The Coal Trader

Private debt behemoths back Whitehaven’s $6.3 billion coal buy

Whitehaven Coal had no troubles bankrolling its $6.2 billion acquisition of BHP’s Daunia and Blackwater coal mines. Street Talk can reveal three of the world’s largest players in private credit wrote cheques for its $US900 million credit facility.

It is understood Whitehaven received commitments from $US395 billion private credit manager Ares Management, as well as Josh Friedman’s Los Angeles-based hedge fund Canyon Partners. Also in the mix was storied multi-strategy hedge fund Farallon Capital Management.

Farallon, in particular, knows Whitehaven well. It was there when Nathan Tinkler’s Aston Resources bought Maules Creek coal mine in 2009 for $450 million. It was also on the scene when Aston listed and later merged with Whitehaven. And it’s there now as Whitehaven works to digest its biggest ever M&A bet – only this time the firm is a lender, having offloaded most of its Whitehaven shares in late 2019. Raymond Zage, who spearheaded the investment for Farallon and left to start his own firm while continuing in an advisory role, remains on Whitehaven’s board as a non-executive director.

Sources said Whitehaven would pay about 600bps margin to borrow $US900 million across a five-year facility, which is better than its initial ask, on both pricing and deal size. Back in November, when the talks began, Whitehaven was said to be seeking $US500 million to $US600 million at the 650bps mark.

Ares, Canyon, Farallon and other lenders replaced Whitehaven’s advisers, Jefferies and Bank of America, which wrote a $US900 million bridge loan to help Whitehaven stand up its $6.2 billion winning bid in the MacCap-run auction.

Whitehaven boss Paul Flynn refrained from tapping equity capital markets, instead relying on the debt deal and future cashflows to bankroll the purchase. Although he faced a campaign of opposition from London’s Bell Rock, the acquisition has been well received by investors; Whitehaven’s share price has risen 17 per cent since the acquisition was announced in October.

Next on the auction block is South32’s Eagles Downs, for which sell-side adviser Macquarie Capital commenced investor meetings last year. It is expected to serve as a precursor for a sale of the miner’s much bigger Illawarra metallurgical coal mine.