CAPITAL STACK ISSUE #10

Hello,

Welcome to this week's edition of the CAPITAL STACK Newsletter.

The Framework

Dilution versus leverage

When a company needs capital, it usually has two clean first choices. It can issue new equity and dilute existing holders, or it can raise debt and preserve ownership while adding a fixed financial claim. In practice, the trade-off is not ideological. It is about who absorbs risk, when cash has to leave the business, and how much control current holders are prepared to give up.

This matters in real transactions because capital structure changes outcomes. Equity buys time and flexibility, but ownership gets spread more thinly. Debt keeps the cap table tighter, but the business must service it. The right answer depends on cash flow reliability, refinancing access, and how much execution risk still sits in the plan.

There is also a third path between plain debt and plain equity. Hybrid instruments sit above ordinary equity in a wind-up, but can still convert or be exchanged later. They are often used when an issuer wants to raise capital without immediate dilution, while still paying investors for taking subordinated risk.

Worked example

A company worth A$100 million needs A$20 million.

If it issues A$20 million of new equity at fair value, the post money value is A$120 million and existing holders fall from 100% ownership to 83.3%.

If it instead borrows A$20 million, existing holders keep 100% ownership, but the company now carries a A$20 million fixed claim that must be serviced or refinanced.

Case Study

Latitude’s Capital Notes 2 show how issuers can use a hybrid rather than plain equity. Latitude’s prospectus says the notes rank senior to ordinary equity, have no voting rights, and have an Optional Exchange Date of 28 April 2031. The prospectus also says the margin steps up by 3.00% per annum if the notes are not redeemed or converted on 28 April 2031, and by a further 5.00% per annum after a Change of Control Event if they are still not redeemed. That is a clear example of an issuer raising capital without immediate common equity dilution, while still compensating investors for subordination and extension risk.

This Week in Deals

Perpetual sells Wealth Management to Bain Capital

Type: Private equity
Value: A$500 million upfront, plus up to A$50 million of additional upfront consideration and up to A$50 million of earn out consideration
Who: Perpetual and Bain Capital Private Equity entered a binding agreement for the sale of Perpetual Wealth Management
Why it matters: It converts a complex operating asset into cash while leaving value transfer partly tied to business performance after signing.
Date of announcement: 16 March 2026

National Storage REIT scheme booklet goes out

Type: Scheme of arrangement
Value: A$4.0 billion
Who: A Brookfield and GIC backed consortium is seeking to acquire National Storage REIT, which has now despatched its scheme booklet
Why it matters: Once a scheme booklet is out, transaction risk shifts from rumour and board process toward timetable, votes and court execution.
Date of announcement: 16 March 2026
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​Ainsworth second bid goes to holders

Type: M&A / takeover
Value: A$1.30 per share
Who: Kjerulf David Hastings Ainsworth completed sending his bidder’s statement for a second off market takeover bid for 5.5% of Ainsworth Game Technology shares
Why it matters: Even a partial bid can reset the market reference point and force shareholders to focus on incremental control economics rather than just daily liquidity.
Date of announcement: 27 March 2026

Qoria merger update with Aura

Type: M&A / scheme
Value: Undisclosed
Who: Aura Consolidated Group Inc has agreed to acquire all Qoria shares by scheme consideration in Aura shares issued as CDIs
Why it matters: In scrip transactions, the quality of the buyer’s paper matters as much as strategic fit because value delivery remains linked to post-signing market confidence.
Date of announcement: 26 March 2026

Pepper Money rejects Challenger proposal

Type: M&A / proposal
Value: About A$1.01 billion
Who: Challenger said Pepper Money would not proceed with its confidential, non binding and conditional proposal, which Reuters said valued Pepper at about A$1.01 billion
Why it matters: A quoted headline value is only useful if execution risk is low enough for the target board to treat price as real.
Date of announcement: 25 March 2026

Star secures WhiteHawk refinancing

Type: Private credit
Value: A$390 million
Who: Star secured a binding three year refinancing commitment from funds associated with WhiteHawk Capital Partners
Why it matters: When liquidity is the immediate constraint, refinancing is not background plumbing. It is the transaction that determines whether any other strategic option survives.
Date of announcement: 30 March 2026

Syrah resets the balance sheet

Type: Capital markets / strategic funding
Value: A$104 million equity raising, with pro forma liquidity of up to US$198 million under the announced funding package
Who: Syrah launched a fully underwritten entitlement offer and disclosed non binding strategic funding proposals with DFC, DOE and AustralianSuper
Why it matters: This is capital structure repair first and growth funding second, which is usually the right order when the operating plan still needs time.
Date of announcement: 26 March 2026

Weebit Nano completes placement

Type: Growth capital
Value: A$87 million across the A$80 million institutional placement and A$7 million Israeli placement
Who: Weebit Nano completed its placement round at A$4.05 per share
Why it matters: Growth capital is most effective when it is raised before the balance sheet is tight and while commercial momentum is still an asset.
Date of announcement: 27 March 2026

ARC Funds disposes of two non-core assets

Type: Asset sale
Value: A$350,000
Who: ARC Funds entered non-binding term sheets to dispose of Merewether Capital Management and ARC Fund Operations
Why it matters: Small disposals can still be rational if they simplify the structure, release management focus and redirect scarce capital into the core platform.
Date of announcement: 27 March 2026

