Restructuring Deal of the Year

Basslink Pty Ltd

The successful sale and recapitalisation saw all agreed claims made by secured creditors being satisfied in full, staff employment and entitlements assumed by the purchaser or paid in full, and the business continuing as a going concern. FTI Consulting successfully preserved the asset during the receivership, traded the inter-connector in the National Energy Market and obtained compensation from regulatory bodies to recover trading losses suffered by the previous Receivers.  FTI Consulting’s role resulted in amounts owing to the State of Tasmania being settled and new agreements negotiated with APA Group that re-established confidence in Basslink as an important part of the State of Tasmania’s energy
security arrangements.

Further, the successful sale of Basslink to APA Group by FTI Consulting not only ensured the continuation of the company’s operations but also safeguarded the livelihoods of 19 full-time employees and one part-time employee who formed over 95% of the workforce at the time of FTI Consulting’s appointment. This accomplishment not only underscores FTI Consulting’s commitment to preserving jobs, but also highlights their expertise in executing complex and time-sensitive transactions. FTI Consulting’s focus on saving jobs and the ability to successfully navigate the sale process amidst ongoing legal disputes, financial pressures, and tight timelines is a testament to the team’s knowledge, skill, and solutions-driven focus. By securing the employment of Basslink’s workforce, FTI Consulting’s efforts have contributed to the overall stability and growth of the Australian energy sector.

Congratulations to our TMA Member Firms

FTI Consulting, King & Wood Mallesons, Gilbert & Tobin

Large Turnaround of the year

 Pizza Hut Australia

In 2016 Yum!, the world’s largest quick service restaurant business, faced a dire situation for it’s Pizza Hut brand in the Australian market. Pizza Hut Australia had been a market leader for Yum! with a seemingly dominant position built around the famous Red Roof restaurants. However, over the past decade, Domino’s had capitalised on macro trends of digital ordering and home delivery to rapidly gain market share and relegate Pizza Hut to a distant #2 position. To make matters worse Yum! had over the same period made a strategic decision to take capital out of the market by sub-franchising out the stores in the network. As a result Yum! now managed directly 250 sub-franchisees (mainly small family owned stores) who were facing declining sales and dropping store values. The catalyst for change was cemented when the sub-franchisees launched a class action against Yum!’s aggressive $4.95 pricing strategy. Ultimately the case was unsuccessful but motivated Yum! to seek a partner to take on managing the Australian market.

Following a competitive sale process Allegro were ultimately successful at securing the master franchisor rights for the Pizza Hut brand in Australia. The terms of the deal were centred around a partnership between Yum! and Allegro to revive the well known brand and bring growth back to the network.

The turnaround plan developed involved a three stage process:

1. Separate and stabilise – carve out the loss making Pizza Hut business unit, build a stand-alone corporate capability and implement quick wins to return to positive cashflow
2. Operational improvement – close the gap on the customer experience, improve unit economics and re-engage the sub-franchisees
3. Grow and exit – regain the differentiated brand position, expand the number of stores and find a long term owner for the business to partner with Yum!

Congratulations to our TMA Member Firm

Allegro Funds

The challenges to deliver this investment thesis proved bigger and more complex than originally anticipated. The new business faced a range of challenges on the journey from activist franchisees, ordering system crashes on Friday nights, integration of Eagle Boys which collapsed and Allegro simultaneously acquired during the Pizza Hut Australia transaction, multiple C-suite changes, COVID and all whilst competing with a successful market leader in Dominos. Fortunately, the business overcame each challenge through a committed partnership, resilient hands on owner, key management talent and an unrelenting focus on the consumer experience.

Today Allegro is proud that the brand and network has returned to growth and Pizza Hut Australia is highly profitable. The final part of the turnaround story was complete in May 2023 when Allegro agreed to sell Pizza Hut Australia to the US based Flynn Group. The Flynn Group is one of the world’s leading restaurant operators with $4.0B in sales in the US through their Pizza Hut, Taco Bell and Appleby’s stores. Pizza Hut Australia represents their first acquisition outside of the US. The Flynn Group have significant expertise and capital to take the Pizza Hut brand on the next part of story.

For Yum! and Allegro the sale marks the end of a successful partnership to return the brand to growth. For Allegro the turnaround has delivered investors in Fund II an attractive return. For Yum! the Pizza Hut Australian market now represents a sustainable long term royalty stream and a platform for further growth for it’s partner Flynn.

Small - Size Turnaround of the Year

Digital Surge Pty Ltd

Digital Surge was the world’s first successful restructure of a digital currency exchange, which enabled customer to continue to trade cryptocurrency on the platform once the turnaround was completed.

The turnaround involved a trading business with annual revenues of ~$5 million, and the management of $60 million of cryptocurrency.

The turnaround was unique because we developed a secure process to hold and manage the cryptocurrency during the engagement and were therefore able to uniquely provide creditors with an in-specie distribution of assets through a deed of company arrangement and a creditors trust

Congratulations to our TMA Member Firms

KordaMentha

Allegro Funds & TMA Australia Turnaround Case Competition winners

1st Place
“BEAN & CO”
Lily Davis – Herbert Smith Freehills
Olivia Cromme – Faraday (pictured)
Kevin Kingsley – GCI Funds (pictured)
Joseph Dean – Herbert Smith Freehills
Angus Dick – Faraday (pictured)

2nd Place
“WU-TANZ CLAN”
Audrey Wu – MA Moelis Australia
Jason Tanza – MA Moelis Australia
Matthew Tanza- Morgan Stanley