Putting money where your mouth is
GORDON Brothers may have only been operating in Australia for three years, but the firm brings with it more than 115 years’ experience passed down through four generations of family leadership.
The US-based, privately owned, family-held business is a global, independent investment and advisory firm that provides customised restructuring, asset remarketing, advisory and capital solutions.
It is a specialist in structuring complex, multi-asset transactions.
Across these platforms, it will buy, sell, operate and value assets on a standalone and integrated basis.
By incorporating its experience in valuing and selling assets, the company is able to extract the maximum value from plant, machinery and equipment, inventory, real estate, receivables and intellectual property.
It works with businesses at all points of the business cycle, whether that means a growth period, transformation, turnaround or strategic consolidation to provide certainty of results.
Gordon Brothers has had an Australian presence for only three years, but in that time, it has demonstrated that it will put its money where its mouth is and take on the principle risk in asset sales.
Gordon Brother’s managing director, Fenton Healy, spoke with the Australian Mining
Review about the fully underwritten sale of the Koolyanobbing machinery fleet.
Mr Healy said that the company’s real expertise was rooted in its knowledge of assets, plant equipment inventory, receivables, intellectual property and retail.
“Usually, we take the view that we will try to take the risk,” he said.
“Our fundamental point of difference is that we will try and buy the equipment – we buy the risk to re-sell the product.
“We have the means and the balance sheet to do it.” When the previous operator of the Koolyanobbing mine near Southern Cross in WA decided to exit the Australian market, the mine and everything bolted to the ground was sold to an Australian publicly listed miner, with all mobile equipment needing to be disposed of by another means.
This left the organisation with a serious amount of equipment and in need of a quick, easy, effective solution.
Mr Healy said that it was Gordon Brothers’ ability to take on the risk that made them the right choice.
“They were looking for someone to solve the problem of all the equipment – of everything that wasn’t bolted to the dirt,” he said.
“We weren’t the first to look at it, there were plenty of people trying to buy bits and pieces, and there were auctioneers trying to offer their services.
“But the client was looking for the most efficient and streamlined way to wind it all back and leave the country without having people trapped here for nine months overseeing the disposal process, so we were introduced to it relatively late to the process.
“Long story short, we did a deal, cut a check, and once both parties had agreed to the final terms of contracts, the money was approved and out in five days.”
As a fully underwritten purchase, Gordon Brothers backed itself on a considerable risk.
The company provided a solution no one else was willing to offer, and the client got what they wanted.
Mr Healy said that while Gordon Brothers may not have been the first option, ultimately it was the right choice.
“We’re one of the only companies with the capacity to do this,” he said.
“And we demonstrated that we will put our money where our mouth is.
“We have a balance sheet and we’re prepared to use it, we’re prepared to buy and to take risk and this was a big package – the biggest for a long, long time.”
After securing a deal, Gordon Brothers was able to sell almost all of the equipment in- situ and did so through private negotiation over a 12-month period.
Not like a traditional lender
The company is also an investment firm, lending under a traditional US- style asset- based lender model.
This means lending principally against the value of assets that are available.
The company aims to provide more flexible term loans for up to three years, as well as short- term bridging loans and sale and lease back options.
Mr Healy said that where the company differs from tradition lenders is that the diligence is in and around the equipment.
“We’re very light in terms of covenants,” he said.
“We don’t try to restrict, hamper or tie the borrower up.
“We give them the money with the plan being they will use, that capital to go and develop opportunity, and move their business from point A to point B.”
As Gordon Brothers is not a credit lender, it is not stuck on typical lending requirements.
Potential clients don’t need the pristine, crystal-clear two-year financial history that traditional lenders typically require, because the company focuses on the security it lends against.
Mr Healy said that in a capital-intensive line of work such as contracting, this is important.
“We’re more focused on what we are taking as security, and in terms of financial due diligence, we are very comfortable in the here and now – who’s running the business, what’s in the pipeline, what’s the current trading activity – we’re not concerned so much with the rear-view mirror because for contractors, sometimes the rear-view mirror doesn’t look good coming out of a fairly ugly downturn,” he said.
As contracting is a capital-intensive line of work, it is important that contractors have the ability to mobilise quickly, and access to the capital that requires is paramount to their success.
Mr Healy said that Gordon Brothers won’t take personal property as security.
“Guys who’ve come out of the downturn have probably had to deal with the banks,” he said.
“And the banks have, at least up until recently, been sidetracked by the royal commission and had cut back lending against used equipment.
“But we can take a look at someone’s circumstances and say, ‘well look, you’ve currently got a $12.5m facility fully secured but you’ve got about $40m worth of plant equipment’: we can offer you the ability to refinance the facility and give you working capital over and above your current limit”.
“We are more expensive than traditional lenders, but at the end of the day clients walk away with the flexibility of the arrangement and know that their home and personal property is no longer tied into the business because we don’t take security over someone’s home.
“They pay a bit more, but come away with working capital to buy the new equipment or chase the new contracts, and assuming they achieve their goals they can, relatively shortly, demonstrate improved financial capacity and return to cheaper traditional lenders.”