Bain Capital runs the rule over Webjet

Webject is in trading halt amid attempts to raise $250m

It now appears to be game on as global distressed debt funds look to secure buying opportunities in the Australian market, with Bain Capital and Kohlberg Kravis Roberts both now known to be circling Webjet.

But the question is how new rules surrounding foreign investment play a part in their attempted investments.

The government has determined that during the coronavirus crisis all foreign groups buying into Australian companies need Foreign Investment Review Board approval.

It is understood this is aimed at major foreign groups rather than private equity funds as such, but the problem is that even if a deal is likely to be given a green light by FIRB, this could now take up to six months, and it may not be soon enough for businesses needing funds now.

It could mean that private equity groups inject funds into companies through convertible debt that would not convert to equity until the rules are no longer in place.

No doubt this is at the forefront of the minds of executives at Bain, which is now said to be looking to recapitalise the struggling Webjet and has embarked on due diligence of the online travel agency.

Earlier, KKR was weighing a recapitalisation, but DataRoom understands Webjet knocked back a proposal to secure a small equity stake in the business and it is no longer close to the situation.

This is because it came with warrants attached with debt that were problematic for the company.

Webjet remains in a trading halt after attempts last week to obtain $250m of equity — $150m of which was for working capital to pay clients — is thought to have been unsuccessful.

With the current uncertainty, more creative structures involving opportunistic private equity funds and debt are likely to emerge.

Major uncertainty remains as to how long the coronavirus crisis will impact the economy, so structures such as those involving warrants offer protection for the investor where they have the right to buy a further stake in the company in the future subject to certain conditions down the track.

The retail space could be the place where much of the action unfolds, given that most apparel groups have pulled down the shutters until the country emerges from the coronavirus crisis. Kathmandu remained in a trading halt on Tuesday night, with questions remaining over whether it can secure funds for an equity raising.

New Zealand retailer Briscoe Group owns about 16 per cent of the company and has been a suitor in the past, so could capitalise on the current opportunity, although most think any corporate activity is off the agenda.

Working on an equity raising for the group is New Zealand firm Forsyth Barr, while Credit Suisse and its local affiliate Jarden may be close to the action.