Dorchester Pacific, which avoided failure last year by convincing investors to accept a debt-for-equity swap, is seeking to raise a further $12 million via a convertible note issue after its banks passed on providing a debt facility.
Major shareholders Hugh Green Investments, the Business Bakery and Paul Byrnes will underwrite $10 million of the issue of notes, which mature in March 2015 and convert to ordinary shares at 10 cents apiece.
The shares last traded at 9.5 cents and have declined 23 per cent this year.
"Dorchester Finance had intended to have in place a $10 million facility one year after its restructure but the banks have told us that we need more runs on the board," said chief executive Paul Byrnes.
The company has retained Simmons Corporate Finance to prepare an independent report to shareholders, who will vote on the capital raising at their annual meeting on September 27.
Under the proposal, holders of Dorchester's existing 2013 options will be able to exercise the options a year earlier in June 2012 at 10 cents a share, rather than the 12.5 cent level if they hold them to expiry.
The company's Dorchester Finance and Dorchester Life units were performing ahead of forecast and are "on track to step over the break-even milestone" in the current financial year, it said. That would put the company in a better position to seek bank funding in future.
In June last year, the company managed to stave off receivership by convincing investors they would get more by accepting a complicated asset swap.
Debenture holders agreed to accept units in a property trust that traded on the Unlisted platform along with new shares of the company, three-year interest-bearing notes and options to buy more shares.