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Quickstep secures AU$17.3 million funding

News International-French

3 May 2011

The Australian company has announced on the 27th of April 2011 it has entered into a funding agreement for the issue of convertible notes to the value of US$15 million (approximately AU$14.0 million on current exchange rates) to US-based small-cap financier, La Jolla Cove Investors, Inc. along with a share placement to sophisticated and professional investors of AU$3.3 million at AU$0.32 per share, including La Jolla and Washington H Soul Pattinson & Co, its largest shareholder.

Quickstep’s existing eligible shareholders will be given the opportunity to participate in the capital raising through a Share Purchase Plan (“SPP”) at AU$0.32, the details of which are attached in Appendix 1.


La Jolla is an experienced financier of financing small-cap, publicly traded companies having signed over US$400 million of financing for companies on leading world exchanges since establishing in 1995.


Under the Funding Agreement between the Company and La Jolla, La Jolla has committed to participate in the share placement for AU$600,000 (on the same terms as other investors). The Company will also be able to access up to a further US$15 million through the issue of convertible notes; being an initial issue of US$7.5 million with an option, at the Company’s discretion, to issue a further US$7.5 million. These funds, together with expected funding assistance from the Australian Federal and State Governments, should see access to additional capital of in excess of AU$30 million by the end of 2012, in an efficient mix of short term equity, medium term equity, loans and grants.


Mr Mark Jenkins, Quickstep’s Chairman, said that “the Company believes that it needs a mixture of short, medium and long term facilities to meet its financing needs. We have therefore raised AU$3.3 million in immediate equity; US$15 million in medium term equity, to be drawn down over a period of time; and we are currently negotiating a debt facility to support the ongoing needs of our JSF production project. In addition, the NSW Government has, as previously announced, agreed to provide a grant to the Company to assist us to set up our new facility in that State.


The Convertible Note Facility with La Jolla represents an excellent funding package, due to the timing of draw-down which will suit Quickstep’s needs and the certainty of commitment from La Jolla.

As we have done in the past, the Board is pleased to offer eligible shareholders participation in this funding round through participation in an SPP at the same AU$0.32 per share price as the institutional placement, details of which are set out in Appendix 1.”he concluded.


The funds are slated for the completion of the move to Boeing’s former Bankstown facility; preparation and start of production under the Memorandum of Understanding signed in November 2009 with Northrop Grumman/Lockheed Martin and Marand/Bae Systems, covering 22 years and some AU$700 million of production and commercialisation; and further development of the Quickstep Process for use in the global automotive and aerospace industries.


Managing Director of Quickstep, Mr Philippe Odouard, added “We are confident that our position as the largest independent aerospace composite manufacturer in Australia puts us in an outstanding position to win further substantial defence contracts as demonstrated by the recent signing of the Memorandum of Understanding with Sikorsky.


On the Quickstep Process, we continue to have confidence that the Quickstep Process will play an important and profitable role in the aerospace industry, where we continue to work with leading global aerospace companies to demonstrate and introduce the benefits of the Quickstep Process.


Additionally the automotive industry has recently come into clear focus for Quickstep, as rising fuel prices and global warming concerns push governments to enforce strict fuel consumption targets for future car designs. Just recently President Obama demonstrated this with his decree that by 2017 the manufacture of vehicles in the United States will need to meet fuel consumption rates of no more than 6.5 litres per 100 km. The Company and several leading global automotive manufacturers believe that reduction in vehicle mass is the most effective way of achieving this in the short term. Quickstep has patented solutions to meet the challenge in a cost effective way that will continue to be developed with this funding package. “


