FreightLink off the rails for mezzanine debt funders

Directors of FreightLink have appointed Steve Parbery from PPB as administrator, and the company's lenders appointed KordaMentha partner Martin Madden as receiver.

The rail firm has around $500 million in debt, including $350 million in senior debt, according to The Australian.

The firm operates the Alice Springs to Darwin rail link, a project heavily subsidised by the Australian government.

A number of capital markets magazines selected the financing as "project finance deal of the year" in 2001, though the rail line never seemed likely to pay its way, or repay its lenders. Those lenders include ANZ and RBS at the head of a syndicate of 16 banks.

Three mezzanine debt holders rejected an offer of around $360 million from Genessee Wyoming, an existing shareholder and supplier, according to columnist John Durie in The Australian. The Financial Review named a Macquarie Group and Transfield consortium as the preferred bidder. The sale price cleared the $350 million senior debt held by the banks but not the $150 million of mezzanine debt, according to Durie.

Columnist Matthew Stephens in the same newspaper said the mezzanine financiers holding out on the sale were one "name" financial institution and two hedge funds, both of which had bought their portion of the debt at a deep discount.

Thus the collapse of FreightLink differs from that of, say, Allco Finance Group, since the directors were willing to sell but the voting methods within the lender group blocked the sale. PPB is likely to renew the sale process and may now sell on terms that recover most, if not all, of the senior bank debt.

Meanwhile, yesterday was disclosure day for some lenders to ABC Learning Centres, which appointed Peter Walker and Greg Moloney of Ferrier Hodgson as administrators, while the lenders appointed Chris Honey of McGrathNicol as receiver.

ANZ said ABC owed it around $180 million; NAB, $140 million; and Westpac, $200 million. CBA may be owed this amount combined, and then some, including senior debt and hybrid securities underwritten by CommSec.
 
Banks also lined up to confirm their exposure to Allco Finance Group, which appointed administrators on Tuesday. CBA said Allco owed it around $170 million; NAB, $140 million; and Westpac, $200 million. ANZ said its exposure to Allco was insignificant.