Fund manager Elanor’s long road ends in $125m rescue plan
Struggling investment manager Elanor Investor Group has found a white knight to invest $125 million into its battered balance sheet, as part of a plan that also revives ambitions to be an Asia-wide fund manager.
But in a dramatic overhaul, ASX-listed Elanor will lose one of its most valuable mandates, managing Challenger Life’s roughly $3 billion real estate portfolio, a move previously foreshadowed by The Australian Financial Review. That mandate is expected to go to Charter Hall.
Elanor did not lodge its interim financial accounts in February this year and has been battling since last year to stabilise its financial position and address soaring debt.
In a series of moves outlined in a complex rescue deal on Monday, one of Elanor’s major investors, Singaporean fund manager Rockworth Capital Partners, will inject $125 million into the funds management platform.
After the whole deal plays out, Rockworth will have increased its holding in Elanor from 11.8 per cent to 47.9 per cent.
One of chunk of the Rockworth recapitalisation is $70 million in senior debt, while the rest, significantly, comes through a form of subordinated capital notes known as perpetual notes. As such, that $55 million portion of the recapitalisation is not counted as debt.
As a result, Elanor’s gearing will fall to within a 20 per cent to 35 per cent, after it ballooned dangerously past 40 per cent.
Pan-Asian strategy
Managing director Tony Fehon said Elanor’s initial plan in 2019 had been a tie-up with Rockworth, then its largest shareholder, which would help expand Elanor’s funds management operation to Asia. That plan was distracted by the pandemic and then its focus on managing the massive Challenger mandate, Fehon said.
“We’ve cut a deal with them [Rockworth], which actually does what we tried to do back in 2019 – and that is to look at Elanor as the Australian base of a pan-Asian strategy, along with Rockworth, our capital partner,” Fehon said.
As part of the multi-step rescue plan, the Rockworth recapitalisation will enable Elanor’s previous debt to credit fund Keyview Financial to be paid off entirely.
As part of its expansion, Elanor will also buy out a Singapore-based property investment manager Firmus, which is majority owned by Rockworth and manages about $780 million in retail and office. That deal is paid for with stock in Elanor.
“Some of those assets are here in Australia, some are in Singapore. Between that and what we already have in our own stable, post-Challenger, it creates a much more balanced platform for us to move forward and to look back towards a stable position from which we can grow,” Fehon said.
After the departure of the Challenger mandate, due to be completed in October, Elanor’s managed portfolio will be cut in half, roughly, from around $6 billion to a little above $3 billion.
It also runs a separately listed commercial property fund, as well as an unlisted hotels and resorts fund.
As part of its restructure, Elanor had hoped to sell down the hotels and resorts in a portfolio deal last year to a group of US businesses including investment firms KSL, KKR and Blackstone. But no deal resulted.
Since then, Elanor has sold several of the properties individually, but after series of low-ball offers it was now planning to focus on improving performance at the remaining portfolio, Fehon said. That includes facilities such as Peppers Cradle Mountain Lodge in Tasmania, Parklands Resort Mudgee in NSW’s central west, and Panorama Retreat and Resort at Kalorama in Victoria.
Elanor has committed to lodge its 2025 financial result next month and, as the rescue plan is bedded down, will launch a search for a new chief executive, to take over from Fehon, a former Macquarie executive and an Elanor non-executive director who had stepped in an ad-hoc basis to run the fund manager through its restructure. Elanor’s stock remains suspended.
