FreightLink finally finds a buyer

IT WAS a case of third time lucky for the receivers of the failed owner of the 1420-kilometre Adelaide to Darwin railway - it has finally sold FreightLink to a US rail company.

By InvestSMART · 10 Jun 2010

By InvestSMART ·
10 Jun 2010

Comments

IT WAS a case of third time lucky for the receivers of the failed owner of the 1420-kilometre Adelaide to Darwin railway - it has finally sold FreightLink to a US rail company.

Almost two years after first going on the auction block, FreightLink has been sold to Genessee & Wyoming for $334 million, as well as taking on debt with a carrying value of $1.7 million.

KordaMentha last attempted to sell FreightLink last year but it was unable to achieve a respectable price amid declining asset values in the aftermath of the global financial crisis.

GWI beat another interested buyer in the latest bidding process which closed last month. Toll Holdings and a consortium of Transfield Services and Macquarie Group are understood to have shown interest in the earlier tender processes.

Receivers were appointed to the heavily indebted FreightLink in November 2008 after a bid to sell the railway failed because several noteholders refused to accept the deal.

The railway is used by freight services, the Ghan passenger train and haulers of bulk minerals.

The original shareholders in FreightLink's parent company included Leighton, Macmahon and MLC Investments. They have written off their investments.

Proceeds from the sale will go towards paying off more than $300 million in FreightLink's senior debt. The bankers, including ANZ and BankWest, will recoup the money owed to them and a small surplus will go to mezzanine creditors.

FreightLink began operations in 2004 after the $1.2 billion construction of the Alice Springs-to-Darwin portion of the rail line as part of a public-private partnership.

The rail line is on land leased to FreightLink under a concession agreement that ends in 2054.

GWI has managed FreightLink's rolling stock since its inception. General freight makes up more than three-fifths of FreightLink's revenue and bulk minerals most of the rest.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

Who bought FreightLink and what was the purchase price?

US rail operator Genesee & Wyoming (GWI) bought FreightLink for $334 million and agreed to take on debt with a carrying value of $1.7 million.

Why was FreightLink sold and who managed the sale process?

FreightLink was sold after receivers were appointed in November 2008 due to heavy indebtedness. The receivers (including KordaMentha, which had previously tried to sell the business) ran the sale process that ultimately led to GWI's purchase.

What will the proceeds from the FreightLink sale be used for?

Proceeds will be used to pay down more than $300 million in FreightLink's senior debt. Bankers such as ANZ and BankWest will recoup amounts owed to them, and any small surplus will go to mezzanine creditors.

What assets and services are included in the FreightLink acquisition?

The sale covers the 1,420‑kilometre Adelaide‑to‑Darwin rail corridor (used by freight services, the Ghan passenger train and bulk mineral haulers) and FreightLink's rolling stock—GWI has actually managed that rolling stock since the railway began operations.

When did FreightLink start operating and how was the rail line funded?

FreightLink began operations in 2004 after the Alice Springs‑to‑Darwin portion of the rail line was built at a cost of $1.2 billion as part of a public‑private partnership.

What is the length of the lease or concession for the Adelaide‑to‑Darwin rail line?

The rail line sits on land leased to FreightLink under a concession agreement that runs until 2054, meaning the concession remains in place for the buyer until that date.

Who were FreightLink's original shareholders and what happened to their investments?

Original shareholders in FreightLink's parent included Leighton, Macmahon and MLC Investments, and they wrote off their investments following the company's financial collapse and receivership.

Which other companies showed interest in buying FreightLink before the sale to GWI?

Earlier bidding processes attracted interest from parties including Toll Holdings and a consortium of Transfield Services and Macquarie Group; GWI beat another unnamed interested buyer in the latest tender.