Creditors and members schemes facilitate restructure and recapitalisation
05 October 2021
05 October 2021
Ashurst has acted as Australian legal advisors to longstanding firm client, Boart Longyear Limited ("BLY") (ASX:BLY) and its subsidiaries (collectively, the "Company") on its complex and multifaceted recapitalisation and re-domiciliation to Canada.
In the largest debt-for-equity swap in the last decade in Australia, the Company deleveraged by swapping more than A$1.1 billion of finance debt for 98.5% of the equity post issue.
The recapitalisation was effected by way of two interdependent creditors' schemes of arrangement approved in the Supreme Court of New South Wales paired with a series of related recapitalisation transactions, including a new money "Exit Finance Facility" and Chapter 15 recognition in the United States. The Company also obtained Court orders approving a related members' scheme of arrangement, under which the corporate and tax domicile of the Company will be transferred from Australia to Canada.
The Company is a leading manufacturer of drilling products, and provider of drilling services and equipment for mining and drilling companies globally, which is operationally headquartered in the United States. Prior to the restructure, the Company had a complex capital structure and unsustainable levels of debt, constraining its ability to take full advantage of significant opportunities in an upward trending commodities cycle.
Before the recapitalisation, the Company's debt capital structure consisted of:
These debt facilities were due to mature imminently. The Company was not in a position to refinance its existing debt.
A thoughtful restructure was required to create a sustainable capital and organisational structure to put the Company on a strong footing to capitalise on the upswing in the mining and exploration sectors and to better access North American capital markets.
Working in conjunction with Rothschild & Co., the Company undertook a strategic review in late 2020 to evaluate all available options to proactively address its problematic outlook. After extensive consideration, the Company and its major finance creditors under the Term Loans, SSNs and SUNs agreed a restructuring plan to provide the best outcome for all stakeholders in the Company. The plan included:
At the same time, the Company pursued re-domiciling its business to Canada to better align the legal structure of the group with the geography of its shareholder base and improve access to capital. Notwithstanding the re-domiciliation, in light of the large number of Australian shareholders, the Company intends on maintaining its listing on ASX through CHESS Depositary Instruments (or CDIs), which will make the Company one of approximately 13 Canadian companies trading on ASX using CDIs.
Simultaneously preparing and implementing such a multifaceted restructure required outstanding technical expertise, perseverance and hard-work by Ashurst, U.S. counsel Milbank LLP, the Company's management team and its financial advisors, Rothschild & Co. and Alvarez & Marsal, and FTI Consulting as scheme administrators, together with a carefully calibrated transaction timeline, including the following key elements:
The Company's hard-work, careful planning and execution has paid off. Not only did the creditors approve the schemes with a very high level of support, the shareholders also voted in favour of the debt-for-equity swap and the redomiciliation to Canada by sizeable majorities.
The restructure has achieved the following:
The debt-for-equity swap effected under the creditors' schemes of arrangement is one of the largest completed in the Australian market. The recapitalisation demonstrates the position of the creditors' scheme of arrangement as the pre-eminent tool for complex restructures in Australia, and how it can be creatively used with other legal processes to deliver real fixes to capital and organisational structures. This case is also a good example of how members' schemes of arrangement can be used to re-domicile corporate groups between jurisdictions, but maintain an Australian presence by listing CDIs on ASX.
Ashurst was privileged to support Boart Longyear and its dedicated management team on this transformational transaction. Boart Longyear is now positioned to take advantage of significant growth opportunities in the ongoing commodities cycle upswing.
Ashurst was also delighted to work closely with Boart Longyear's advisor group, including Rothschild & Co., Milbank LLP, Dorsey & Whitney LLP and Alvarez & Marsal, as well as FTI Consulting as scheme administrators.
Authors: James Marshall, Partner; Alinta Kemeny, Partner; Harrison Cross, Senior Associate; Simon Parmeter, Lawyer.
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