The financing arrangements are the focus of this case study. The table below provides a summary of the main components of the financing. This is followed by commentary on the equity raising.
Source of funding | Amount | Percentage |
Equity raised through an initial public offering (IPO) | $A 1,170 million | 24% |
Equity from a distribution reinvestment plan | $A 345 million | 7% |
Deferred equity | $A 200 million | 4% |
Bank debt | $A 2,928 million | 60% |
State works contribution | $A 267 million | 5% |
TOTAL | $A 4,910 million | 100% |
• At the time of contract signature in March 2008, the equity private financing was fully underwritten by Macquarie Capital Advisors and Deutsche Bank.
• The state government was to contribute a total of $A 1.5 billion.
• In July 2008, the BrisConnections completed an IPO with an upfront subscription of $A 1 per unit (in the two stapled unit trusts). At the time of the IPO, 12 percent of investors was retail. The structure of this offering also required investors to make two further subscriptions-of $A 1 per unit held in 2009 and 2010-both of which were underwritten by Macquarie and Deutsche. A timeline of these events is shown in Figure 1.
• However, shortly after the IPO the stock price collapsed, at times trading at less than a tenth of a cent, and a significant number of retail investors bought significant holdings in the company apparently unaware of the future financial commitments. One individual retail investor held 13 percent of the company.
• The underwriting banks stood by their commitments and are now majority shareholders.