Financing Highlights

  • AU$3.3m placement at AU$0.32 per share.
  • The Convertible Note Facility is for a total value of US$15 million, comprised of a Convertible Note of US$7.5 million along with an option exercisable at Quickstep’s discretion that allows for a further Convertible Note issue of US$ 7.5 million.
  • La Jolla will pay for each Convertible Note by way of an initial payment of US$400,000 and then monthly payments at La Jolla’s discretion of not less than US$500,000 and not more than US$1,000,000 (or such higher amount as the Company agrees in writing).
  • Each Convertible Note will have a repayment term of four years from the date of initial drawdown; any outstanding Convertible Notes can be converted into ordinary shares over the six months before maturity at Quickstep’s discretion.
  • Interest is payable monthly in arrears at a fixed rate of 3% per annum, on the then outstanding unconverted principal amount. Interest is payable in ordinary shares at the Company’s election.
  • The Convertible Notes can be converted into ordinary shares at the conversion price being the lesser of AU$0.90 or 80% of the average of the volume weighted average prices of Quickstep shares during the 10 trading days prior to La Jolla’s election to convert. If the volume weighted average price of Quickstep is less than AU$0.28 on the day La Jolla elects to convert, Quickstep may elect to repay the amount rather than converting it into ordinary shares.
  • The Funding Agreement includes a control limitation clause which restricts La Jolla from converting a Convertible Note to the extent that after giving effect to the conversion La Jolla would beneficially own in excess of 19.99% of Quickstep’s share capital on issue. The agreement also restricts La Jolla from ‘short selling’ the Company’s ordinary shares, whilst any Convertible Note is outstanding.
  • The SPP will be available to existing eligible shareholders at the placement price of AU$0.32 per share.
  • Appendix 1 contains a summary of the terms of the Placement and SPP and an indicative timetable for the Placement and SPP. Appendix 2 contains a summary of the terms and conditions of the Funding Agreement with La Jolla.



More information :



Appendix 1 – Terms of Placement and SPP (all amounts in AU$)

The Placement to institutional and sophisticated investors of 10,277,500 fully paid ordinary shares in Quickstep (“Shares”) (including the 1,875,000 Shares to be issued to La Jolla) was marketed chiefly within Australia and raised $3.3 million before costs.


RBS Morgans Corporate Limited acted as Lead Manager to the Placement and State One Stockbroking Ltd acted as a broker to the Placement.


Settlement of the Placement is scheduled for Wednesday, 4 May 2011 and the Placement Shares are expected to be allotted and issued the trading day after settlement (Thursday, 5 May 2011). The Placement Shares will rank equally with existing Shares on issue.


The issue price under the Placement and SPP (32 cents) represents a 10.22% discount to the volume weighted average price for the five day period up to and including 14 April 2011 (the trading day prior to the Company going into trading halt while it conducted the capital raising) of 36 cents.


The SPP will consist of an offer to existing eligible shareholders of Quickstep of up to $15,000 of Shares per eligible shareholder.


Participation in the SPP is optional and will be open to shareholders who were holders of Shares as at 5.00pm (Perth time) on the record date for the SPP, which was Thursday, 21 April 2011, and whose registered address is in Australia or New Zealand. Each eligible shareholder will be able to acquire up to 46,875 Shares under the SPP.


The SPP offer will open, and SPP offer documents will be despatched to eligible shareholders, on or about Thursday, 5 May 2011. The SPP is currently expected to close at 5.00pm (Perth time) on Friday, 3 June 2011. The SPP Shares are anticipated to be tradeable on Monday, 13 June 2011 and will rank equally with existing Shares on issue.


The SPP will not be underwritten. The Company reserves the right to scale back applications if it determines that the applications received under the SPP exceed its needs for further funding. An appropriate scale-back policy will be applied if the Company decides to scale back applications under the SPP.


The SPP is non-renounceable. This means that eligible Quickstep shareholders who do not take up their entitlement to participate in the SPP will not be able to transfer or receive any value for those entitlements.


The Placement and SPP will not require shareholder approval. However, Quickstep will likely seek shareholder approval at a general meeting to ratify the issue of Shares under the Placement so as to reinstate its capacity to issue Shares pursuant to the ASX Listing Rules.


