Warburg Pincus leads Transpacific’s A$800m recap

The global private equity firm will invest A$65m for a stake of 18% in the Australian waste management company and the remaining A$735m will be raised via an entitlement offer.

In its first investment in Australia, Warburg Pincus has committed up to A$496 million ($402 million; €286 million) of the A$800 million recapitalisation of waste management services company Transpacific Industries Group, according to a statement from the company.  

Warburg Pincus will invest approximately A$65 million in Transpacific for a stake of about 18 percent. Approximately A$735 million will be raised via a 1.77 for 1 pro-rata renounceable entitlement offer, at an

Transpacific: Warburg have jumped onboard

entitlement price of A$1.20 per share, to Warburg Pincus and other shareholders, the Transpacific statement said.

In February, after breaching covenants on some its debt facilities, Transpacific shares were suspended from trading on the Australian Stock Exchange while the company discussed a recapitalisation plan and held negotiations with its 23-member banking syndicate, a Transpacific spokesman said in an interview. Transpacific’s shares last traded at A$1.80 per share.

Terry Peabody, chairman and executive director of Transpacific, who currently holds a stake of roughly 24 percent, will see his holding diluted to about 17 percent after the firm’s initial injection of A$65 million, the spokesman said. 

The equity raising, which will take place within the next two to four weeks, will be used to “retire debt and terminate certain ‘out-of-the-money’ interest rate swaps”. It also gives Warburg Pincus a seat on Transpacific’s board of directors, according to the company's statement.

The recapitalisation will give the company “a solid foundation for growth,” Rajiv Ghatalia, a Warburg Pincus managing director, said in the same statement. Transpacific disclosed that it underperformed in the first five months of 2009 due to the economic slowdown.

Australia and New Zealand Banking Group, Commonwealth Bank and National Australia Bank, the three joint lead arrangers of Transpacific banking syndicate have since “received the credit approval for the long-term extension and amendment of Transpacific’s syndicated debt facilities”, the statement confirmed.

Transpacific has debt of roughly A$2.4 billion, mostly accrued from the acquisitions of Australian waste company Cleanaway and New Zealand-based Waste Management New Zealand, according to the company's spokesman. The company had actively acquired businesses in the same industry since its listing in 2005, he added.

In 2007, US buyout firm Kohlberg Kravis Roberts sold Cleanaway to Transpacific for A$1.25 billion. KKR had bought Cleanaway and a mining services unit from logistics operator Brambles for A$1.8 billion 11 months before. According to Bloomberg, KKR paid around A$1 billion for the assets, suggesting a A$250 million profit in less than a year.

Transpacific is a waste management solutions provider with operations in solid and liquid waste management. It has offices across Australia and New Zealand.