Triangle proposes Tetragon spin-out and IPO

Type: Capital deployment
Value: Minimum A$4.0 million, with capacity for up to A$5.0 million including oversubscriptions
Who: Triangle Energy said Tetragon was expected to raise capital through a proposed IPO as part of the Philippines asset spin-out
Why it matters: Spin-outs can separate funding needs and risk appetite, especially when a project set may deserve a different capital base than the parent.
Date of announcement: 24 March 2026

DGR receives first SolGold settlement proceeds

Type: Capital deployment
Value: Approximately A$45 million received, with approximately A$23 million expected from the second tranche
Who: DGR Global received first tranche net proceeds from the acquisition by Jiangxi Copper of DGR’s interest in SolGold
Why it matters: Realised proceeds matter more than notional mark to market gains because they immediately change leverage, liquidity and reinvestment optionality.
Date of announcement: 26 March 2026

NRFC invests in Silicon Quantum Computing​
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Type: Growth funding
Value: A$20 million
Who: The National Reconstruction Fund Corporation invested in Silicon Quantum Computing as part of a larger funding round
Why it matters: Government backed growth capital matters most when it helps keep manufacturing capability and commercial scaling inside Australia rather than offshore.
Date of announcement: 24 March 2026

Capital Stack's View

A carve out only works when the price, approvals and transition plan all line up.​
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Perpetual’s wealth sale is one of those deals where the headline number tells you less than the structure around it. Bain is paying A$500 million upfront, with scope for up to A$50 million of additional upfront consideration tied to pre-completion performance and a further earn-out of up to A$50 million linked to the Accounting and Wealth operations after completion. Perpetual also keeps ownership of the broader Perpetual brand while licensing Perpetual Wealth and Perpetual Private for 15 years. On the day of the announcement, the shares rose 1.9%, their best session since 26 February 2026, which makes sense. The market was really responding to certainty after a long and messy simplification process.
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What matters now is not whether A$500 million feels neat on first look. It is whether Perpetual can actually deliver the separation cleanly enough for the value to land. The sale is on a cash and debt free basis, subject to working capital, regulatory capital and customary completion adjustments, and still needs FIRB and ACCC approvals as well as a broader internal restructure, ASIC relief, court orders and ministerial consent for parts of the trustee business. There is no financing condition, which removes one obvious source of risk, but that does not make this a simple closing. Perpetual itself is guiding to around A$30 million post-tax of additional transaction and separation costs over the next 12 to 18 months.
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The practical read is that Bain is paying for a real platform, but not pretending the transition risk is trivial. Reuters reported the wealth business generated A$235.6 million of revenue in 2025 while pre-tax profit fell 5%. That makes the contingent consideration look less like financial engineering and more like a sensible way to bridge handover risk. For Perpetual, this is about balance sheet room as much as sale proceeds. Net proceeds are earmarked to repay the A$400 million Facility D bridge, and management says the group should land at roughly 0.2 times pro forma net debt to EBITDA after completion.
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That is why this deal matters. It is not just a divestment. It is the point where simplification either becomes tangible or remains a story. In carve-outs, price is only half the work. The rest sits in separation, timing and whether the seller actually ends up with a cleaner business than the one it started with.

Capital Transitions

Selected recent insolvency and capital transition signals that may intersect with deal flow or special situations:
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​VIQ Australia Group
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Industry: Legal Services
Appointment: Robert Smith and Keith Crawford of McGrathNicol appointed as voluntary administrators [SP13]
Why it matters: Voluntary administration can move value discussions away from equity and toward creditors, buyers and recapitalisation providers.
Date of appointment or announcement: 16 March 2026 [SP13]
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BOSSCAP Group​
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Industry: Manufacturing/Engineering
Appointment: ASIC’s published notice records administrators appointed and receiver and manager appointed
Why it matters: Dual appointments often mean creditor protection is now the governing lens, which can accelerate an asset sale or force a recap solution.
Date of appointment or announcement: 18 March 2026
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​Genetic Technologies​
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Industry: Genetic testing and diagnostics
Appointment: Genetic Technologies said it remained under external administration, had executed its DOCA, and continued to progress the proposed recapitalisation
Why it matters: A listed shell under deed administration can still hold option value if the recap path remains live and counterparties stay engaged.
Date of appointment or announcement: 30 March 2026
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LGE Holdings

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Industry: Property
Appointment: Ozem Kassem and Ian Niccol of KPT Restructuring listed as joint appointees in the Receiver & Manager Appointment
Why it matters: Large country estate will be going to market.
Date of appointment or announcement: 24 March 2026
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​Roberts Co (VIC) Pty Limited​
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Industry: Construction services
Appointment: McGrathNicol disclosed Federal Court orders dated 21 March 2026 extending the period for certain section 443B liabilities
Why it matters: Court ordered time can preserve optionality in a deed process where contracts, employee obligations and counterparties still need structured management.
Date of appointment or announcement: 21 March 2026

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CAPITAL STACK​
Understanding how capital really moves.

Market summaries are AI-assisted and may contain errors.
This is general information only, not financial advice.

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