King & Wood Mallesons has acted as Australian counsel to Barclays on the $900m financing of a joint venture between Leighton Holdings (CIMIC) and US private equity firm Apollo Global Management.
The financing was secured by way of a seven year senior secured Term Loan B facility, split into US$350m and A$359m parts with an A$100m revolver with a five year term, the deal marking the first predominately Australian dollar TLB financing.
“We are delighted to have assisted our client with the first ever Australian dollar denominated TLB financing,” said Richard Hayes, banking and finance partner who headed up the King & Wood Mallesons deal team. “This type of ‘covenant-lite’ TLB financing is particularly attractive to borrowers with exposure to earnings fluctuations as a direct or indirect result of adverse movements in commodity prices and related services connected to the resources industry,” he said.
Hayes predicted that TLB financing will become increasingly popular with access to Australian dollar denominated financing.
“It is great news for the market that Australian borrowers and the portfolio companies of domestic and international private equity firms can now access an AUD TLB market without having to incur the cost of expensive AUD-USD cross-currency swaps,” he said. “We anticipate that this may become the new financing solution of choice for many, particularly when compared with the quarterly maintenance covenant regime typically imposed by the traditional Australian bank debt market.”
In Hayes’ view, the transaction is a testament to confidence in the Australian financial market.
“The success of this deal can be attributed, at least in part, to the growing pool of superannuation funds and other investors looking for attractive risk adjusted returns and the ongoing disintermediation of the financial markets in Australia”.