Freehills has overseen a debt for equity swap which saved radiology business I-Med from “suffocating” debt.
Freehills banking and finance partner John Nestel said the restructuring and recapitalisation of Australia’s largest privately-owned diagnostic imaging network was a “landmark transaction”.
“It hadn’t been done before and certainly not to convert such a large and complex capital structure into a very simplified and low debt group through a consensual arrangement whereby we had over 40 financial institutions who we had to herd and sign up to it,” Nestel told Lawyers Weekly.
I-Med got into trouble this time last year after the group’s leverage financed buy out by CVC in 2006.
"It had large senior facility of about $600 million …and it also had mezzanine debt of about $350 million,” explained Nestel.
This time last year, I-Med had almost one billion dollars of debt on its balance sheet, but on Thursday (1 December), by lunchtime, the group emerged debt-light.
Freehills advised on the restructure in two phases. The first phase was a reorganisation, completed in late June, whereby the senior syndicate took ownership of the group and CVC were removed as owners.
“At that point we were able to eliminate all the mezzanine debt,” explained Nestel, “and [then] we proceeded with a dual track process.”
The dual track process pursued a completely consensual agreement with all the senior financiers including the swap providers, as well as, simultaneously, a scheme of arrangement through the courts.
“All the senior financiers, including the swap providers, came to the party and signed up to a fully consensual agreement which we completed last Thursday,” said Nestel.
“We were able to do a debt for equity swap and bring the senior debt level down to about $300 million dollars and the rest of the senior debt was converted in equity now owned by the former lending group.”
The transaction saved around 300, 000 employee jobs and numerous hospital agreements with I-Med throughout Australia.
Freehills partners Andrew Rich, Mark Crean and Peter Smith, and senior associates Nikki van Rooijen, Mark Currell, Ivan Rubinstein and Nick Carney also advised on the transaction.
Joshua Cardwell of Greenwoods and Freehills advised on the taxation aspects of the transaction.
“It was very rewarding to remove so much of the debt burden that [I-Med] has been suffocating under for two to three years,” said Nestel.