Freehills partners Andrew Pike and Damien Hazard, with senior associate Daniel Krutik, advised Goldman Sachs JBWere Private Equity on its ‘PIPE’ investment in AJ Lucas, which completed at the end of last year and which is a good example of a style of private equity investment that appears to be on the increase.
GSJBW Private Equity subscribed for $45 million in unlisted Redeemable Convertible Preference Shares (RCPS). The funding was used by AJL, a leading provider of drilling services to the coal seam gas sector, to retire bridging finance taken on at the time of its acquisition of Mitchell Drilling.
The RCPS are similar in some respects to many listed hybrid securities, having a debt-like financial profile for the issuer, while giving the subscriber both preferred returns and exposure to equity upside.
The transaction demonstrates how in the current environment:
- private equity funds and similar investors can fill a funding gap for listed entities who are unable, or unwilling, to raise ordinary equity, and
- investments in geared listed entities can be attractive, in the current climate, to private equity funds who are finding it difficult to access new bank debt to pursue full public-to-private transactions.
We are seeing increasing interest in ’PIPE’ deals from both issuers and potential subscribers.
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