Indicative key dates (which are subject to change) in relation to the Placement and SPP are as follows:


Key dates - Placement

Trading halt : Friday, 15 April 2011

Completion of Placement announced: Pre-market open, Wednesday, 27 April 2011

Quickstep shares re-commence trading: Wednesday, 27 April 2011

Placement settlement date: Wednesday, 4 May 2011

New Placement shares commence trading: Thursday, 5 May 2011

Key dates – SPP

Record date for determining entitlement to participate in SPP: Thursday, 21 April 2011

Announcement of SPP: Pre-market open, Wednesday, 27 April 2011

SPP offer opens and SPP offer materials despatched to eligible shareholders: Thursday, 5 May 2011

SPP offer closes: Friday, 3 June 2011

New SPP shares commence trading: Monday, 13 June 2011



Annexure 2 –Funding Agreement terms and conditions

The key terms and conditions of the Funding Agreement are as follows:

  • La Jolla has agreed to subscribe for AU$600,000 of ordinary shares at AU$0.32 pursuant to the Placement (see Appendix 1 for key terms of placement).


  • Quickstep has agreed to issue and sell and La Jolla has agreed to purchase up to US$15,000,000 in aggregate of convertible notes under the Funding Agreement (“Convertible Notes”).


  • The Convertible Notes will consists of two notes, each in the principal amount of US$7,500,000 (“Purchase Price”) and comprising of:


(i) an Initial Note to be issued on the Initial Closing Date being ten business days following the execution date (24 April 2011), or such earlier date on which the Company is ready to issue a cleansing statement in relation to the issue of the Initial Note pursuant to ASIC Class Order [CO 10/322]; and


(ii) a Subsequent Note, to be issued at Quickstep’s option which is exercisable during the period commencing on the date that the Purchase Price for the Initial Note has been fully paid and ending 90 days thereafter.


  • La Jolla will pay for each of the Initial Note and the Subsequent Note by way of an initial payment of US$400,000 and monthly payments of not less than US$500,000 and not more than US$1,000,000 (or such higher amount as the Company agrees in writing).


  • The Company must pay La Jolla a facility fee of AU$30,000, which amount may be withheld by La Jolla from the initial payment for the Initial Note.


  • The Convertible Notes are not transferable by La Jolla except with the Company’s prior consent.


  • La Jolla’s obligation to purchase the Convertible Notes and make monthly payments is subject to a number of customary conditions precedent, including there not having occurred a declaration of a banking moratorium or any suspension of payments in respect of banks in Australia or the United States and there not having occurred any event or development, and there being in existence no condition, having or which reasonably and foreseeably could have a material adverse effect on the business, properties, prospects, condition (financial or otherwise) or results of the operations of the Company or its subsidiaries or on the consummation of any of the transactions contemplated by the Funding Agreement.


  • At the election of La Jolla, a Convertible Note may be converted, either in whole or in part, up to the full principal amount into Shares. The number of Shares into which a Convertible Note may be converted is equal to the dollar amount being converted divided by the Conversion Price, which shall be equal to the lesser of:


(i) AU$0.90 (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalisations or the like); and

(ii) 80% of the average of the Volume Weighted Average Prices during the ten (10) trading days prior to La Jolla’s election to convert.


  • If La Jolla elects to convert a Convertible Note in whole or in part and, on the day that the election is made, the Volume Weighted Average Price per ordinary share is below AU$0.28 (the “Floor Price”), the Company shall have the right to prepay that portion of the Convertible Note La Jolla elected to convert, plus any accrued and unpaid interest. The Floor Price is subject to adjustment if the Company, at any time while a Convertible Note is outstanding, issues or sells, or is deemed to have issued or sold, any Shares, excluding Shares deemed to have been issued or sold by the Company in connection with any Excluded Securities (as that term is defined in the Funding Agreement), for a consideration per share less than a price equal to the Floor Price in effect immediately prior to such issue or sale.


  • La Jolla shall not have the right to convert any portion of a Convertible Note, to the extent that after giving effect to the conversion, on the applicable conversion notice, La Jolla (together with its affiliates, and any other person or entity acting as a group together with La Jolla or any of La Jolla’s affiliates) would beneficially own in excess of 19.9% in voting shares of Quickstep on issue.


