Packer's playtime

James Packer’s newly created Asia-based private equity fund is to lead the recapitalisation of Living & Leisure Australia, the resort and entertainment arm of the distressed property and tourism group, Octaviar.

Packer’s Arctic Capital, which was established only last December, is to buy $63 million in LLA debt from Octaviar’s Premium Income Fund and underwrite a $90 million rights issue. It will also buy the responsible equity for LLA from Octaviar, formerly MFS, to give it influence over board selection.

The investment will give Packer an interest in the Mount Hotham and Falls Creek ski fields, adding to the Perisher ski fields business he already owns through his family company, Consolidated Press Holdings.

Other assets in the LLA portfolio include Oceanis, the world’s largest aquarium owner, which owns the Melbourne Aquarium and the adjacent Northbank Place property development. It also owns the Treetops forest walk business.

The transaction was led by Craig Carracher, the former CPG general counsel and Minter Ellison partner, who moved to Hong Kong last year to establish Arctic Capital and launch its first fund, the $100 million Arctic Asia Opportunities Fund.

His eight-strong team in Hong Kong include long time CPH investment director Martin Green, while Packer and his right hand man, Ashok Jacob, sit on the investment board with Carracher.

Arctic was approached by a Pitt Capital Partners team led by Charbel Nader earlier this year after LLA was suspended from trade following a sharp fall in its share price and amid debt negotiations with NAB, believed to be owed around $125 million.

Other parties had also been involved in purchase discussions, most notably Village Roadshow, but a deal being brokered by another LLA advisor Grant Samuel for the purchase of the aquariums fell through.

The $90 million equity raising will equate to around 80-90 per cent of the recapitalised LLA. Arctic might end up with a sizeable stake given that MFS (19.9 per cent), PIF (6 per cent), and other stakes held by MFS staff and the ANZ through its exposure to Opes Prime might not participate in the rights issue. Arctic, however, plans to organise sub-underwriting agreements and is not actively seeking a large stake for the long term.

It is expected NAB’s debt will be repaid in full in June, with another financier being sought to provide a reduced senior debt facility of around $80 million. Mezzanine debt will also be reduced, with the recapitalized LLA having an enterprise value of around $220 million.

Arctic Capital was created last year as one of three private equity groups created by Packer, along with Ellerston Capital and the London-based Park Street Capital.

Arctic's first fund will be fully vested after this deal, as it is also negotiating taking a 26 per cent stake in a Philippines private bank called Bank of Commerce, alongside the Cogjuanco family that controls the San Miguel group. The fund also has a 15 per cent stake in Singapore-based shipping operation called Maritime Capital Shipping, which is soon to be floated.

Arctic has already begun raising for its second fund, with a $US300 million target. Carracher says current markets simply don’t justify any higher raising.

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