McAleese owns 10% of plummeting Atlas

“McAleese Limited confirms that following the recent capital raising by Atlas Iron Limited it holds 280 million shares in Atlas, representing 10.51% of the shares on issue,” the trucking company said on Wednesday.

“The company also holds 280 million listed options over ordinary shares in Atlas. The options have a strike price of 7.5 cents per share and expire 30 June 2017.”

Atlas was frozen on the ASX for its equity raising period at 12 cents a share. At the end of that raising, McAleese’s 280 million shares held a value of $33.6m.

Since Atlas re-entered trading on Friday, July 24, its share price has plummeted. The iron ore junior opened on Wednesday, July 29 at 3.3 cents a share – down more than 70% from its price a week ago.

Atlas’ market capitalisation at that share price is roughly $100m. That’s a week after the company  raised more than $80m, during an equity raising period.

The price decline also means McAleese’s share in Atlas is now worth just over $9m – roughly $20m less than it was worth a week ago.

Making matters worse, McAleese has warned the market its 2015 earnings could be impacted by “a significant debtor” to its Heavy Haulage & Lifting division, which the company says has been unable to repay McAleese due to “slow payments by one of the debtor’s key customers”.

“While the amount outstanding is not the subject of any dispute,” McAleese told the ASX, “the debtor has not been able to pay McAleese Group… This may have a negative impact on the company’s FY2015 earnings.”

Heavy Haulage & Lifting is not the division of Atlas which holds the contract with Atlas.

McAleese’s Bulk Haulage division is contracted to provide haulage and ancillary services to Atlas’ three mines, which came close to being mothballed earlier this year, before the miner worked out more workable deals with its contractors – including McAleese itself.

That new arrangement will also influence the trucking company’s 2014/15 result, it said.

“The company’s revised arrangements with Atlas make assessment of the carrying value of the Bulk Haulage division sensitive to the Australian dollar iron ore price,” McAleese said.

“At recent iron ore prices and exchange rates, an impairment of approximately $50 – $70 million to a combination of goodwill, intangibles (together ~$49 million) and property, plant and equipment is expected.”

After originally being listed in November 2013 at just below $1.50 a share, McAleese has endured a scandal with its Cootes Transport business, the issuance of a show cause notice from a NSW regulator, a cost cutting program, and the sale or divestment of several business assets.

With its new exposure to Atlas, and the subsequent decline in that business, McAleese share price sat at 10 cents this morning.