Pandemic, Finances Burden Hydrodec

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United Kingdom-based transformer oil rerefiner Hydrodec Group Plc continues working on a refinancing package for its plant in the United States, but it cautioned recently that a delay in an audit of its financial performance could get the company delisted from AIM, the London Stock Exchange’s market for small and medium growth companies.

The company’s directors said in a Feb. 3 filing that it has been unable to conclude its financial statement audit for the 18-month period ending June 30, 2020, due to the ongoing impact of the pandemic and Hydrodec’s financial constraints.

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“The board remains committed to publishing these audited accounts at the earliest opportunity,” the company said in its update. “However, the board has been advised by its auditors that in the company’s current circumstances, there is no guarantee that they would be in a position to conclude the audit of the financial results for the 18-month period ending 30 June 2020 by the end of March 2021,” which would be 9 months from the end of the financial period.

Hydrodec’s shares remain suspended from trading on AIM, pending the publication of the financial statements and resolution of the company’s financial difficulties. If the March 31 deadline for concluding the audit isn’t met, “then under the AIM rules the company’s shares will be canceled from trading on AIM.” Should that occur, the company said it “will communicate with its shareholders as to the implications and the way forward as an unlisted company, and would seek to offer some form of matched bargain facility that matches buyers and sellers, as is common for companies in similar circumstances.”

The company said it continued to work on a refinancing package for its U.S. plant in Canton, Ohio, and assets to replace the existing equipment lease, which is over-collateralized, with an extended facility to provide additional funds for feedstock, approved capital expenditure and growth opportunities. “Despite delays, due in part to the global pandemic, progress continues to be made,” Hydrodec stated. “The company has an agreement in principle with one party to provide funding of up to $6.75 million and is in advanced stage negotiations with its existing U.S. bank to conclude arrangements.”

In recent months Hydrodec continued to lean on support of its major shareholder, Andrew Black, who lent an additional $200,000 further in cash since the company’s previous update on Oct. 1 last year. If completion of refinancing is further delayed, the company said its cash and working capital positions could be impacted accordingly.

Subject to that resolution of its funding position, the company expects to sign an operating agreement for a proposed joint venture with a U.S. industrial recycling company. The JV will use part of Hydrodec’s existing site in Canton to establish a facility for dismantling and recycling pole and pad-mount electrical transformers. The JV will transfer all used transformer oil extracted at the facility to Hydrodec of North America at no cost, and the JV partner will provide all the used oil it secures outside of the JV’s activities to Hydrodec of North America at no cost.

“We continue to pursue our strategy of targeting U.S. utilities highlighted in previous updates, and the progress made to refinance the company together with the JV agreement with a transformer recycling company will, if and when consummated, position the company strongly to build on the encouraging signs for its sustainability strategy,” CEO and Interim Executive Chairman Chris Ellis said in a news release.