Billion-dollar refinancing succeeds via rarely used structure with legal giants’ advice

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Two top firms contributed to the success of a long-drawn-out negotiation that led to the billion-dollar refinance of a coal terminal in Queensland.

Allens and Ashurst were involved in the refinancing of the US$2.5bn senior project financing for the US$3.5bn Wiggins Island Coal Export Terminal (WICET). Allens acted for a syndicate of 22 financiers, while Ashurst acted for WICET.

The deal is one of the largest and most high-profile restructuring and refinancing transactions in the Australian infrastructure market in recent years, Allens said.

Partner Nick Adkins, who led the Allens team, said that the transaction was a huge team effort over several years. Partner Chris Prestwich, who led the creditors' scheme and other restructuring aspects of the transaction for Allens, said that the use of the creditors’ scheme of arrangement in the transaction is quite rare in the Australian market.

Prestwich said that “it will be interesting to see if it is deployed in similar transactions in the future.”

The refinance was challenging because of a number of issues that included the insolvency of three of the eight take-or-pay shippers that underpin the financing structure. Financing of coal assets has also been a generally difficult market in the last couple of years, Allens said.

The deal has two key takeaways, the legal giant said.

The senior financiers could not reach a unanimous agreement about the terms of the extension. WICET, backed by a majority of its senior financiers, sought court approval to use a solvent creditors’ scheme of arrangement to bind all senior financiers.

“While rarely used in this context, it shows that a solvent refinancing can be achieved with less than unanimous support of a class of creditors, even when particular terms of the restructure (such as the extension of the maturity date), would ordinarily require 100% creditor consent under the terms of the facility documentation,” Allens said.

The refinance also needed to be completed with an intricate capital structure that included both mezzanine debt and preference shares, which would remain in the structure after the refinance.

“This shows the importance of ensuring when multi-layered financing structures are being put in place that senior debt holders are in a position to implement a refinancing of this type without any formal consent from other layers of the capital structure (which they cannot control),” Allens said.

Also part of the Allens team were senior associate Michael Gibling, associates Jacques McElhorne and Luke Leybourne, and lawyer Kate Buchanan.