McAleese Limited is a specialised transportation provider focused on bulk commodity haulage, heavy haulage & lifting, oil & gas and general freight. Following sustained weakness in commodities prices and reduced transportation/construction demand in the resources sector, the company’s financial performance had significantly deteriorated. This was exacerbated by a major accident in the oil & gas business, which led to a drastic reduction in its footprint.
The company’s existing lenders were concerned about the business deterioration and an unfavourable macro backdrop, which made a near term recovery unlikely. At the same time, McAleese had engaged a corporate advisor to assist in recapitalising the company and help provide an exit for existing lenders. This also gave existing shareholders the opportunity to participate in the business post the recapitalization. The advisor subsequently ran a comprehensive process to either sell the entire company, parts of the business, or to recapitalise the business.
At this stage, SC Lowy led a consortium through the competitive process and provided a structured financing solution which involved engaging with the company and negotiating the purchase of debt (A$191 million) held by existing lenders. Subsequently the largest shareholder and CEO agreed to underwrite the injection of A$26 million of capital into the business. To secure this commitment, the consortium provided a separate credit facility secured by a pool of global assets owned and controlled by the CEO.
The business was subsequently placed into Administration as a number of the conditions’ precedent required as part of the consortium’s funding were not met. The Administration process provided an opportunity to streamline the company’s operations by divesting underperforming assets and removing substantial operating costs.
This, coupled with a recovery in commodity prices (principally iron ore), resulted in McAleese going on to have its best quarter in three years. As secured creditors, the consortium proposed a Deed Of Company Arrangement’s (DOCA’s) to return operational control back to management. The DOCA’s were widely supported by all employees, who were either re-instated into the new business or paid out their cash entitlements in full.
The restructuring has led to a positive outcome for all stakeholders including customers, suppliers, employees, creditors and shareholders. The business has emerged stronger and with a de-leveraged capital structure, thereby enabling management to focus on growth opportunities ahead.