Open pit leveraged buyout - best alternative investments from Caspian trading Inc.

Investment case. Another construction business investment project we have interest in is an operating open pit in Kazakhstan (Aktobe). The pit supplies major Kazakh constructing companies with a broad range of constructing materials: drafted and untooled stones, gravel, cruched stone, limestone and cobble, to name but a few. Operationally, the pit is a big business. With more than 3,000 employees it extracts in excess of 1.2 mln tons of rocks per year. Located near major railways, the business has easy and unimpeded access to market. For the moment our investment fund holds a minor stake in the project. We set out to conduct a leveraged buyout to bring up our stake in the business to a controlling level. In doing so we are attracting a major financial institution to finance up to 70% of the expnditures. The rest part is to be financed thru partnership with strategic investors.
Finance. We estimate that deal’s value should be between $20 mln and $30 mln. Given a bank credit facilities arrangements in place, we plan to raise up to $10 mln in cash before mid-2010. Rough calculations prove the payback period to be equal to 3-4 years, depending on the macroeconomic environment. Analysis of comparable businesses enables us to figure on an operational margin of 40%, with a net income of $3 mln per year.

Project progress. At this stage we are in the final round of negotiations with the bank, which should be concluded early next year. We are now open to consideration of potential investors’ business offers.