Washington H. Soul Pattinson and Co Ltd (ASX: SOL) is a rather famous share on the S&P/ASX 200 Index (ASX: XJO). For one, it's one of the oldest shares on the entire ASX. Soul Patts first opened its doors in the pre-Federation days of the 1870s and was first listed on the ASX way back in 1903.
Today, the company is known for its sizeable investment portfolio. Soul Patts now owns significant chunks of many other ASX businesses. Its largest holdings are in companies like Brickworks Ltd (ASX: BKW), TPG Telecom Ltd (ASX: TPG) and New Hope Corporation Limited (ASX: NHC).
But Soul Patts has been in expansion mode in recent years. Last year, it acquired the monstrous listed investment company (LIC) Milton Corporation. This resulted in the company taking over the multi-billion dollar portfolio of blue-chip shares that Milton used to run on behalf of its investors.
But it's one of Soul Patt's smaller positions in the spotlight today – Electro Optic Systems Holdings Ltd (ASX: EOS).
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Electro Optic Systems has a shocker
Soul Patts informed the markets in July that it had built up a "substantial" position in Electro Optic Systems. As of 15 July, Soul Patts held approximately 10.14 million shares, giving the company a 6.21% stake in Electro Optic Systems in terms of voting power.
But, perhaps unfortunately for Soul Patts, Electro Optics Systems is having a very lousy day indeed today.
As my Fool colleague James reported this morning, the space and defence systems company has just reported its half-year earnings results. These included a 45% loss in revenues to $53.8 million and a ballooning net loss after tax of $99 million, a substantial increase from the previous loss of $11.7 million.
As a result, the Electro Optic Systems share price has now cratered a painful 25.6% or so today.
But in these results, Electro Optic Systems also revealed that Soul Patts had thrown the company a lifeline. Soul Patts has reportedly given Electro Optic Systems a $20 million working capital facility.
The company has agreed to refinance Electro Optic Systems' Roadnight debt facility, which was due to expire on 6 September 2022. It has now extended the maturity date to 26 September 2022.
Electro Optic Systems "expects to seek further extensions" from Soul Patts. But it also notes there is no guarantee this will be granted.
Why is Soul Patts lending a hand?
So what might Soul Patts think about all of this? Well, it's likely that management is not delighted with what Electro Optics Systems had to say today. However, the terms of the $20 million working capital facility are arguably very favourable to the company.
Soul Patts is charging Electro Optic Systems an interest rate of 15%. That's with a maturity date scheduled for 12 months after the first drawdown.
The minimum in interest and fees Soul Patts will receive from this facility will be $6.9 million. That's worth more than what Soul Patt's stake in Electro Optic Systems is now valued at (just under $5.5 million).
So it could be for this reason that Soul Patts is lending a hand to Electro Optics Systems.
