Maximising returns in a complex environment
KordaMentha Partner Martin Madden reflects on the successful Receiver’s sale of the Connector Motorways Group (‘Connector). Throughout the Advisory and Receivership phases of this project, the KordaMentha team harnessed their breadth of experience and skills to drive a higher than expected return for the secured lender.
‘Connector held the contract from the Roads and Traffic Authority (RTA) to design, construct and operate the Lane Cove Tunnel and Military Road E-Ramps which opened in March 2007. The months following the opening saw lower than expected traffic activity in the area, resulting in Connector’s inability to meet interest payments to the secured lender.
KordaMentha was engaged by the secured lender for an 18-month period to provide independent advice and negotiate a standstill agreement between Connector and the secured lender.
We worked with the secured lender during this phase to monitor the Group’s performance and undertake an analysis of financial forecasts for available cost savings.
The successful negotiation of the standstill period was to allow for:
- a comprehensive options analysis
- a traffic ramp-up to be experienced
- an opportunity to undertake vendor due diligence prior to a sale
- a plan for an orderly sale process
- a reworking of enterprise value modelling, incorporating cost synergies and revised operating assumptions.
In January 2010, the standstill agreement was terminated and David Merryweather and I were appointed receivers of the Group. During the Receivership period, we operated the Group on a ‘business as usual’ basis and an extensive sale process was conducted in a short period of time.
In preparation for a potential sale we worked with legal and sale advisors to provide advice as to the lender’s security position, a potential restructuring alternative and sale processes/timetables. The sale involved the novation of all project documents which required the consent of the RTA. We drove extensive transaction planning and management of stakeholders to ensure a smooth approval and transition process.
In May 2010 we entered into an Assets Disposal Agreement for the sale of the Tunnel and Ramps to Transurban for $630.5 million, exceeding lender expectations. Completion occurred in August 2010.
We maximised value to our client by/through:
- an in-depth analysis of the key value drivers
- working closely with traffic advisors
- identifying and modelling cost optimisation opportunities
- working closely with sale advisors, to maximise competitive tension and demand for the assets
- identifying options for sale structuring.
Our team received, and continues to receive, much praise from the secured lender who confirms our commitment and sensible commercial approach to complex issues were instrumental in the success of the sale of the tunnel.’