING PACKAGE FOR ORBITAL'S JV SYNERJECT
PERTH, AUSTRALIA:
Orbital Corporation Limited today announced that Synerject LLC its
50:50 joint venture with Siemens VDO Automotive Corporation (Siemens)
has established new financing arrangements with the SunTrust Banks
Inc (USA). This will provide replacement for existing funding arrangements
which mature on 30 September 2006 and support the future working
capital needs of Synerject. The package consists of an US$8 million
term loan to be amortized over 4 years and US$3 million line of
credit to be drawn as and when required. There are no parent company
guarantees provided to SunTrust Bank.
In conjunction with the banking arrangements,
Orbital and Siemen's have agreed to each contribute US$2 million
additional share capital, with Orbital providing its capital contribution
out of cash reserves. This will result in Synerject's equity increasing
to approximately US$12 million by 30 June 2006 and Synerject's debt
and cash balances will be US$8 million and approximately US$4 million
respectively. Synerject's net debt to equity ratio will be approximately
33% and Synerject's cash, together with the available line of credit
provides Synerject with US$7 million for future growth. In addition
it has been agreed that Synerject will adopt a policy to pay dividends
of 45% of profit after tax to its parent companies on a semi-annual
basis commencing with the half year ending 31 December 2006.
"These new finance arrangements for Synerject
are a critical step to remove any customer concerns about the financial
strength of Synerject as well as ensuring they are better positioned
to invest in the future growth of the company" said Orbital's
CEO Dr. Rod Houston. "Synerject have begun a new phase of growth
in Asia with the launch of the manufacturing line for their new
engine management system and the setting up of a new engineering
centre, both in China. Major new customers have been identified
in both China and India and work has already begun on a number of
new motorcycle applications which will utilise Synerject products.
The overall strategy for Synerject is targeting revenue of more
than A$250m by 2010 and this refinance package is one of the key
building blocks to ensure this target is met".
As previously announced, Orbital and Siemens
each contributed additional businesses to Synerject in 2003 to support
the restructure of Synerject. As part of that restructure the relative
performance of the contributed businesses are to be assessed for
the 3 years ending 30 June 2006 and the percentage ownership of
Synerject will be recalculated based upon this assessment. The change
determined by this process is capped at 10 percentage points ie.
a Synerject ownership ratio of 40:60, however the owner with the
smaller ratio has an option to maintain 50% ownership by purchase
of Synerject shares for $400k for each 1% (option value).
The assessment of the contributed business
performance will not be completed until August 2006 however the
parties anticipate that due to the stronger performance of the non-automotive
systems business contributed by Siemens, the option, if exercised,
may be valued as high as $4 million and will be payable by Orbital
to Siemens. However as part of this new refinancing package, it
has been agreed by Orbital and Siemens that the entitlement to exercise
this option will be extended by 2 years and during this period the
present 50:50 ownership will continue unchanged.
"We are very happy with the support and commitment of Siemens
VDO in this joint venture and I am pleased with the outcome of these
new arrangements" said Orbital's CEO Dr Rod Houston. "Synerject
has performed particularly well for a number of years and is now
sufficiently mature to secure the financial capacity to take advantage
of its future growth potential. The dividend policy now in place
will also add to Orbital's cashflow starting in the 2007 financial
year and I believe our shareholders will continue to benefit significantly
from this valuable joint venture".
Stephane Tagliante, Synerject's CEO added "All
Synerject's business sectors are performing well, including the
recently announced Delavan acquisition. We are pleased that the
ownership and financial support of Synerject has been settled for
the foreseeable future and look forward to continuing to work closely
with both parents during the next stage of development of Synerject"
"Synerject is very important to the future
of Orbital." added Dr Houston.
Forward Looking Statements
This release includes forward-looking statements that involve risks
and uncertainties. These forward-looking statements are based upon
management's expectations and beliefs concerning future events.
Forward-looking statements are necessarily subject to risks, uncertainties
and other factors, many of which are outside the control of the
Company, that could cause actual results to differ materially from
such statements. Actual results and events may differ significantly
from those projected in the forward-looking statements as a result
of a number of factors including, but not limited to, those detailed
from time to time in the Company's Form 20-F filings with the US
Securities and Exchange Commission. Orbital makes no undertaking
to subsequently update or revise the forward-looking statements
made in this release to reflect events or circumstances after the
date of this release.
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