Alinta’s future hinges on private equity consortium deal

TPG Opportunities Partners has reportedly acquired a sizeable chunk of Alinta’s senior debt in the secondary markets at a 25-35% discount.

TPG has now forged a consortium with other significant fund creditors, namely Anchorage Advisers and Oaktree Capital Partners, as well as its own private equity unit. As a bloc, the three represent the dominant credit interest, holding 35% of Alinta’s senior loan facilities. The company is currently carrying a debt load of about A$2.7 billion ($2.43 billion).

Alinta has assets diversified by geography, location, fuel source, customers, contract types and operating modes. And it plans to grow by both strategic acquisition and new construction, with current interests in 12 operating power stations representing approximately 3,000 MW of installed generation capacity. In Western Australia Alinta operates the largest integrated private gas and electricity retailing business, with over 580,000 customers. Unfortunately, without a restructuring plan, the company could be forced to scrap all all of the above.

The TPG-led consortium has now put forward a proposal to other creditors to proceed with a partial debt-for-equity swap, along with an underwritten rights issue valued at approximately A$300 million ($277 million), cutting the total in half to A$1.55 billion ($1.43 billion).

The consortium is also proposing a major management shift in which the leading interest, TPG, will introduce a new board to rectify existing portfolio problems and lay the appropriate strong foundation for future growth.

Sources close to the situation discount speculation that the consortium is also angling for an extra 15% of Alinta’s equity “…as a reward and incentive for running the business.”
Instead, these sources say, 75% of the heavily discounted new rights issue will be pro-rated to the ownership of senior debt. The balance would be structured as a guaranteed placement to the underwriters, namely the private equity consortium.

More broadly, the deal is one of a number of new manifestations of real interest in Australian companies of size by international players. As a senior banker told AVCJ, “Where you’ve got companies that are willing to consider control-changing transactions, and that becomes known publicly – even where it wasn’t being examined by other private equity firms – I think you’ll now have multiple firms looking to decide whether they want to get involved or not. From what we see, there’s considerably more funding available that there was even four to five months ago for private equity.” 

Further reading

TPG, Oaktree, Anchorage ready to back Alinta recap

• Australasia
• 10 Sep 2010

TPG said to be supporting Alinta restructuring

• Australasia
• 13 Aug 2010

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• Topics
• Australasia
• Infrastructure
• Infrastructure
• Infrastructure
• TPG Capital
• Oaktree Capital