Freehills acted for Australian healthcare company DCA Group on its acquisition of NZ aged care provider Guardian Healthcare and the subsequent successful hybrid capital raising of $200 million to partly refinance the purchase.
A specialist in diagnostic imaging and residential aged care, DCA Group bought Guardian in September this year.
The capital raising on the Australian Stock Exchange (ASX) was by way of a Hybrid Equity-Linked Trust-issued High-Yield Securities (HELTHYS) made by Permanent Investment Management Limited as the responsible entity for the DCA Funding Trust. HELTHYS began trading on a deferred settlement basis on 2 November.
Corporate partner Stephen Dobbs was responsible for the capital raising, with partner Andrew Pike acting in the purchase of Guardian.
Dobbs said the most challenging part was creating the terms of issue of the HELTHYS and the associated debt and security documentation.
“These are complex instruments which need to deal with a wide range of remarketing, exchange and redemption scenarios. The issues were made even more complex in this case given the need to develop a structure which delivered the desired outcomes both in Australia and in New Zealand.”
Freehills advised DCA Group on all aspects of the offer, including preparing the terms of the HELTHYS securities, advising on the content of the offer document, managing the due diligence and verification processes and applying for relevant waivers and confirmations from the Australian Securities and Investments Commission and the ASX.
Dobbs explained that for each of these securities structures permission is often required to use them from ASIC and the ASX if they don’t strictly adhere to the regulators rules.
“The Corporations Act and the ASX listing rules all need to flex a bit if you are going to do these sorts of instruments.
“You have to go along to ASIC and say ‘the various features of this hybrid are such that I’m going to need this many waivers … to make it work and this is why I think it is consistent with policy’,” Dobbs explained.
“The same with the ASX, because we all have features of these [structures] which on their face aren’t allowed by the existing rules. So you have to go to the ASX as well and say ’this is what your rules say, but we still think it provides adequate investor protection and is consistent with the policy of your rules’.”
He said the HELTHYS instrument gives investors a floating rate, fully franked quarterly distribution. The rate is set each quarter based on the prevailing 90-day bank bill swap rate plus a margin of 2.25 per cent, which was set via an institutional bookbuild.
“The instrument resets in 2011, at which time the margin can be ‘remarketed’ via a new bookbuild. The issuer has the right to exchange the HELTHYS for shares in DCA at that time.”
Dobbs and Pike were principally supported by senior associate Daniel Krutik and solicitor Lance Jones.