  • The Convertible Notes will bear interest at the rate of 3.00% per annum payable on the then outstanding principal amount, payable monthly in arrears. Payment of interest shall be in cash or, at the election of the Company, in Shares valued at the then applicable Conversion Price.


  • The maturity date of the Convertible Notes will be four years after the issue date of the relevant Convertible Note. On the maturity date, Quickstep is required to repay the principal amount outstanding on the relevant Convertible Note. Quickstep may not make any prepayments without the consent of La Jolla or as described below.


  • In each of the six months prior to the maturity date, the Company may elect to force La Jolla to convert one-sixth of the then remaining principal amount (calculated at the beginning of the first of the six months prior to the maturity date, so that the effect of the forced conversion over the last six successive months would be to convert the entire remaining principal amount) of a Convertible Note due to mature into ordinary shares of the Company, provided however there is not currently occurring an Event of Default (as that term is defined in the Funding Agreement, and including a number of events of default which are customary for this style of transaction) on behalf of the Company.


  • The Company has undertaken and agreed that as soon as reasonably practicable following the date of the Funding Agreement, and (while any Convertible Note is outstanding) at any time when La Jolla’s ability to convert Convertible Notes could be constrained by the Company’s ASX Listing Rule 7.1 capacity, the Company will convene and hold a shareholders’ meeting to seek approval for, or to ratify, issues of Shares in order to free up Listing Rule 7.1 capacity. La Jolla’s right to convert the whole or any part of a Convertible Note into Shares is subject to and conditional upon the Company obtaining prior approval of shareholders of the Company in accordance with ASX Listing Rule 7.1 where such approval is required at the time of issue of a Conversion Notice.


  • If a Fundamental Corporate Change (as that term is defined in the Funding Agreement, including a takeover of the Company) occurs then La Jolla shall have the right to:


(i) require the Company to prepay a Convertible Note for cash at one hundred five percent (105%) of the principal amount, together with all accrued and unpaid interest payable to the date of prepayment;


(ii) convert the Convertible Note (in whole or in part); or


(iii) require the Company to use its best endeavours to procure the Company or such successor resulting or purchasing corporation, as the case may be, to, without benefit of any additional consideration, execute and deliver to La Jolla a convertible note with substantially identical rights, privileges, powers, restrictions and other terms as a Convertible Note in an amount equal to the principal amount immediately prior to such Fundamental Corporate Change (in exchange for the transfer of the Convertible Note back to the Company for no consideration).


  • If an Event of Default (as that term is defined in the Funding Agreement) occurs and is continuing, then La Jolla may, in its sole and absolute discretion, by a notice in writing to the Company, rescind any outstanding Conversion Notice and declare that any or all amounts owing or otherwise outstanding under a Convertible Note are immediately due and payable. Upon any such declaration, a Convertible Note or such portion, as applicable, shall become immediately due and payable in cash at a price of one hundred percent (100%) of the principal amount, together with all accrued and unpaid interest to the date of payment.


  • So long as the Convertible Notes are outstanding, La Jolla agrees and covenants on its behalf and on behalf of its affiliates that neither La Jolla nor its affiliates shall at any time engage in any short sales with respect to Quickstep’s ordinary shares, or sell put options or similar instruments with respect to Quickstep’s ordinary shares.


  • The Convertible Notes will be issued in US$, but all conversions of the Convertible Notes into Shares will be made in AU$ based on the actual AU$ amount received by the Company in its AU$ bank account in respect of payment of the Purchase Price.


  • Under the Funding Agreement, the Company gives certain customary warranties, indemnities and undertakings in favour of La Jolla.


  • Further details about the Funding Agreement and the terms of the Convertible Notes will be set out in a cleansing statement to be issued pursuant to ASIC Class Order [CO 10/322] prior to issue of the Convertible Notes. This cleansing statement will be announced to ASX.