Houlihan Lokey Advises Basslink

Houlihan Lokey is pleased to announce the sale of Basslink Pty Ltd. (Basslink) out of receivership to APA Group (APA) for A$773 million. Houlihan Lokey was the sole financial advisor to the receivers and managers, FTI Consulting (Receivers). The transaction closed on 27 October 2022, with all agreed secured claims repaid in full.

The sale of Basslink is the largest distressed M&A transaction in Australia since 2020, when Houlihan Lokey also led the sale of Virgin Australia.

Basslink is a 370km high-voltage, direct-current electricity cable, constructed in 2006, that runs across the Bass Strait between the Australian States of Victoria and Tasmania. Basslink is a critical component of Australia’s grid infrastructure, connecting Tasmania to Australia’s national electricity market (NEM), providing both critical energy security and the opportunity to export Tasmanian generated electricity into the NEM. Basslink’s operations are governed by the Basslink Operations Agreement (BOA) executed with the state of Tasmania.

APA is a leading Australian energy infrastructure business with a market capitalisation of approximately A$12 billion and enterprise value of approximately A$22 billion. APA owns, operates, and manages a diverse portfolio of gas transmission, storage, processing and compression facilities, power generators, and high-voltage, direct-current electricity interconnectors.

Basslink historically operated under an availability-based contract (the Basslink Services Agreement) with Hydro Tasmania (HT). Following an outage in 2015 and an extended dispute between Basslink and HT, an arbitration process that concluded in 2020 found that Basslink owed costs and damages to HT. Basslink was also required to implement certain “mitigating actions.” In November 2021, HT served a performance default notice on Basslink, crystallising certain financial obligations. As a result, voluntary administrators—and receivers and managers—were appointed to Basslink in November 2021. Total secured claims were approximately A$800 million. APA subsequently acquired 100% of the senior loan facilities from bank lenders, following which Basslink had three secured creditors: APA, HT, and the state of Tasmania.

On 16 June 2022, with the support of APA as Senior Lender, FTI Consulting Australia was appointed to replace the prior Receivers. The following day, Houlihan Lokey was appointed as the sole financial advisor to the Receivers in relation to the immediate recapitalisation, restructure, and/or sale of Basslink.

Within 10 days, Houlihan Lokey contacted 124 potential investors internationally, soliciting eight expressions of interest a week later. Following a competitive and efficient process that carefully managed information protocols and helped Receivers minimise the risk of further operational challenges, two compelling binding offers were received for Basslink on 29 August. Houlihan Lokey and the Receivers successfully negotiated transaction documentation with APA, the state of Tasmania, and HT, signing on 7 October and reaching financial close on 27 October.

Houlihan Lokey led all key workstreams in relation to the complex and challenging sale process. The successful outcome demonstrates Houlihan Lokey’s leadership in Australian distressed M&A and restructuring and further enhances the firm’s credentials in relation to energy, utilities, and infrastructure assets.