Altech Chemicals’ dogged bid to avoid almost any further equity dilution when locking away the final chunk of funding needed to build its exciting high purity alumina plant, just got a giant shot in the arm with an offer of further debt now firmly on the table.
The company said last week that a global investment bank had offered up the entire remaining amount of $US120 million in debt needed to complete the project and other offers are expected by month’s end.
Importantly, the debt offered is mezzanine debt which means it will be subordinate to Altech’s already secured senior debt facility of USD$190m.
Whilst the project looks like it will end up carrying a significant amount of debt, Altech says it is expected to spit out USD$76m in EBITDA a year when operational.
In a sublime development, Altech has already managed to convince the German Government to guarantee $170m of its USD$190m senior debt facility under Germany’s export credit scheme.
The company has not announced the interest rate applicable to that deal, but with a Government guarantee standing behind it, there is a general expectation that it is at the very bottom end of the scale.
Mezzanine debt on the other hand rarely comes cheaply but a combination of both may well produce an average interest rate that the company can live with and it comes with the added bonus of avoiding any further capital dilution.
Altech is planning to build its HPA plant in Malaysia and will ship its super-pure kaolin feedstock there for processing from its Meckering deposit in W.A.
According to the company, the global investment bank offering the US$120m in mezzanine debt has more than $US300 billion in assets under management. The offer comprises a US$90m facility plus accrued interest during construction and commissioning taking it up to USD$120m in total.
Other potential lenders are currently in Altech’s data room which has been significantly enhanced by the prior due diligence efforts of KfW IPEX, the German bank that will provide the senior secured debt.
Altech Managing Director, Iggy Tan, said: “From the outset, the company has been targeting ‘vanilla’ mezzanine debt from top-tier lenders. This approach does take longer and involves a higher level of scrutiny (due diligence), however securing mezzanine debt from top-tier providers will be a far better outcome for the company and shareholders. We are now starting to see some reward from this strategy and our efforts.”
The potential new lenders are drawing on reports prepared by KfW IPEX during its own due diligence that lasted 18 months to satisfy the German government that taxpayer money was not being put at risk.
This process not only resulted in a number of design improvements to the plant but secured guarantees over the completion and performance of the plant from SMS Global, the giant German engineering firm that will build it. In fact SMS Group liked it so much that it ploughed USD$15m into Altech by way of equity.
By Matt Birney
