Case Study: A$700m+ Refinancing - Magma Capital Advisory

Client

Australian subsidiary of a major Asia based company active in upstream and midstream conventional and renewable power generation

The Project

First stage: To review company existing financial arrangements, current market conditions, credit metrics and provide a refinancing strategy and recommendations report to senior management for a ~A$700million of bank loan and guarantee facilities.

Second Stage: To assist the Client in the implementation of the agreed refinancing plan through careful management of current lenders and the introduction of new lenders.

The Objectives

Facility Consolidation: consolidate numerous bilateral and syndicated bank facilities into a single bilateral facility with term, revolver and LC/guarantee tranches
Lender Composition: expand bank group compositionto reach outside of Australia to replace known exiting lenders and those lenders wishing to reduce limits, as well as work with existing lenders to increase limits to ensure total required limit is well covered
Amortisation: maintain bullet structure notwithstanding some lender preference for amortisation
Refinancing Risk: manage facility refinancing risk and the refinancing of other debt instruments
Retain Flexibility: retain the existing unsecured borrowing platform and covenant structure, notwithstanding the background of sector challenges and lender preferences for changes
Tenor: implement a mix of tenors to ensure the debt profile of the company is diversified and extended
Documentation: create a borrower-driven facility document to ensure optimal flexibility
Pricing: achieve optimal pricing on market competitive terms
Timing: achieve financial close before a year end, nine weeks from launch

The Solution

Magma Capital designed a price and volume tender process for a syndicated/common terms deed "hybrid" style facility structure. This allowed a tailored positions to be adopted with each existing and potential lender to ensure the transaction was fully subscribed as well as ensuring competition in price/tenor combinations.

Magma Capital revised and updated a detailed debt information memorandum which included a detailed company background, overview of contracts, financial analysis and financing objectives. This information memorandum was ptovided to both new potential lenders as well as existing lenders to reinforce the strong credit qualities of the business.

The challenge of the refinancing was that there was enormous push-back from all bank credit departments for this sector. Magma Capital's approach was to reinforce the strong credit metrics of the business and not be swayed by media hype around the sector.

A five year term loan tranche was priced on a negotiated market clearing price basis while three and five year revolver tranche allocations we awarded on a bilateral basis, allowing the Client to select the optimal mix of price and tenor.

This approach allowed the company to achieve their stated objectives in the following manner:

Facility Consolidation	Yes	Established a single facility with four tranches

Lender Composition	Yes	Added two international lenders and upsized several existing lenders

Amortisation	Yes	Bullet facilities, with structural amortisation through a mixture of three and five year maturities, replacing existing facilities due within six to fifteen months

Refinancing Risk	Yes	3 year and 5 year tranche maturities straddled other debt maturities in 4 and 6 years

Flexibility	Yes	Existing unsecured borrowing platform and covenant structure retained

Pricing	Yes	Tender structure allowed selection and scale backs to optimise pricing

Timing	Yes	Financial close achieved within nine weeks

Following the financial close of the transaction the business has the following things to say about Magma Capital's involvement:

"Many thanks for your [Magma Capital's] valuable involvement and guidance throughout the process which has achieved a great result." - GM Finance

"Thank you [Magma Capital] for your assistance and good counsel. It was great working with you this year and it was a good result." - Deputy CEO

Australian subsidiary of a major Asia based company active in upstream and midstream conventional and renewable power generation.