The ultimate return to the taxpayer from the NZ$160 million sale of Helicopters NZ by South Canterbury Finance (SCF) receiver McGrathNicol is unclear at this point, but will be a "substantial" amount of the sale price, says McGrathNicol managing partner Kerryn Downey.
Downey told interest.co.nz that alongside the NZ$90 million value ascribed to Helicopters NZ when its ownership was transferred from one Allan Hubbard controlled company - Southbury Corporation - to another - SCF - in February last year, was financing through an SCF subsidiary on the lease of seven helicopters to Helicopters NZ worth about NZ$55 million.
He said the sale, to Canadian Helicopters Limited, would see 100% recovery of the NZ$55 million for SCF, and ultimately its taxpayer masters. And a "substantial piece of the balance" of the NZ$160 million sale price would also ultimately find its way into the government coffers. His staff were currently "working through the numbers" on just what the taxpayers' return would be.
"There are some other prior ranking claims, - finance companies that have financed Helicopters, so those need to be settled but we will see a sizable recovery to SCF," Downey said.
He wouldn't say who the other claims were held by or how much they were worth. Downey said some were New Zealand based and others Australian based. They weren't Hubbard related entities. Ranking behind the lenders and SCF were preference shareholders with about NZ$20 million worth of preference shares, Downey added.
The deal requires Overseas Investment Office and Civil Aviation Authority (CAA) approval.
"They're both roughly two to three month processes and we have already started work on them," said Downey. "CAA approval is for the issuance of new air operating certificates."
Canadians paying 5.7 times ebitda
The NZ$160 million Canadian Helicopters Limited has agreed to pay is equivalent to 5.7 times Helicopters NZ's 2010 earnings before interest, tax, depreciation and amortisation of NZ$28 million.
It's the first asset sale from the government guaranteed failed finance company. Other SCF assets McGrathNicol has on the block include a 79% stake in Scales Corporation which is the country’s biggest apple grower and exporter, plant and equipment lender Face Finance, and a 33.5% stake in New Zealand's biggest dairy farming group Dairy Holdings.
A letter from SCF's lawyers Bell Gully, released as part of a Reserve Bank dump of SCF related correspondence last year, shows the Southbury-SCF deal valued Helicopters at NZ$90 million.
SCF was tipped into receivership on August 31 last year with McGrathNicol appointed receivers after it failed to secure up to NZ$300 million from new investors. Its receivership triggered a NZ$1.6 billion payout to about 35,000 SCF investors under the Crown retail deposit guarantee scheme, plus a NZ$175 million Crown loan to McGrathNicol so it could repay SCF's prior charge holders including the George Kerr chaired Pyne Gould Corporation subsidiary Torchlight.
Earlier this month Downey said between NZ$290 million and NZ$300 million of NZ$331 million worth of additional government guaranteed finance company provisions to hit the Crown accounts stemmed from SCF related party loans, some of which are now under investigation by the Serious Fraud Office.
Helicopters NZ has 181 employees and a fleet of 33 helicopters. In the 2010 calendar year it had revenue of NZ$83 million and ebitda of NZ$28 million. As of June 30 last year its 33 helicopters had an appraised value of NZ$137 million.
Helicopters NZ has 11 bases to support its operations across New Zealand, Australia, Laos and Cambodia, plus a corporate office in Perth to support its Australian operations.
"We are very pleased with the acquisition of Helicopters NZ", said Don Wall, President and Chief Executive Officer of Canadian Helicopters. "The acquisition represents a transformational investment for Canadian Helicopters Ltd and in a part of the world that complements our activities in the northern hemisphere."
Canadian Helicopters Limited says it will fund the deal through a combination of cash on hand and bank debt. It has secured loans from National Bank of Canada and Caisse centrale Desjardins totaling C$125 million.
Downey said McGrathNicol, which was advised by Goldman Sachs & Partners, believed it had got a good price for the business.
Read the receiver's statement below and see Canadian Helicopters' statement here.
Kerryn Downey and William Black of McGrathNicol, as receivers of the SCF Group are pleased to announce that a conditional agreement has been entered into for the sale of the business and assets of its wholly owned investment company Helicopters (N.Z.) Limited (“HNZ”), to international helicopter operator Canadian Helicopters Limited (“CHL”).
HNZ is a leading provider of helicopter services and operates in New Zealand, Australia, South East Asia and Antarctica. HNZ was founded in 1955 with one helicopter and has grown significantly, now operating a fleet of 37 helicopters.
CHL is the largest helicopter transportation services company operating in Canada and is also one of the largest in the world based on the size of its fleet. With over 35 base locations across Canada, CHL provides helicopter services to a broad range of sectors, including infrastructure maintenance, utilities, oil and gas, mining, forestry, construction and emergency medical services and provides military support.
With over 60 years of experience, CHL is an industry leader in establishing safety standards and operating procedures. CHL is a public corporation trading on the Toronto Stock Exchange (TSX).
CHL was selected through a competitive sale process that commenced following HNZ’s shareholder, SCF, being placed into receivership in late August 2010. The sale price is approximately NZ$160 million. The sale is subject to a number of conditions, including regulatory approvals, and is expected to complete in the coming months.
Kerryn Downey commented “This announcement is the culmination of a significant amount of work by the company and our advisors. This has been a very robust process and we are very pleased to have identified such a credible purchaser and achieved what we believe is a good price for the business”.
“Helicopters New Zealand has grown from a local NZ based company to an internationally respected operator involved in all aspects of helicopter operations, we welcome the opportunity to continue to maintain our high level of quality services and continue to grow and enhance our business for all stakeholders, including our clients and staff in the future with Canadian Helicopters” said HNZ’s CEO Brian McDonald.
“We are very pleased with the acquisition of HNZ”, said Don Wall, President and Chief Executive Officer of Canadian Helicopters. “HNZ has excellent people and a very strong brand particularly with respect to safe operations, and will be a significant part of CHL’s growth plan as we look to the future. Like CHL, HNZ operates in challenging environments and positions itself as providing “excellence in the extremes”.
We look forward to supporting the employees in New Zealand, Australia and elsewhere in the region in continuing to provide “best in class” service.”
Goldman Sachs & Partners New Zealand Limited acted as financial advisor to the receivers of the SCF Group.
(Updates add interview with Kerryn Downey, plus detail and background).
8 Comments
Let's see if people can now figure out the different between a valuation on a debt free / cash free basis (ie the enterprise value) vs. equity value (which is what we actually receive).
Poor Canadians - HNZ was a big pile of poo. Great outcome for the taxpayer though.
This is a meaningless statement
Questions which need to be know are:
What was the carrying value on SCF books pre-administration?
What does the $160m mean in contect - xEBITDA, P/E, xNTA?
Is the administrator providing any finance or guarantees?
Its NZ taxpayer money, we have a right to know the dynamics of the deal.
Someone else would be able to disect this deal better than me, but it looks like CHL have pretty much got the business for the cost of the plant and machinery.
I am sure there are other assets than just the helicopters.
No debt is mentioned though, which could change the perspective on this.
Gareth
I would be surprised if Hubbard had undervalued the transaction so significantly given his track record.
Obviously the amount of debt held by Helicopters NZ at the time of sale for $90m is significant. If much of the debt restructured in the receivership and the company sold with less or no debt then it could have actually proven to be a loss for SCF.
Well worth finding that out for us, please Gareth.
(ie, say if HNZ had $100m in debt when Hubbard shored up SCF, then the receiver sold it debt-free, this would actually be a $30m loss for SCF - not such good news).
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