Lack of inquiry from financiers over distressed transport firms viewed as a positive development
By Rob McKay | May 28, 2013
A positive note about the state of industry has been sounded at the Victorian Transport Association’s State Conference.
Following a presentation on the importance of business value, Ferrier Hodgson Partner and industry expert Brendan Richards moved to accentuate the positive when asked how many transport operators he thought were destined to fail this year.
“In my view, there is some reason for optimism,” Richards told the audience of about 150.
“The enquiry rate I was receiving six months ago from banks and financiers in respect of transport companies was much higher than it is today.
“There was a lot of concern about a range of businesses, some of which have since disappeared but many of which haven’t and are actually showing signs of improvement.”
This pause had also been felt across other industries.
Assumptions that he and his team were swamped with work were far from the mark.
“Really, what I am seeing in transport is nothing new,” Richards says.
“The talk is out the same businesses that we’ve been talking about for a long time now. Somehow they keep going.
“A couple have come on to the market recently, and it’s not bad timing because buyers are returning.”
Richards’ most recent assignment, finding a solution to the weakness at Wettenhalls, had been five months ago.
That had taken six days to resolve, which Richards counted as one of the shortest receiverships in Australian corporate history.
This had occurred despite financier GE Capital pushing for the firm to be wound up but because Ferrier Hodgson was able to demonstrate the value contained in the bulk of the operation, once its deadly, loss-making express division had been closed.
“What we did see is a reasonably strong nucleus in what existed in the rest of the business,” Richard says.
“The dedicated and regional parts actually had good, solid customers and were pretty ingrained in their supply chains.
“Had we just shut down and walked off, there would have been a huge amount of pain for a lot of customers that weren’t able to quickly adapt and find somebody else to do their work for them.
“So, we knew we had a good bit of commercial leverage in how we dealt with those customers and that, as a consequence of having that leverage, we did have some value that we could sell.”
In fending off the demand from its customer, GE Capital, Ferrier Hodgson was also aided by the time afforded by the Australia Day long weekend the day after its appointment, and the ability to dispense with due diligence, given the ultimate purchase came through a management buyout.
This had allowed the money owed GE Capital, put at $12-13 million, to be paid out in full, along with other entitlements and leave a surplus for creditors on top of various fees as a result of the management buyout offer rising 500 percent on its first offer.
