In December 2010, Next Capital led the recapitalisation of the Discovery, one of the largest owners and operators of caravan parks in Australia. Discovery was in financial distress as a result of an aggressive acquisition strategy that was heavily reliant on bank debt. The recapitalisation resulted in Next Capital becoming the largest individual shareholder in the business.
The investment thesis was predicated on the assumptions that the business was fundamentally strong and that there were opportunities to grow the business via improving operating efficiency, development of the existing portfolio and through acquisition.
Next Capital worked closely with the management team to create value by:
- Acquiring 8 properties at attractive yields for a consideration of approximately $120 million
- Investing approximately $50 million in high returning development expenditure
- Divesting 8 non-core properties at attractive valuations
These initiatives drove strong earnings growth, delivering compound annual EBITDA increases of approximately 50% with limited incremental external capital required and a balanced approach to risk.
Next Capital completed the sale to a financial investor in February 2014.