Shanks Group, the international waste-to-product business, has announced the sale of 100% of the subordinated debt and 49.99% of the equity in the financing and infrastructure vehicle (SPV) relating to its PFI contract with Wakefield Council to Equitix.

The asset consists of a municipal waste management PFI project situated within the city of Wakefield, West Yorkshire. The project reached Financial Close in January 2013, with Full Service occurring in December 2015.    

Under the terms of the transaction, the gross cash consideration of £30 million (US$44 million) is payable in cash on completion and costs will be approximately £1 million (US$1,46 million) . The Transaction has been signed by Equitix andhas full bank consent.

This disposal is consistent with the Group’s strategy to actively manage the business portfolio. Shanks remains wholly committed to the long term success of the Wakefield project through its retention of 50.01% of the equity in the SPV and the ongoing delivery of the associated 25 year operating contract which expires in 2038. 

As a consequence of the transaction, Shanks will deconsolidate its investment, resulting in a reduction of the Group’s core net debt to EBITDA leverage ratio.

Furthermore, The transaction will result in a profit on disposal of approximately £11 million.  However, after writing off other associated assets in Shanks Waste Management Ltd on the basis that the Group will no longer be fully consolidating the SPV which holds the PFI contract with the Local Authority, the Transaction will result in a loss of approximately £10m as a non-trading item.   

Peter Dilnot, Group Chief Executive of Shanks, said:

“This transaction is consistent with our strategy of actively managing the Group’s portfolio. The proceeds will be used to reduce borrowings and support our ongoing investment in infrastructure projects. It will also enhance the ability of the Group to redeploy capital for accretive acquisitions or investments where accelerated growth and returns can be delivered.  Shanks remains wholly committed to the success of our flagship Wakefield contract as both an operator and an ongoing investor.”