SCT Logistics (“SCT”) is Australia’s largest private rail freight operator and has been a FIIG client since 2015. Established in 1974, SCT provides a full suite of vertically integrated, national logistics services, at the core of which is Australia’s most modern rail freight operation. SCT has strong competitive advantage by virtue of its difficult to replicate assets and access rights secured over long term arrangements. SCT operates in a largely duopolistic market with Pacific National being the other key competitor, and has a very sticky customer base.
In 2019, FIIG Debt Capital Markets arranged the largest unrated corporate bond deal for a private company in Australia with a $100m, five-year unsecured non-amortising note issue (“Notes”) for SCT Logistics (“SCT”), Australia’s largest private rail freight operator.
The Notes addressed a gap in traditional funding markets, with lenders typically extending loans based on hard asset security. SCT was looking for long-term alternative capital solutions, and the FIIG solution provided SCT with the flexibility and scale to grow the business over the long term, leveraged against the earnings of the business. The funding enabled the refinance of an earlier $85m 2015 FIIG-arranged bond with additional headroom to finance future growth.
Despite a series of natural disasters, including floods, bushfires, Covid-19 restrictions and other rail-related incidents between 2019 and 2021, the flexibility afforded by the Notes enabled SCT to successfully trade through these events.
In September 2022, SCT Logistics was able to optimise its capital structure further, attracting traditional borrowers into its loan syndicate to redeem the Notes.
SCT Logistics Chief Financial Officer, Michael Fiteni, had this to say about the deal:
“The FIIG team approached SCT Logistics when we were looking for alternative capital solutions that better suited our business needs and commercial environment. The team were very quick to put forward solutions which were market competitive and provided sufficient flexibility and scale to enable our management team to focus on running the business. Importantly these solutions were matched throughout the entire note raising process.
The FIIG arranged capital assisted our journey of business growth over many years as our major funder particularly when there were limited choices of commercially viable alternatives. The FIIG team have been responsive and easy to work with through two rounds of note raising.”